Kevco Inc – ‘424B3’ on 1/30/98

As of:  Friday, 1/30/98   ·   Accession #:  930661-98-179   ·   File #:  333-43691

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Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Definitive Final Prospectus                          202   1.06M 

Document Table of Contents

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PROSPECTUS                                                                      

                                              Filed pursuant to Rule 424(b)(3)
                                    SEC File No. 333-43691

KEVCO, INC. 

OFFER TO EXCHANGE ITS SERIES B 10 3/8% SENIOR 

SUBORDINATED NOTES DUE 2007 FOR ANY AND ALL OF ITS  

OUTSTANDING SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 4,    
1998, UNLESS EXTENDED.                                                          

Kevco, Inc., a Texas corporation (the "Company"), hereby offers (the        
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus   
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of   
Transmittal"), to exchange $1,000 principal amount of its Series B 10 3/8%      
Senior Subordinated Notes due 2007 (the "Exchange Notes"), which will have      
been registered under the Securities Act of 1933, as amended (the "Securities   
Act"), pursuant to a Registration Statement of which this Prospectus is a       
part, for each $1,000 principal amount of its outstanding Series A 10 3/8%      
Senior Subordinated Notes due 2007 (the "Old Notes"), of which $105,000,000     
principal amount is outstanding. The form and terms of the Exchange Notes are   
the same as the form and terms of the Old Notes (which they replace) except     
that the Exchange Notes will bear a Series B designation and will have been     
registered under the Securities Act and, therefore, will not bear legends       
restricting their transfer and will not be entitled to registration rights or   
other rights under the Registration Rights Agreement (as defined herein). See   
"The Exchange Offer." The Exchange Notes will evidence the same debt as the     
Old Notes (which they replace) and will be issued under and be entitled to the  
benefits of the Indenture (the "Indenture") dated December 1, 1997 between the  
Company and the United States Trust Company of New York, N.A., as Trustee (the  
"Trustee"), governing the Old Notes. See "The Exchange Offer" and "Description  
of the Notes." The Old Notes, together with the Exchange Notes, are referred    
to herein as the "Notes" and holders of the Notes are sometimes referred to as  
the "Holders."                                                                  

Interest on the Notes will be payable semi-annually in arrears on June 1 and
December 1 of each year, commencing June 1, 1998. The Notes will mature on      
December 1, 2007. The Notes will be redeemable at the option of the Company,    
in whole or in part, at any time on or after December 1, 2002 at the            
redemption prices set forth herein, plus accrued and unpaid interest and        
Liquidated Damages (as defined herein), if any, to the redemption date.         
Notwithstanding the foregoing, on or before December 1, 2000, the Company may   
redeem at any time or from time to time up to 35% of the original aggregate     
principal amount of the Notes at a redemption price equal to 110.375% of the    
principal amount thereof, plus accrued and unpaid interest and Liquidated       
Damages, if any, thereon to the redemption date, with the net cash proceeds of  
a Public Equity Offering (as defined herein); provided, however, that at least  
65% of the original aggregate principal amount of Notes remains outstanding     
following such redemption. Upon the occurrence of a Change of Control (as       
defined herein), the Company will be required to make an offer to repurchase    
all or any part of the Notes at a price equal to 101% of the aggregate          
principal amount thereof, plus accrued and unpaid interest and Liquidated       
Damages, if any, thereon to the date of repurchase. See "Description of the     
Notes."                                                                         

SEE "RISK FACTORS" ON PAGE 17 FOR A DESCRIPTION OF CERTAIN RISKS TO BE      
CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.         

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION   
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF      
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.      

THE DATE OF THIS PROSPECTUS IS JANUARY 30, 1998 

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The Old Notes are, and the Exchange Notes will be, guaranteed on a senior   
subordinated basis by all existing and future Restricted Subsidiaries (as       
defined herein) of the Company. The Notes and the Subsidiary Guarantees (as     
defined herein) are general, unsecured obligations of the Company and the       
Subsidiary Guarantors (as defined herein), respectively. The payment of the     
principal of and interest, premium and Liquidated Damages, if any, on the       
Notes will be subordinated in right of payment to all Senior Indebtedness (as   
defined herein) of the Company and the Subsidiary Guarantors, respectively. As  
of September 30, 1997, on a pro forma basis after giving effect to the          
Transactions (as defined herein), the Company and its consolidated              
subsidiaries had outstanding approximately $98.1 million of outstanding Senior  
Indebtedness (including $93.2 million of Senior Indebtedness under the Senior   
Credit Facility). The Indenture will prohibit the Company and the Subsidiary    
Guarantors from incurring any Indebtedness (as defined herein) that is          
subordinated in right of payment to any Senior Indebtedness unless such         
Indebtedness is subordinated in right of payment to, or ranks pari passu with,  
the Notes or the Subsidiary Guarantees, as applicable. See "Description of the  
Notes--Subordination" and "--Certain Covenants--Limitations on Layering         
Indebtedness.                                                                   

The Company will accept for exchange any and all Old Notes validly tendered 
and not withdrawn prior to 5:00 p.m., New York time, on March 4, 1998, unless   
extended by the Company in its sole discretion (the "Expiration Date").         
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the     
Expiration Date. The Exchange Offer is subject to certain customary             
conditions. The Old Notes were sold by the Company on December 1, 1997 to the   
Initial Purchaser (as defined herein) in a transaction not registered under     
the Securities Act in reliance upon an exemption under the Securities Act. The  
Initial Purchaser subsequently placed the Old Notes with qualified              
institutional buyers in reliance upon Rule 144A under the Securities Act.       
Accordingly, the Old Notes may not be reoffered, resold or otherwise            
transferred in the United States unless registered under the Securities Act or  
unless an applicable exemption from the registration requirements of the        
Securities Act is available. The Exchange Notes are being offered hereunder in  
order to satisfy the obligations of the Company under the Registration Rights   
Agreement entered into by the Company in connection with the offering of the    
Old Notes. See "The Exchange Offer."                                            

Based on no-action letters issued by the staff of the Securities and        
Exchange Commission (the "Commission") to third parties, the Company believes   
the Exchange Notes issued pursuant to the Exchange Offer may be offered for     
resale, resold and otherwise transferred by any holder thereof (other than any  
such holder that is an "affiliate" of the Company within the meaning of Rule    
405 under the Securities Act) without compliance with the registration and      
prospectus delivery provisions of the Securities Act, provided that such        
Exchange Notes are acquired in the ordinary course of such holder's business    
and such holder has no arrangement or understanding with any person to          
participate in the distribution of such Exchange Notes. See "The Exchange       
Offer--Purpose and Effect of the Exchange Offer" and "The Exchange Offer--      
Resale of the Exchange Notes." Each broker-dealer (a "Participating Broker-     
Dealer") that receives Exchange Notes for its own account pursuant to the       
Exchange Offer must acknowledge that it will deliver a prospectus in            
connection with any resale of such Exchange Notes. The Letter of Transmittal    
states that by so acknowledging and by delivering a prospectus, a               
Participating Broker-Dealer will not be deemed to admit that it is an           
"Underwriter" within the meaning of the Securities Act. This Prospectus, as it  
may be amended or supplemented from time to time, may be used by a              
Participating Broker-Dealer as a result of market-making activities or other    
trading activities. The Company has agreed that, for a period of one year       
after the Expiration Date (or such shorter period during which all such         
resales have occurred), it will make this Prospectus available to any           
Participating Broker-Dealer for use in connection with any such resale. See     
"Plan of Distribution."                                                         

Holders of Old Notes not tendered and accepted in the Exchange Offer will   
continue to hold such Old Notes and will be entitled to all the rights and      
benefits and will be subject to the limitations applicable thereto under the    
Indenture and with respect to transfer under the Securities Act. The Company    
will pay all the expenses incurred by it incident to the Exchange Offer. See    
"The Exchange Offer."                                                           

There has not previously been any public market for the Notes. Although the 
Initial Purchasers have informed the Company that they currently intend to      
make a market in the Exchange Notes, they are not obligated                     

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to do so, and any such market-making activities with respect to the Exchange    
Notes may be discontinued at any time without notice. Accordingly, the Company  
does not intend to list the Exchange Notes on any securities exchange or to     
seek approval for quotation through any automated quotation system.             

Any Old Notes not tendered and accepted in the Exchange Offer will remain   
outstanding and will be entitled to all the rights and will be subject to the   
limitations applicable thereto under the Indenture. Following consummation of   
the Exchange Offer, the holders of Old Notes will continue to be subject to     
the existing restrictions upon transfer thereof and the Company will have no    
further obligation to such holders to provide for registration under the        
Securities Act of the Old Notes held by them. To the extent that Old Notes are  
tendered and accepted in the Exchange Offer, a holder's ability to sell         
untendered Old Notes could be adversely affected. See "Risk Factors--Exchange   
Offer Procedures" and "Exchange Offer--Consequences of Failure to Exchange."    

The Exchange Notes will be available initially only in book-entry form. The 
Company expects that the Exchange Notes issued pursuant to this Exchange Offer  
will be issued in the form of one or more Global Notes (as defined herein),     
which will be deposited with, or on behalf of, The Depository Trust Company     
(the "Depositary") and registered in its name or in the name of Cede & Co.,     
its nominee. Beneficial interests in a Global Note representing the Exchange    
Notes will be shown on, and transfers thereof will be effected through,         
records maintained by the Depositary and its participants. After the initial    
issuance of the Global Notes, Exchange Notes in certificated form will be       
issued in exchange for a Global Note only on the terms set forth in the         
Indenture. See "Description of the Notes--Book Entry, Delivery and Form."       

THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT     
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE     
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER       
THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.                                 

This Prospectus, together with the Letter of Transmittal, is being sent to  
all registered holders of Old Notes as of January 30, 1998.                     

The Company will not receive any cash proceeds from the issuance of the     
Exchange Notes offered hereby. No dealer-manager is being used in connection    
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."     

The Exchange Offer is not being made to, nor will tenders be accepted from  
or on behalf of, holders of the Old Notes in any jurisdiction in which the      
making of the Exchange Offer or acceptance thereof would not be in compliance   
with the laws of such jurisdiction or would otherwise not be in compliance      
with any provision of any applicable security law.                              

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AVAILABLE INFORMATION 

The Company is subject to the informational requirements of the Securities  
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance       
therewith, files reports, proxy statements and other information with the       
Commission. Such reports, proxy statements and other information can be         
inspected and copied at the public reference facilities maintained by the       
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and    
at the Commission's Regional Offices in Chicago, Illinois (Northwestern Atrium  
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60604) and New   
York, New York (7 World Trade Center, 13th Floor, New York, New York 10007).    
Copies of such material can also be obtained from the Public Reference Section  
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at         
prescribed rates. Additionally, the Commission maintains a web site             
(http:www.sec.gov) that contains reports, proxy and information statements and  
other information regarding registrants that file electronically with the       
Commission including the Company.                                               

This Prospectus, which constitutes part of a Registration Statement filed by
the Company with the Commission under the Securities Act (the "Registration     
Statement"), omits certain of the information contained in the Registration     
Statement. Reference is made to the Registration Statement and to the exhibits  
thereto for further information with respect to the Company and the Exchange    
Notes offered hereby. Copies of such Registration Statement are available from  
the Commission. Statements contained herein concerning the provisions of        
documents filed herewith as exhibits are necessarily summaries of such          
documents, and each such statement is qualified in its entirety by reference    
to the copy of the applicable document filed with the Commission. Under the     
Indenture, the Company shall file with the Trustee annual, quarterly and other  
reports within 15 days after it files such reports with the Commission (or      
within 15 days after it would have been required to file such reports with the  
Commission, in the event the Company is no longer subject to the informational  
requirements of the Exchange Act). Annual reports delivered to the Trustee and  
the holders of Exchange Notes will contain financial information that has been  
examined and reported upon, with an opinion expressed by, an independent        
certified public accountant. The Company will also furnish such other reports   
as may be required by law.                                                      

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SUMMARY 

 The following summary is qualified in its entirety by reference to and should
be read in conjunction with the more detailed information and financial         
statements, including the notes thereto, appearing elsewhere in this            
Prospectus. Unless otherwise indicated or the context otherwise requires, all   
references in this Prospectus to the Company and its business, operations and   
pro forma financial condition and results of operations give effect to the      
Shelter Acquisition (as defined herein). As used in this Prospectus, unless     
otherwise indicated or the context otherwise requires: (i) "Kevco" refers to    
Kevco, Inc. and its subsidiaries prior to giving effect to the Shelter          
Acquisition; (ii) "Shelter" refers to Shelter Components Corporation and its    
subsidiaries prior to giving effect to the Shelter Acquisition and (iii) the    
"Company" refers to the combined entity comprised of Kevco and its consolidated 
subsidiaries, including Shelter.                                                

THE COMPANY 

The Company believes it is the largest wholesale distributor of building    
products to the United States manufactured housing industry. Through its 47     
distribution centers, the Company provides national distribution of more than   
75,000 items to approximately 530 manufactured housing (79% of 1996 net sales)  
and recreational vehicle ("RV") and other manufacturing facilities (21% of 1996 
net sales) throughout the United States. In addition to its distribution        
activities, the Company manufactures wood products, laminated wallboard and     
thermoformed bathtubs and shower enclosures for the manufactured housing        
industry. The Company believes that the combination of Kevco and Shelter        
results in substantial operating synergies due to their complementary product   
lines, overlapping marketing functions and national distribution networks, and  
significant economies of scale. During the latest twelve months ended September 
30, 1997, the Company's pro forma net sales and EBITDA (as defined) were $855.2 
million and $45.7 million, respectively.                                        

 The manufactured housing industry has experienced significant growth over the
last several years. Since 1992, the number of manufactured home shipments has   
experienced a compound annual growth rate of approximately 14.6%, growing from  
210,787 homes shipped in 1992 to 363,411 homes shipped in 1996, which resulted  
in approximately $14 billion in retail sales in 1996. As a result of this       
growth, manufactured housing has outpaced traditional site-built housing growth 
and increased as a percentage of total new single family houses sold, growing   
from 25.7% in 1992 to 32.4% in 1996. The Company believes that demand for       
manufactured housing has grown and will continue to grow due to: (i) the        
increased quality of manufactured homes and the accompanying widespread         
consumer acceptance of manufactured homes; (ii) steady employment and economic  
growth in key regions; (iii) greater availability of mortgage financing for     
manufactured homes; and (iv) continued substantial price advantages of          
manufactured homes compared to site-built homes.                                

Suppliers and customers have been increasingly relying on distributors in an
attempt to focus on their core businesses and improve inventory management.     
Larger, national distributors, like the Company, have benefited from trends in: 
(i) suppliers and customers reducing the number of distributors they use to     
increase operating efficiencies and reduce costs; (ii) suppliers and            
manufacturers selecting distributors that are able to serve their needs through 
national distribution networks; and (iii) manufacturers requiring distributors  
to carry more comprehensive product lines. In addition, the Company believes it 
leads the industry in providing value-added services to its customers,          
including inventory management, product support and training, and               
implementation of cost saving measures, all of which are services the Company   
believes its suppliers cannot directly provide manufacturers in a cost-         
effective manner.                                                               

Since its founding in 1964 by Jerry E. Kimmel, the Company's majority       
shareholder, Chairman, Chief Executive Officer and President, the Company has   
experienced substantial growth. In addition to positive manufactured housing    
industry trends which favor larger distributors, the Company has primarily      
grown through: (i) completing eight complementary acquisitions since the        
beginning of 1993; (ii) adding distribution and                                 

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manufacturing facilities to serve new markets; and (iii) increasing sales to    
existing customers by distributing additional product lines. As a result, the   
Company has increased net sales at a compound annual growth rate of 35.4% since 
1992, from $254.8 million on a historical combined basis in 1992 to $855.7      
million on a pro forma combined basis in 1996. During the same time period,     
EBITDA grew at a compound annual growth rate of 42.3% from $12.4 million on a   
historical combined basis in 1992 to $51.2 million on a pro forma combined      
basis in 1996.                                                                  

SHELTER ACQUISITION BENEFITS

The Company expects the following strategic and operating benefits as a     
result of the Shelter Acquisition:                                              

.  INDUSTRY LEADERSHIP. The Company believes that the Shelter Acquisition   
improves its competitive position by making it the largest wholesale  
distributor of building products to the United States manufactured    
housing industry, based on total sales. The Company expects to benefit
from its improved competitive position by: (i) better serving its     
customers through its enhanced national distribution network; (ii)    
serving as the exclusive distributor for certain of its suppliers that
are seeking to consolidate distributors of their products to the      
manufactured housing and RV industries; and (iii) continuing to be a  
leader in the consolidation of the industry.                          

.  ACQUISITION OF COMPLEMENTARY PRODUCT LINES. While Shelter and Kevco      
served a similar customer base, each company primarily distributed and
manufactured product lines with little overlap. Kevco had significant 
market share in plumbing fixtures and supplies and wood products,     
including wood trusses and cut lumber. Shelter had significant market 
share in electrical products, exterior building products, laminated   
wallboards, thermoformed products and hardware.                       

.  SUBSTANTIAL COST REDUCTION OPPORTUNITIES. The Company believes the       
Shelter Acquisition affords it substantial opportunities to eliminate 
certain administrative and corporate positions and expenses. In       
addition, the Company believes that it will be able to reduce selling 
 expense by consolidating its sales operations as both Kevco and Shelter
  maintain active relationships with approximately 90% of all manufactured
housing production facilities. As the largest wholesale distributor in
the industry, the Company believes that it will be able to obtain     
 economies of scale through its increased purchasing volume. The Company
believes it will be able to increase the volume of purchases by       
consolidating its purchases from suppliers where it has overlapping   
product lines and by increasing sales from cross-selling its product  
lines.                                                                

.  RATIONALIZATION OF NATIONAL DISTRIBUTION NETWORKS. The Company believes  
that it will be able to reduce operating costs by consolidating       
distribution facilities and reducing overhead at such facilities.     
  Substantially all of Kevco's and Shelter's distribution facilities serve
the same geographic regions. On a pro forma combined basis, 45 of the 
Company's 47 total distribution facilities serve overlapping markets, 
 providing the Company significant opportunities to realize distribution
efficiencies over time.                                               

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BUSINESS STRATEGY 

 The Company's primary objective is to maintain and strengthen its position as
the leading national distributor of building products to the manufactured       
housing and RV industries. The Company intends to continue to pursue this       
objective through internal growth and opportunistic acquisitions. To achieve    
its objective, the Company has adopted a strategy based on the following key    
elements:                                                                       

.  PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its         
emphasis on customer service differentiates it from other distributors
and fosters long-term relationships with its customers. The Company is
 committed to a Total Quality Management program to serve its customers'
needs and to work in partnership with its suppliers and customers to  
improve their operations. The Company seeks to be an integral part of 
its customers' inventory management activities and manufacturing      
  process. The Company has received several industry awards in recognition
of its high level of customer service.                                

.  LEVERAGE NATIONAL DISTRIBUTION NETWORK. The Company will continue to use 
its national distribution network as a platform for growth and        
 profitability. The Company believes that its national presence provides
it with a significant competitive advantage due to its ability to     
  service the nationwide needs of its customers' manufacturing facilities.
 The Company believes that its national distribution network has allowed
it to develop close relationships with its product suppliers and to   
become the exclusive supplier of certain product lines.               

.  INCREASE CUSTOMER PENETRATION AND PRODUCT OFFERINGS. The Company         
supplies over 90% of all manufactured housing plants in the United    
States with one or more product lines. This established customer base 
 provides the Company with a significant opportunity to supply a greater
 portion of its customers' building products needs as the customers seek
  to reduce the number of their suppliers. The Company also intends to add
new product lines through internal growth and opportunistic           
acquisitions. With its existing national distribution infrastructure, 
the Company believes that additional product lines can be offered to  
existing customers, thereby increasing net sales without adding       
significant costs.                                                    

.  EXPAND MANUFACTURING CAPABILITIES. The Company intends to expand its     
manufacturing capabilities through internal growth and opportunistic  
  vertical acquisitions. By manufacturing certain of its own products, the
Company believes it can achieve greater profitability from its sales, 
while obtaining direct control over product availability and quality. 
The Company currently operates five wood products manufacturing       
facilities and plans to expand to new markets, including opening new  
manufacturing facilities in Arizona and North Carolina by the second  
quarter of 1998. Through the Shelter Acquisition, the Company obtained
additional manufacturing platforms, including plastic thermoforming,  
injection molding and laminated wallboard operations. The Company     
believes that there are significant opportunities to grow its         
manufacturing business through additional acquisitions and new        
facilities.                                                           

.  PURSUE OPPORTUNISTIC ACQUISITIONS. The Company intends to selectively    
explore the acquisition of other distributors and manufacturers of    
 building products. The Company seeks to acquire distributors that offer
  complementary product lines to extend its existing offerings and realize
significant operating synergies.                                      

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THE TRANSACTIONS/RECENT DEVELOPMENTS

Pursuant to the terms of a definitive merger agreement entered into on      
October 21, 1997 (the "Acquisition Agreement"), SCC Acquisition Corp.           
("SCCAC"), an Indiana corporation and a wholly owned subsidiary of Kevco,       
commenced the Tender Offer pursuant to which it offered to purchase all of the  
outstanding shares of Shelter Common Stock. The Tender Offer expired on         
December 1, 1997 at which time Kevco accepted for payment all validly tendered  
shares of Shelter Common Stock, which represented approximately 95.5% of the    
then issued and outstanding shares of Shelter Common Stock. On January 16,      
1998, SCCAC was merged (the "Merger") with and into Shelter, with Shelter being 
the surviving corporation. As a result of the Merger, Shelter became a wholly   
owned subsidiary of Kevco. The consummation of the Tender Offer and the Merger  
are collectively referred to herein as the "Shelter Acquisition." The aggregate 
consideration paid in the Shelter Acquisition was approximately $138.8 million, 
excluding the repayment of Shelter's existing indebtedness and expenses         
relating to the Shelter Acquisition and the Old Notes Offering (as defined      
herein).                                                                        

On December 1, 1997, Kevco issued $105,000,000 aggregate principal amount of
Old Notes (the "Old Notes Offering"). The Company used the gross proceeds of    
the Old Notes Offering, together with additional borrowings by the Company of   
approximately $48.7 million under the Senior Credit Facility and $13.1 million  
of then existing available cash held by Shelter, as follows: (i) approximately  
$138.8 million was used to purchase all outstanding shares of Shelter Common    
Stock and retire outstanding options to acquire shares of common stock held by  
employees and directors of Shelter; (ii) approximately $16.7 million was        
applied to repay existing indebtedness of Shelter; and (iii) approximately      
$11.3 million was applied to pay the fees and expenses incurred in connection   
with the Shelter Acquisition, the Old Notes Offering and related transactions   
(collectively the "Transactions"). Shelter indebtedness repaid had a final      
maturity date of March 31, 2005 and bore a blended interest rate of 9.0%.       

On December 12, 1997, the Company acquired the inventory and certain        
distribution rights of certain building products distributed by the             
Manufactured Housing and Recreational Vehicle division of Shepherd Products     
Company for a cash purchase price payable at closing of $5.9 million, with an   
additional $2.0 million payable over a five-year period following the           
acquisition.                                                                    

THE OLD NOTES OFFERING

Old Notes...................  The Old Notes were sold by the Company on         
                   December 1, 1997 to Donaldson, Lufkin &
               Jenrette Securities Corporation and
                        NationsBanc Montgomery Securities, Inc. (the
                        "Initial Purchasers") pursuant to a Purchase
                  Agreement dated November 21, 1997 (the
                         "Purchase Agreement"). The Initial Purchasers
                subsequently resold the Old Notes to
                      qualified institutional buyers pursuant to
               Rule 144A under the Securities Act.

Registration Rights                                                             
Agreement...................  Pursuant to the Purchase Agreement, the           
                      Company and the Initial Purchasers entered
                      into a Registration Rights Agreement dated
                      December 1, 1997 (the "Registration Rights
                        Agreement"), which grants the holders of the
                       Old Notes certain exchange and registration
                     rights. The Exchange Offer is intended to
                         satisfy such exchange rights, which terminate
                        upon the consummation of the Exchange Offer.

THE EXCHANGE OFFER

Securities Offered..........  $105,000,000 aggregate principal amount of        
                      Series B 10 3/8% Senior Subordinated Notes
            due 2007 (the "Exchange Notes").

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The Exchange Offer..........  $1,000 principal amount of the Exchange Notes     
                        in exchange for each $1,000 principal amount
                of Old Notes. As of the date hereof,
                      $105,000,000 aggregate principal amount of
                       Old Notes are outstanding. The Company will
                     issue the Exchange Notes to holders on or
                         promptly after the Expiration Date. The terms
                       of the Exchange Notes and the Old Notes are
    substantially identical.

                      Based on an interpretation by the staff of
                         the Commission set forth in no-action letters
                    issued to third parties unrelated to the
                       Company, the Company believes that Exchange
                       Notes issued pursuant to the Exchange Offer
                        in exchange for Old Notes may be offered for
                       resale, resold and otherwise transferred by
                   any holder thereof (other than any such
                         holder which is an "affiliate" of the Company
                    within the meaning of Rule 405 under the
                       Securities Act) without compliance with the
                registration and prospectus delivery
                      provisions of the Securities Act, provided
                        that such Exchange Notes are acquired in the
                         ordinary course of such holder's business and
               that such holder does not intend to
                 participate and has no arrangement or
                        understanding with any person to participate
                       in the distribution of such Exchange Notes.

                 Each Participating Broker-Dealer that
                       receives Exchange Notes for its own account
               pursuant to the Exchange Offer must
                         acknowledge that it will deliver a prospectus
                 in connection with any resale of such
                     Exchange Notes. The Letter of Transmittal
                  states that by so acknowledging and by
                    delivering a prospectus, a Participating
                     Broker-Dealer will not be deemed to admit
                  that it is an "underwriter" within the
               meaning of the Securities Act. This
               Prospectus, as it may be amended or
                       supplemented from time to time, may be used
               by a Participating Broker-Dealer in
                     connection with resales of Exchange Notes
                         received in exchange for Old Notes where such
                         Old Notes were acquired by such Participating
                      Broker-Dealer as a result of market-making
                         activities or other trading activities (other
                         than a resale of an unsold allotment from the
                        original sale of Old Notes). The Company has
                       agreed that, for a period of one year after
                       the Expiration Date (or such shorter period
                         during which all such resales have occurred),
                         it will make this Prospectus available to any
                  Participating Broker-Dealer for use in
                         connection with any such resale. See "Plan of
Distribution."      

                        Any holder who tenders in the Exchange Offer
                         with the intention to participate, or for the
                       purpose of participating, in a distribution
                       of the Exchange Notes could not rely on the
                   position of the staff of the Commission
                       enunciated in no-action letters and, in the
                   absence of an exemption therefrom, must
                       comply with the registration and prospectus
                       delivery requirements of the Securities Act
                      in connection with any resale transaction.
                       Failure to comply with such requirements in
                   such instance may result in such holder
                        incurring liability under the Securities Act
                      for which the holder is not indemnified by
the Company.        

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Expiration Date.............  5:00 p.m., New York time, on March 4, 1998        
                     unless the Exchange Offer is extended, in
                       which case the term "Expiration Date" means
                 the latest date and time to which the
       Exchange Offer is extended.

Interest on the Exchange                                                        
Notes and the Old Notes.....  Each Exchange Note will bear interest from        
                      the most recent date to which interest has
                     been paid or duly provided for on the Old
                 Note surrendered in exchange for such
                     Exchange Note or, if no interest has been
                       paid or duly provided for on such Old Note,
                     from December 1, 1997. The Exchange Notes
                      accrue interest at the rate of 10 3/8% per
                     annum, payable semiannually in arrears on
               June 1 and December 1 of each year,
    commencing June 1, 1998.

                    Holders of Old Notes whose Old Notes are
                  accepted for exchange will not receive
                      accrued interest on such Old Notes for any
                        period from and after the last date to which
                       interest has been paid or duly provided for
                        on the Old Notes prior to the original issue
                     date of the Exchange Notes or, if no such
                        interest has been paid or duly provided for,
                         will not receive any accrued interest on such
                         Old Notes, and will be deemed to have waived,
                         the right to receive any interest on such Old
                         Notes accrued from and after the last date to
                         which interest has been paid or duly provided
                        for on the Old Notes or, if no such interest
                        has been paid or duly provided for, from and
   after December 1, 1997.

Procedures for Tendering                                                        
Old Notes...................  Each holder of Old Notes wishing to accept        
                      the Exchange Offer must complete, sign and
                        date the accompanying Letter of Transmittal,
                      or a facsimile thereof, in accordance with
                 the instructions contained herein and
                       therein, and mail or otherwise deliver such
                     Letter of Transmittal, or such facsimile,
                     together with the Old Notes and any other
                        required documentation to the Exchange Agent
                        (as defined herein) at the address set forth
                      in the Letter of Transmittal. By executing
                       the Letter of Transmittal, each holder will
                      represent to the Company that, among other
                        things, the Exchange Notes acquired pursuant
                       to the Exchange Offer are being obtained in
                         the ordinary course of business of the person
                         receiving such Exchange Notes, whether or not
                       such person is the holder, that neither the
                    holder nor any such other person has any
                        arrangement or understanding with any person
                      to participate in the distribution of such
                      Exchange Notes and that neither the holder
                        nor any such other person is an "affiliate,"
                       as defined under Rule 405 of the Securities
                     Act. See "The Exchange Offer--Purpose and
                  Effect of the Exchange Offer" and "The
                      Exchange Offer--Procedures for Tendering."

Untendered Old Notes........  Following the consummation of the Exchange        
                   Offer, holders of Old Notes eligible to
                       participate but who do not tender their Old
                    Notes will not have any further exchange
                         rights and such Old Notes will continue to be
                        subject to certain restrictions on transfer.
                        Accordingly, the liquidity of the market for
                       such Old Notes could be adversely affected.

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Consequences of Failure to                                                      
Exchange....................  The Old Notes that are not exchanged pursuant     
                        to the Exchange Offer will remain restricted
                       securities. Accordingly, such Old Notes may
                   be resold only (i) to the Company, (ii)
                       pursuant to Rule 144A or Rule 144 under the
                        Securities Act, (iii) pursuant to some other
                         exemption under the Securities Act (and based
                      on an opinion of counsel if the Company so
                        requests), (iv) outside the United States to
                         a foreign person pursuant to the requirements
                        of Rule 904 under the Securities Act, or (v)
                 pursuant to an effective registration
                        statement under the Securities Act. See "The
                      Exchange Offer--Consequences of Failure to
Exchange."          

Shelf Registration                                                              
Statement...................  If (i) the Exchange Offer is not permitted by     
                       applicable law or (ii) if any Holder of Old
                    Notes shall notify the Company within 20
                       Business Days following the Expiration Date
                         that (A) such Holder was prohibited by law or
                       Commission policy from participating in the
                     Exchange Offer or (B) such Holder may not
                   resell the Exchange Notes to the public
                   without delivering a prospectus and the
                        Prospectus relating to the Exchange Offer is
                         not appropriate or available for such resales
                  by such Holder or (C) such Holder is a
                      Broker-Dealer and holds Old Notes acquired
                   directly from the Company or any of its
                affiliates, then the Company and the
                       Guarantors shall: (1) cause to be filed, on
                        or prior to 45 days after the earlier of (i)
                         the date on which the Company determines that
                  the Exchange Offer is not permitted by
                         applicable law and (ii) the date on which the
                         Company receives such notice from a Holder, a
                    shelf registration statement (the "Shelf
                         Registration Statement"), relating to all Old
                     Notes, and (2) shall use their respective
                       reasonable best efforts to cause such Shelf
                         Registration Statement to become effective on
                        or prior to 120 days after the date on which
                 the obligation of the Company and the
                   Subsidiary Guarantors to file the Shelf
          Registration Statement arises.

                     The Company and the Subsidiary Guarantors
               have agreed to use their respective
                     reasonable best efforts to keep any Shelf
                         Registration Statement continuously effective
                       for a maximum of two years (or such shorter
                         period in which all Old Notes covered by such
                         Shelf Registration Statement have been sold).

Special Procedures for                                                          
Beneficial Owners...........  Any beneficial owner whose Old Notes are          
                       registered in the name of a broker, dealer,
                   commercial bank, trust company or other
                    nominee and who wishes to tender, should
                       contact such registered holder promptly and
                        instruct such registered holder to tender on
                   such beneficial owner's behalf. If such
                     beneficial owner wishes to tender on such
                         owner's own behalf, such owner must, prior to
                  completing and executing the Letter of
                     Transmittal and delivering its Old Notes,
                   either make appropriate arrangements to
                       register ownership of the Old Notes in such
                       owner's name or obtain a properly completed
                      bond power from the registered holder. The
                     transfer of registered ownership may take
  considerable time. The

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                         Company will keep the Exchange Offer open for
                         not less than twenty days in order to provide
                     for the transfer of registered ownership.

Guaranteed Delivery                                                             
Procedures..................  Holders of Old Notes who wish to tender their     
                 Old Notes and whose Old Notes are not
                       immediately available or who cannot deliver
                         their Old Notes, the Letter of Transmittal or
                         any other documents required by the Letter of
                        Transmittal to the Exchange Agent (or comply
                        with the procedures for book-entry transfer)
                    prior to the Expiration Date must tender
                       their Old Notes according to the guaranteed
                 delivery procedures set forth in "The
               Exchange Offer--Guaranteed Delivery
Procedures."        

Withdrawal Rights...........  Tenders may be withdrawn at any time prior to     
                       5:00 p.m., New York time, on the Expiration
Date.               

Acceptance of Old Notes and                                                     
Delivery of Exchange Notes..  The Company will accept for exchange, subject     
                  to the conditions described under "The
                        Exchange Offer--Conditions," any and all Old
                    Notes which are properly tendered in the
                       Exchange Offer prior to 5:00 p.m., New York
                      time, on the Expiration Date. The Exchange
                       Notes issued pursuant to the Exchange Offer
                    will be delivered promptly following the
                      Expiration Date. See "The Exchange Offer--
         Terms of the Exchange Offer."

Use of Proceeds.............  There will be no cash proceeds to the Company     
                      from the exchange pursuant to the Exchange
Offer.              

Exchange Agent..............  United States Trust Company of New York, N.A.     

THE EXCHANGE NOTES

General.....................  The form and terms of the Exchange Notes are      
                     the same as the form and terms of the Old
                      Notes (which they replace) except that (i)
              the Exchange Notes bear a Series B
                     designation, (ii) the Exchange Notes have
                         been registered under the Securities Act and,
                        therefore, will not bear legends restricting
                       the transfer thereof, and (iii) the holders
                     of Exchange Notes will not be entitled to
                        certain rights under the Registration Rights
                         Agreement, including the provisions providing
                       for an increase in the interest rate on the
                       Old Notes in certain circumstances relating
                      to the timing of the Exchange Offer, which
                         rights will terminate when the Exchange Offer
                     is consummated. See "The Exchange Offer--
                      Purpose and Effect of the Exchange Offer."
                     The Exchange Notes will evidence the same
                         debt as the Old Notes and will be entitled to
              the benefits of the Indenture. See
                         "Description of the Notes." The Old Notes and
                     the Exchange Notes are referred to herein
        collectively as the "Notes."
                      $105,000,000 aggregate principal amount of
                  Series B 10 3/8% Notes due 2007 of the
Company.            

Issuer......................  Kevco, Inc.                                       

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Maturity Date...............  December 1, 2007.                                 

Guarantors..................  The Notes will be guaranteed on a senior          
                         subordinated basis by all existing and future
                   Restricted Subsidiaries of the Company.

Ranking.....................  The Notes and the Subsidiary Guarantees will      
                    be general, unsecured obligations of the
                  Company and the Subsidiary Guarantors,
                         respectively. The payment of the principal of
                    and interest and premium, if any, on the
                        Exchange Notes will be subordinated in right
                        of payment to all Senior Indebtedness of the
                  Company and the Subsidiary Guarantors,
                        respectively. As of September 30, 1997, on a
                      pro forma basis after giving effect to the
             Transactions, the Company and its
                     consolidated subsidiaries had outstanding
                      approximately $98.1 million of outstanding
                        Senior Indebtedness (including $93.2 million
                   of Senior Indebtedness under the Senior
                         Credit Facility). The Indenture will prohibit
                     the Company and the Subsidiary Guarantors
                   from incurring any Indebtedness that is
                   subordinated in right of payment to any
                        Senior Indebtedness unless such Indebtedness
                      is subordinated in right of payment to, or
                   ranks pari passu with, the Notes or the
                     Subsidiary Guarantees, as applicable. See
                         "Description of the Notes--Subordination" and
                         "--Certain Covenants--Limitations on Layering
Indebtedness."      

Optional Redemption.........  The Notes are redeemable, in whole or in          
                     part, at the option of the Company at any
                     time on or after December 1, 2002, at the
                    redemption prices set forth herein, plus
                      accrued and unpaid interest and Liquidated
                   Damages, if any, thereon to the date of
                      redemption. In addition, at any time on or
                    before December 1, 2000, the Company may
                      redeem up to 35% of the original aggregate
                      principal amount of the Notes with the net
                     proceeds of a Public Equity the Old Notes
                   Offering at a redemption price equal to
                     110.375% of the principal amount thereof,
                plus accrued and unpaid interest and
                      Liquidated Damages, if any, thereon to the
                       date of redemption; provided, however, that
                  at least 65% of the original aggregate
                 principal amount of the Notes remains
                      outstanding following such redemption. See
               "Description of the Notes--Optional
Redemption."        

Change of Control...........  Upon a Change of Control, each holder of the      
                    Notes will have the right to require the
                         Company to repurchase all or any part of such
                      holder's Notes at a price equal to 101% of
                      the principal amount thereof, plus accrued
                       and unpaid interest and Liquidated Damages,
                      if any, thereon to the date of repurchase.
                  See "Description of the Notes--Certain
                        Covenants--Repurchase of Notes at the Option
                    of the Holder Upon a Change of Control."

Certain Covenants...........  The Indenture contains certain covenants,         
                    including, but not limited to, covenants
                       prohibiting or limiting: (i) the incurrence
             by the Company and its Restricted
                         Subsidiaries of additional Indebtedness; (ii)
                     the payment of dividends or the making of
other restricted    

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                       payments by the Company; (iii) the creation
                      of liens by the Company and its Restricted
                        Subsidiaries; (iv) the creation or existence
                        of restrictions on the ability of Restricted
                       Subsidiaries to pay dividends or make other
                        payments to the Company; (v) transactions by
                       the Company and its Restricted Subsidiaries
                         with affiliates; (vi) certain sales of assets
             by the Company and its Restricted
                  Subsidiaries; (vii) the ability of the
                      Company and the Restricted Subsidiaries to
                    engage in certain lines of business; and
                       (viii) the Company's ability to consolidate
                     or merge with or into, or transfer all or
                       substantially all of its assets to, another
                   person. See "Description of the Notes--
Certain Covenants." 

RISK FACTORS

See "Risk Factors" beginning on page 17 for a discussion of certain         
information that should be considered by Holders of Old Notes prior to          
tendering their Old Notes in the Exchange Offer.                                

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA 

 The following table sets forth summary unaudited pro forma condensed combined
balance sheet data at September 30, 1997 and summary unaudited pro forma        
condensed combined statements of income for the year ended December 31, 1996,   
the nine month period ended September 30, 1997 and the last twelve months ended 
September 30, 1997. The pro forma condensed combined balance sheet data at      
September 30, 1997 give effect to the Transactions as if they had occurred on   
September 30, 1997. The pro forma condensed combined statements of income for   
the fiscal year ended December 31, 1996, the nine month period ended September  
30, 1997 and the last twelve months ended September 30, 1997 give effect to the 
Pro Forma Transactions (as defined herein) as if they had occurred on January   
1, 1996. The following information should be read in conjunction with           
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," "Unaudited Pro Forma Financial Data," "Selected Consolidated       
Financial Data," and the Consolidated Financial Statements and Notes thereto of 
Kevco and Shelter, included elsewhere herein.                                   

                                                                [Download Table]

                                   LAST TWELVE                                
                                  MONTHS ENDED  NINE MONTHS ENDED  YEAR ENDED 
                                  SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,
                                      1997            1997            1996    
                                             (DOLLARS IN THOUSANDS)           
                                                                              
INCOME STATEMENT DATA:                                                        
Net sales........................   $855,176        $652,091        $855,686  
Gross profit.....................    119,616          89,866         122,773  
Commission income................      8,930           6,580           9,359  
Selling, general and                                                          
 administrative expenses.........     91,014          69,077          88,722  
Operating income.................     37,532          27,369          43,410  
Net income.......................     10,239           7,270          13,164  
OTHER DATA:                                                                   
EBITDA(1)........................     45,686          33,456          51,243  
Depreciation and amortization....      8,154           6,087           7,833  
Cash interest expense(2).........     18,580          13,935          18,580  
EBITDA/cash interest expense.....        2.5x            --              --   
Total debt/EBITDA................        4.4x            --              --   

                                                                [Download Table]

                                                          AT SEPTEMBER 30, 1997
                                                          ---------------------
                                                            ACTUAL    PRO FORMA
                                                                               
BALANCE SHEET DATA:                                                            
Working capital.......................................... $   35,127 $   71,413
Total assets.............................................    114,578    315,116
Total debt...............................................     45,849    203,103
Stockholders' equity.....................................     40,397     40,397

--------------------                                                            
(1) EBITDA for any relevant period presented above is defined as net income     
  plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
  EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by      
operating activities, which are determined in accordance with generally 
accepted accounting principles. EBITDA is included because management   
   believes that certain readers may find it to be a useful tool for analyzing
operating performance, leverage, liquidity, and a company's ability to  
 service debt. See "Unaudited Pro Forma Condensed Combined Financial Data"
and the Consolidated Financial Statements and the Notes thereto of Kevco
and Shelter included elsewhere in this Prospectus.                      
(2) Cash interest expense represents total interest expense less amortization   
of deferred financing costs, on a pro forma basis giving effect to the  
   issuance of the Old Notes pursuant to the Old Notes Offering at an interest
 rate of 10 3/8%, borrowings under the Senior Credit Facility at a rate of
8.25% and the application of the net proceeds therefrom, as if the      
Transactions had occurred on January 1, 1996.                           

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SUMMARY SELECTED FINANCIAL DATA 

The summary historical consolidated financial data for and as of the end of 
each of the years in the three-year period ended December 31, 1996 set forth    
below have been derived from the audited consolidated financial statements of   
Kevco and Shelter. The summary historical consolidated financial data set forth 
below for and as of the end of the nine-month period ended September 30, 1997   
have been derived from the unaudited condensed consolidated financial           
statements of Kevco and Shelter. The historical condensed consolidated results  
of operations of Kevco and Shelter for the nine months ended September 1997 are 
unaudited and are not necessarily indicative of the results of operations of    
Kevco and Shelter for the full year. The unaudited historical consolidated      
financial data reflects all adjustments (consisting of normal, recurring        
adjustments) which are, in the opinion of management of each company, necessary 
for a fair summary of such company's financial position, results of operations  
and cash flows for and as of the end of the periods presented. The following    
data should be read in conjunction with "Management's Discussion and Analysis   
of Financial Condition and Results of Operations," "Unaudited Pro Forma         
Financial Data," "Selected Consolidated Financial Data," and the Consolidated   
Financial Statements and Notes thereto of Kevco and Shelter, included elsewhere 
herein.                                                                         

                                                        [Enlarge/Download Table]

                                                                   NINE MONTHS ENDED     
                               YEAR ENDED DECEMBER 31,               SEPTEMBER 30,       
                         ------------------------------------ ---------------------------
                                           HISTORICAL                      HISTORICAL    
                         PRO FORMA -------------------------- PRO FORMA -----------------
                          1996(1)    1996     1995     1994    1997(1)  1997(2)    1996  
                                              (DOLLARS IN THOUSANDS)                     
                                                                                         
         Kevco                                                                           
         -----                                                                           
INCOME STATEMENT DATA:                                                                   
Net sales............... $401,119  $267,344 $182,519 $ 99,279 $289,952  $271,957 $205,048
Gross profit............   59,646    40,691   26,878   15,923   39,056    36,819   30,993
Operating Income........   24,282    16,465    8,599    5,048   12,895    12,494   12,503
OTHER DATA:                                                                              
EBITDA(3)...............   27,700    18,257    9,640    5,447   15,350    14,666   13,821
Depreciation and                                                                         
 amortization...........    3,418     1,792    1,041      399    2,455     2,172    1,318
Capital expenditures....      --      1,586    2,844      432      --      2,000    1,086
        Shelter                                                                          
        -------                                                                          
INCOME STATEMENT DATA:                                                                   
Net Sales............... $454,567  $521,022 $462,323 $333,104 $362,139  $357,879 $397,065
Gross profit............   63,127    73,321   68,548   51,296   50,810    49,973   57,516
Operating income........   15,033    15,586   18,844   15,271   11,645    11,237   15,052
OTHER DATA:                                                                              
EBITDA(3)...............   18,629    18,936   21,741   17,303   14,509    13,691   17,497
Depreciation and                                                                         
 amortization...........    3,596     3,350    2,897    2,032    2,864     2,454    2,445
Capital expenditures....      --      8,368    2,790    2,136      --      6,210    6,057
   Pro Forma Combined                                                                    
   ------------------                                                                    
EBITDA(4)............... $ 51,243       --       --       --  $ 33,456       --       -- 

--------------------                                                            
(1) Reflects the pro forma effect of (i) Kevco's acquisition of Bowen Supply,   
Inc. ("Bowen") and Consolidated Forest Products, L.L.C. ("Consolidated  
  Forest") in February 1997, (ii) for 1996, Shelter's sale of operations and
certain assets of its carpet and yarn manufacturing subsidiary, Danube  
Carpet Mills, Inc. ("Danube") on December 31, 1996 and (iii) the        
   acquisition of net assets and operations of Plastic Solutions, Inc. ("PSI")
in June 1997.                                                           
(2) The decline in Shelter's net sales is attributable to the sale of           
operations and certain assets of its Danube subsidiary on December 31,  
1996.                                                                   
(3) EBITDA for any relevant period presented above is defined as net income     
  plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
  EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by      
operating activities, which are determined in accordance with generally 
accepted accounting principles. EBITDA is included because management   
   believes that certain readers may find it to be a useful tool for analyzing
operating performance, leverage, liquidity, and a company's ability to  
 service debt. See "Unaudited Pro Forma Condensed Combined Financial Data"
and the Consolidated Financial Statements and the Notes thereto of Kevco
and Shelter included elsewhere in this Prospectus.                      
(4) EBITDA for Kevco and Shelter combined, including the estimated cost savings 
   associated with the Shelter Acquisition. See "Unaudited Pro Forma Condensed
Combined Financial Data."                                               

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RISK FACTORS  

In addition to the other information contained or incorporated by reference 
in this Prospectus, Holders of Old Notes should consider carefully the factors  
listed below before tendering their Old Notes in the Exchange Offer.            

SUBSTANTIAL LEVERAGE                                                            

The Company has a substantial amount of indebtedness. As of September 30,   
1997, on a pro forma basis after giving effect to the Transactions, the         
Company had approximately $203.1 million of consolidated indebtedness and a     
ratio of debt to total capitalization of 83.4%. See "Capitalization."           

The degree to which the Company is leveraged could have important           
consequences to holders of the Notes, including the following: (i) the          
Company's indebtedness, acquisitions, working capital, capital expenditures or  
other purposes may be impaired, (ii) funds available to the Company for its     
operations and general corporate purposes or for capital expenditures will be   
reduced as a result of the dedication of a substantial portion of the           
Company's consolidated cash flow from operations to the payment of the          
principal and interest on its indebtedness, (iii) the Company may be more       
highly leveraged than certain of its competitors, which may place it at a       
competitive disadvantage, (iv) the agreements governing the Company's and its   
subsidiaries' long-term indebtedness and bank loans contain restrictive         
financial and operating covenants, (v) an event of default (not cured or        
waived) under financial and operating covenants contained in the Company's or   
its subsidiaries' debt instruments, including the Indenture, could occur and    
have a material adverse effect on the Company, (vi) certain of the borrowings   
under debt agreements of the Company's subsidiaries have floating rates of      
interest, which causes the Company and its subsidiaries to be vulnerable to     
increases in interest rates and (vii) the Company's substantial degree of       
leverage could make it more vulnerable to a downturn in general economic        
conditions.                                                                     

The ability of the Company and its subsidiaries to make principal and       
interest payments under long-term indebtedness (including the Notes) and bank   
loans will be dependent upon their future performance, which is subject to      
financial, economic and other factors affecting the Company and its             
subsidiaries, some of which are beyond their control. There can be no           
assurance that the current level of operating results of the Company and its    
subsidiaries will continue or improve. The Company believes that it will need   
to access the capital markets in the future in order to provide the funds       
necessary to repay a significant portion of its indebtedness. There can be no   
assurance that any such refinancing will be possible or that any additional     
financing can be obtained, particularly in view of the Company's anticipated    
high levels of debt and the debt incurrence restrictions under its existing     
debt agreements, including the Indenture. If no such refinancing or additional  
financing were available, the Company and/or its subsidiaries could default on  
their respective debt obligations. In such case, virtually all other debt of    
the Company and its subsidiaries, including payments to be made under the       
Notes, could be immediately due and payable.                                    

SUBORDINATION                                                                   

The Old Notes are, and the Exchange Notes will be, unsecured and            
subordinated in right of payment to all existing and future Senior              
Indebtedness of the Company, including all indebtedness under the Senior        
Credit Facility. Although the obligations of the Company under the Notes are    
guaranteed by the Subsidiary Guarantors, such guarantees are also subordinated  
in right of payment to all Senior Indebtedness of the Subsidiary Guarantors.    
As of September 30, 1997, on a pro forma basis after giving effect to the       
Transactions, the Company and its consolidated subsidiaries had approximately   
$98.1 million of outstanding Senior Indebtedness (including $93.2 million of    
Senior Indebtedness under the Senior Credit Facility). The Indenture permits    
the Company and its Subsidiaries to incur additional indebtedness, including    
Senior Indebtedness, subject to certain limitations.                            

By reason of the subordination of the Notes and Subsidiary Guarantees to all
Senior Indebtedness of the Company and the Subsidiary Guarantors, as            
applicable, in the event of a liquidation or dissolution of the Company or a    
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,            
receivership or similar                                                         

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proceeding relating to the Company or such Subsidiary Guarantor, the holders    
of Senior Indebtedness will be entitled to receive payment in full before the   
holders of the Notes receive any payment. In addition, the Company and the      
Subsidiary Guarantors will not be permitted to make any payment to the holders  
of the Notes for specified periods if (i) there occurs a payment default with   
respect to any Senior Indebtedness or (ii) there occurs a default with respect  
to Senior Indebtedness held by designated persons which permits the holders of  
such Senior Indebtedness to accelerate its maturity and such holders notify     
the Trustee (as defined herein) of such default. These provisions may have the  
effect of reducing the amounts payable to or recoverable by the holders of the  
Notes.                                                                          

The Company currently conducts all of its business through subsidiaries.    
Accordingly, the Company is dependent on the cash flow generated by its         
subsidiaries for the payment of its obligations, including the Notes. Except    
by virtue of the Subsidiary Guarantees, the subsidiaries of the Company have    
no obligation to make payments under the Notes. To the extent that a            
subsidiary of the Company does not become a Subsidiary Guarantor or the         
Subsidiary Guarantee of a Subsidiary Guarantor is not enforceable under         
applicable law, the Notes will be structurally subordinated to any              
Indebtedness or other obligations of the subsidiaries of the Company.           

RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES                                    

The Senior Credit Facility and the Indenture contain numerous restrictive   
covenants which limit the discretion of Company management with respect to      
certain business matters. These covenants place significant restrictions on,    
among other things, the ability of the Company to incur additional              
indebtedness, to create liens or other encumbrances, to pay dividends or make   
other restricted payments, to make investments, loans and guarantees and to     
sell or otherwise dispose of a substantial portion of assets to, or merge or    
consolidate with, another entity. The Senior Credit Facility also contains a    
number of financial covenants that require the Company to meet certain          
financial ratios and tests and provide that a "change of control" will          
constitute an event of default. A failure to comply with the obligations        
contained in the Senior Credit Facility or the Indenture, if not cured or       
waived, could permit acceleration of the related indebtedness and acceleration  
of indebtedness under other instruments that contain cross-acceleration or      
cross-default provisions. If the Company were obligated to repay all or a       
significant portion of its indebtedness, there can be no assurance that the     
Company would have sufficient cash to do so or that the Company could           
successfully refinance such indebtedness. Other indebtedness of the Company     
that may be incurred in the future may contain financial or other covenants     
more restrictive than those applicable to the Senior Credit Facility or the     
Notes. In addition, the obligations of the Company under the Senior Credit      
Facility are secured by substantially all of the assets of the Company, and     
the Indenture permits other Senior Indebtedness of the Company to be secured.   
In the case of an event of default under the Senior Credit Facility or such     
other secured indebtedness, the lenders thereunder would be entitled to         
exercise the remedies available to a secured lender under applicable law. See   
"Description of the Notes--Certain Covenants" and "Description of Senior        
Credit Facility."                                                               

INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL                            

Upon a Change of Control, the Company will be required to offer to          
repurchase all outstanding Notes at 101% of the principal amount thereof plus   
accrued and unpaid interest and Liquidated Damages, if any, to the date of      
repurchase. However, there can be no assurance that sufficient funds will be    
available at the time of any Change of Control to make any required             
repurchases of Notes tendered. In addition, the Senior Credit Facility          
prohibits the Company from making such required repurchases and there can be    
no assurance that the Company's debt instruments existing at the time of any    
Change of Control will allow the Company to make such required repurchases.     
Notwithstanding these provisions, the Company could enter into certain          
transactions, including certain recapitalization, that would not constitute a   
Change of Control but would increase the amount of debt outstanding at such     
time. See "Description of the Notes--Certain Covenants--Repurchase of Notes at  
the Option of the Holder Upon a Change of Control."                             

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COMPETITION                                                                     

The wholesale distribution industry relating to producers of manufactured   
homes and RVs is highly competitive, and the barriers to entry are relatively   
low. Competition exists in terms of price, product quality and features,        
service, warranty terms and distribution facility location. The manufacturing   
of roof trusses, laminated wallboard products and thermoformed bathroom         
products are also highly competitive businesses. There are numerous companies,  
both public and private, that are in direct competition with the Company, and   
many of these competitors have been operating longer and have substantially     
greater financial and other resources than the Company. A downturn in the       
manufactured housing or RV industries could result in increased competition     
adversely affecting the Company's results of operations or financial            
condition. In addition, there are certain product manufacturers that sell and   
distribute their products directly to manufactured home and RV producers.       
There can be no assurance that additional manufacturers of products             
distributed by the Company will not elect to sell and distribute directly in    
the future. No assurance can be given that the Company will be able to compete  
effectively in the future.                                                      

CYCLICAL NATURE OF THE MANUFACTURED HOUSING AND RV MARKETS                      

Approximately 79% of the Company's net sales for the year ended December 31,
1996, were to producers of manufactured homes. The manufactured housing market  
historically has been cyclical and is influenced by many of the same national   
and regional economic and demographic factors that affect the broader housing   
market, including consumer confidence, interest rates, availability and terms   
of financing, regional population and employment trends, availability and cost  
of alternative housing and general economic conditions, including recessions.   
The RV market has also historically been cyclical and is also influenced by     
factors such as interest rates, availability and terms of financing and         
general economic conditions, as well as gasoline prices. The Company may be     
adversely affected by these factors.                                            

GROWTH THROUGH ACQUISITIONS                                                     

Part of the Company's business strategy is to grow through strategic        
acquisitions. There can be no assurance that the Company will be able to        
identify attractive or willing acquisition candidates or that it will be able   
to successfully integrate the operations of any companies it acquires. In       
addition, there can be no assurance that such acquired companies would perform  
in accordance with management's expectations or that the Company would not      
encounter unanticipated problems or liabilities. Also, if the Company does not  
have sufficient cash resources for any acquisition, its growth could be         
limited. There can be no assurance that the Company will be able to obtain      
adequate financing for any acquisition or that, if available, such financing    
will be on terms acceptable to the Company. The Senior Credit Facility          
requires the consent of the Company's lenders prior to the consummation of      
certain acquisitions. There can be no assurance such consents will be granted   
any time they are required or that the Company will be able to successfully     
implement its acquisition strategy.                                             

RISKS RELATED TO THE INTEGRATION OF KEVCO AND SHELTER                           

The Shelter Acquisition involves the integration of two companies that have 
previously operated independently. The assimilation of the companies may be     
difficult and will require integration and coordination of the Company's        
product offerings, management, systems, manufacturing and sales and marketing   
efforts. In addition, the process of integrating the operations of Kevco and    
Shelter will require substantial attention from management and could cause the  
interruption of, or a loss of momentum in, the business activities of the       
Company, which could have an adverse effect on the Company's financial          
position, results of operations and cash flows. Accordingly, no assurance can   
be given that difficulties will not be encountered in integrating the           
operations of Kevco and Shelter or that the efficiencies and benefits expected  
from such integration will be realized.                                         

DEPENDENCE ON KEY PERSONNEL                                                     

The success of the Company is dependent upon the continued services of the  
Company's senior management, particularly its Chairman of the Board, President  
and Chief Executive Officer, Jerry E. Kimmel.                                   

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The loss of the services of Mr. Kimmel could have a material adverse effect on  
the Company and its business. In addition, the Company's success and continued  
growth will depend upon its ability to attract and retain experienced, quality  
management personnel.                                                           

IMPORTANCE OF PRINCIPAL CUSTOMERS                                               

The Company's two largest customers, Champion Enterprises, Inc. and         
Fleetwood Enterprises, Inc., accounted for approximately 14% and 12%,           
respectively, of the Company's combined historical net sales in 1996. Although  
the Company has ongoing supply relationships with these customers, it does not  
have a formal supply contract with these customers or most of its other         
customers. The Company's business could be adversely affected if these          
customers, or other major customers, substantially reduced or discontinued      
purchases from the Company. Further, the Company can give no assurance that     
its sales to its customers will continue at historical levels. See "Business--  
Sales and Marketing" and Note 1 to the Consolidated Financial Statements of     
Kevco and Shelter.                                                              

IMPORTANCE OF KEY SUPPLIERS                                                     

There are numerous competing suppliers of most of the products that the     
Company purchases; however, if a particular supplier were to unexpectedly       
discontinue sales of a product to the Company, the Company could experience     
temporary shortages in that product until it obtains a replacement supplier.    
Such a temporary shortage could have a negative impact on the Company's         
relationships with its customers, which could in turn result in the loss of     
one or more customers. The loss of one or more major customers could have a     
material adverse effect on the Company and its business. See "Business--        
Purchasing and Suppliers."                                                      

FLUCTUATIONS IN PRICES OF LUMBER                                                

The Company has experienced significant fluctuations in the cost of lumber  
products from primary producers. A variety of factors over which the Company    
has no control, including environmental regulations, weather conditions and     
natural disasters, impact the market price of lumber products. The Company      
anticipates that these fluctuations will continue in the future. The Company's  
purchase and resale practices seek to minimize the impact of fluctuations in    
lumber prices. The Company prices its wood products on a monthly basis based    
on the then-current lumber prices. It charges the raw material cost on a FIFO-  
basis to cost of goods as products are sold. Periods of prolonged lumber price  
decreases may have a material adverse impact on the Company's inventory value   
and profitability.                                                              

CONTROL BY PRINCIPAL SHAREHOLDER                                                

As of November 20, 1997, Jerry E. Kimmel, the Chairman of the Board,        
President and Chief Executive Officer of the Company, owned approximately       
55.1% of the outstanding Common Stock of the Company. As a result, Mr. Kimmel   
is able to (i) elect the entire Board of Directors of the Company, (ii)         
through his ability to elect directors, exercise control over the business,     
officers, policies and management of the Company and (iii) in general,          
determine the outcome of any matter submitted to a vote of the shareholders of  
the Company, including an amendment to the Articles of Incorporation of the     
Company, the authorization of additional shares of the Company's capital stock  
or any merger, consolidation or other extraordinary corporate transaction       
requiring a vote of the shareholders of the Company. See "Principal             
Shareholders."                                                                  

REGULATION                                                                      

The Company's suppliers and customers are subject to a variety of federal,  
state and local laws and regulations. The National Manufactured Housing         
Construction and Safety Standards Act of 1974 and regulations promulgated       
thereunder by the U.S. Department of Housing and Urban Development ("HUD")      
impose comprehensive national construction standards for manufactured homes     
and preempt conflicting state and local regulations. HUD has adopted            
regulations that divide the United States into three "Wind Zones" and impose    

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more stringent construction standards for homes to be sold in areas designated  
as Wind Zones II or III. These regulations have resulted in higher              
manufacturing and dealer costs. The Company cannot predict if additional        
regulations will be adopted or the effect that any such regulations would have  
on the Company. To the extent regulations make manufactured housing less        
competitive with other housing alternatives, the Company's operations could be  
negatively impacted. See "Business--Regulation."                                

FRAUDULENT CONVEYANCE                                                           

The Company believes that the indebtedness represented by the Notes was     
incurred for proper purposes and in good faith, and that, based on present      
forecasts, asset valuations and other financial information, after the          
consummation of the Transactions, the Company will be solvent, will have        
sufficient capital for carrying on its business and will be able to pay its     
debts as they mature. Notwithstanding the Company's belief, however, if a       
court of competent jurisdiction in a suit by an unpaid creditor or a            
representative of creditors (such as a trustee in bankruptcy or a debtor-in-    
possession) were to find that, at the time of the incurrence of such            
indebtedness, the Company was insolvent, was rendered insolvent by reason of    
such incurrence, was engaged in a business or transaction for which its         
remaining assets constituted unreasonably small capital, intended to incur, or  
believed that it would incur, debts beyond its ability to pay such debts as     
they matured, or intended to hinder, delay or defraud its creditors, and that   
the indebtedness was incurred for less than reasonably equivalent value, then   
such court could, among other things, (i) void all or a portion of the          
Company's obligations to the holders of the Notes, the effect of which would    
be that the holders of the Notes may not be repaid in full and/or (ii)          
subordinate the Company's obligations to the holders of the Notes to other      
existing and future indebtedness of the Company to a greater extent than would  
otherwise be the case, the effect of which would be to entitle such other       
creditors to be paid in full before any payment could be made on the Notes.     

The Company's obligations under the Notes are guaranteed, jointly and       
severally, on a senior subordinated basis, by each of the Subsidiary            
Guarantors. The Company believes that indebtedness represented by the           
Guarantees was, and is being, incurred by the Subsidiary Guarantors for proper  
purposes and in good faith, and that, based on present forecasts, asset         
valuations and other financial information, after the consummation of the       
Transactions, each of the Subsidiary Guarantors will be solvent, will have      
sufficient capital for carrying on its business and will be able to pay its     
debts as they mature. Notwithstanding the Company's belief, however, if a       
court of competent jurisdiction in a suit by an unpaid creditor or a            
representative of creditors (such as a trustee in bankruptcy or a debtor-in-    
possession) were to find that, at the time of the incurrence of such            
indebtedness, the Subsidiary Guarantors were insolvent, were rendered           
insolvent by reason of such incurrence, were engaged in a business or           
transaction for which their remaining assets constituted unreasonably small     
capital, intended to incur, or believed that they would incur, debts beyond     
their ability to pay such debts as they matured, or intended to hinder, delay   
or defraud their creditors, and that the indebtedness was incurred for less     
than reasonably equivalent value, then such court could, among other things,    
(i) void all or a portion of such Subsidiary Guarantors' obligations to the     
holders of the Notes, the effect of which would be that the holders of the      
Notes may not be repaid in full and/or (ii) subordinate such Subsidiary         
Guarantors' obligations to the holders of the Notes to other existing and       
future indebtedness of such Subsidiary Guarantors to a greater extent than      
would otherwise be the case, the effect of which would be to entitle such       
other creditors to be paid in full before any payment could be made on the      
Notes. Among other things, a legal challenge to a guarantee on fraudulent       
conveyance grounds may focus on the benefits, if any, realized by the           
Subsidiary Guarantors as a result of the issuance by the Company of the Notes.  

EXCHANGE OFFER PROCEDURES                                                       

Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such  
Old Notes, a properly completed and duly executed Letter of Transmittal and     
all other required documents. Therefore, holders of the Old Notes desiring to   
tender such Old Notes in exchange for Exchange Notes should allow sufficient    
time to ensure timely delivery. The Company is under no duty to give            
notification of defects or irregularities with respect to the tenders of Old    
Notes for                                                                       

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exchange. Old Notes that are not tendered or are tendered but not accepted      
will, following the consummation of the Exchange Offer, continue to be subject  
to the existing restrictions upon transfer thereof and, upon consummation of    
the Exchange Offer, registration rights under the Registration Rights           
Agreement generally will terminate. In addition, any holder of Old Notes who    
tenders in the Exchange Offer for the purpose of participating in a             
distribution of the Exchange Notes may be deemed to have received restricted    
securities and, if so, will be required to comply with the registration and     
prospectus delivery requirements of the Securities Act in connection with any   
resale transactions. Each Participating Broker-Dealer that receives Exchange    
Notes for its own account in exchange for Old Notes, where such Old Notes were  
acquired by such Participating Broker-Dealer as a result of market-making       
activities or other trading activities, must acknowledge that it will deliver   
a prospectus in connection with any resale of such Exchange Notes. See "Plan    
of Distribution." To the extent that Old Notes are tendered and accepted in     
the Exchange Offer, the trading market for untendered and tendered but          
unaccepted Old Notes could be adversely affected. See "The Exchange Offer."     

ABSENCE OF PUBLIC MARKET FOR THE NOTES                                          

The Old Notes were issued on December 1, 1997 to qualified institutional    
buyers and are eligible for trading in the PORTAL Market, the National          
Association of Securities Dealers' screen-based, automated market for trading   
of securities eligible for resale under Rule 144A. To the extent that Old       
Notes are tendered and accepted in the Exchange Offer, the trading market for   
the remaining untendered Old Notes could be adversely affected. There is no     
existing trading market for the Exchange Notes, and there can be no assurance   
regarding the future development of a market for the Exchange Notes, or the     
ability of holders of the Exchange Notes to sell their Exchange Notes or the    
price at which such holders may be able to sell their Exchange Notes. Although  
the Initial Purchasers have informed the Company that they currently intend to  
make a market in the Exchange Notes, they are not obligated to do so and any    
such market making may be discontinued at any time without notice. As a         
result, the market price of the Exchange Notes could be adversely affected.     

The Company does not intend to apply to list the Old Notes or the Exchange  
Notes on any securities exchange or for quotation through the National          
Association of Securities Dealers Automated Quotation System. The liquidity     
of, and trading market for, the Notes also may be adversely affected by         
general declines in the market for similar securities, regardless of the        
Company's financial performance or prospects.                                   

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THE TRANSACTIONS  

On October 28, 1997, SCCAC, a wholly-owned subsidiary of Kevco, commenced   
the Tender Offer for all the outstanding shares of Shelter Common Stock at      
$17.50 net per share as required under the terms of the Acquisition Agreement,  
dated as of October 21, 1997 among Kevco, SCCAC and Shelter. The Tender Offer   
expired on December 1, 1997, at which time Kevco accepted for payment all       
validly tendered shares of Shelter Common Stock, which represented              
approximately 95.5% of the then issued and outstanding shares of Shelter        
Common Stock. On January 16, 1998, SCCAC was merged with and into Shelter,      
with Shelter being the surviving corporation. As a result of the Merger,        
Shelter became a wholly-owned subsidiary of Kevco. The aggregate consideration  
paid in the Shelter Acquisition was approximately $138.8 million, excluding     
the repayment of Shelter's existing indebtedness and expenses relating to the   
Shelter Acquisition and the Old Notes Offering, which is being funded by some   
combination of the proceeds of the Old Notes Offering, additional borrowings    
under the Senior Credit Facility and then existing available cash held by       
Shelter. See "Use of Proceeds".                                                 

USE OF PROCEEDS 

The Company will not receive any cash proceeds from the issuance of the     
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy        
certain of the Company's obligations under the Registration Rights Agreement.   

The Company used the gross proceeds of the Old Notes Offering of $105.0     
million, together with additional borrowings by the Company of approximately    
$48.7 million under the Senior Credit Facility and $13.1 million of then        
existing available cash held by Shelter, as follows: (i) approximately $138.8   
million was used to purchase all outstanding shares of Shelter Common Stock     
and retire outstanding options to acquire shares of Shelter Common Stock held   
by employees and directors of Shelter; (ii) approximately $16.7 million was     
applied to repay existing indebtedness of Shelter; and (iii) approximately      
$11.3 million was applied to pay the fees and expenses incurred in connection   
with the Transactions. Shelter indebtedness repaid had a final maturity date    
of March 31, 2005 and bore a blended interest rate of 9.0%.                     

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CAPITALIZATION  

The following table sets forth the capitalization of Kevco at September 30, 
1997, (i) on an actual basis and (ii) on a pro forma basis to give effect to    
the Transactions as set forth under "Use of Proceeds." This table should be     
read in conjunction with the Consolidated Financial Statements of Kevco and     
Shelter and the notes thereto included elsewhere in this Prospectus.            

                                                                [Download Table]

                                                              SEPTEMBER 30,  
                                                                  1997       
                                                            -----------------
                                                            ACTUAL  PRO FORMA
                                                               (DOLLARS IN   
                                                               THOUSANDS)    
                                                                             
Cash....................................................... $    77 $     77 
                                                            ======= ======== 
Total debt:                                                                  
Capital lease obligations.................................. $ 1,435 $  1,435 
Long-term notes payable....................................     --     3,500 
Senior Credit Facility:                                                      
 Revolving Credit Facility.................................  14,414    3,168 
 Term Loan(1)..............................................  30,000   90,000 
Old Notes Offering.........................................     --   105,000 
                                                            ------- -------- 
  Total debt...............................................  45,849  203,103 
Stockholders' equity.......................................  40,397   40,397 
                                                            ------- -------- 
  Total capitalization..................................... $86,246 $243,500 
                                                            ======= ======== 

---------------------                                                           
(1) The Indenture provides that the Company's borrowing capacity under the      
Term Loan of the Senior Credit Facility is reduced by the cash          
  consideration necessary to purchase the amount of Shelter Common Stock not
 acquired under the Tender Offer until such time as Kevco owns 100% of the
Shelter Common Stock.                                                   

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA 

The unaudited pro forma condensed combined financial data is based on the   
consolidated financial statements of Kevco, the consolidated financial          
statements of Bowen, the consolidated financial statements of Consolidated      
Forest and the consolidated financial statements of Shelter included elsewhere  
in this Prospectus. The unaudited pro forma financial data gives effect to:     
(i) the effect on weighted average shares and earnings per share of the sale    
of 2,415,000 shares of common stock of Kevco and the tax impact of Kevco's      
conversion from an S corporation to a C corporation in November 1996            
(including an over-allotment option of 315,000 shares exercised in December     
1996) ("Public Offering"); (ii) the acquisition by Kevco of Bowen ("Bowen       
Acquisition") and Consolidated Forest ("Consolidated Forest Acquisition" and,   
collectively with the Bowen Acquisition, the "Kevco Acquisitions"); (iii)       
Shelter's sale of the operations and certain assets of its Danube subsidiary    
and the acquisition by Shelter of PSI ("PSI Acquisition"); (iv) the Shelter     
Acquisition; (v) the Senior Credit Facility and (vi) the Old Notes Offering     
(collectively, the "Pro Forma Transactions") as if these transactions had       
occurred on January 1, 1996.                                                    

The unaudited pro forma condensed combined balance sheet at September 30,   
1997 is based on the consolidated financial statements of Kevco adjusted to     
give effect to the Transactions as if such transactions had occurred on         
September 30, 1997. The unaudited pro forma condensed combined statements of    
income for the year ended December 31, 1996, the nine month-period ended        
September 30, 1997 and the last twelve months ended September 30, 1997, are     
based on the consolidated financial statements of Kevco and adjusted to give    
effect to the Pro Forma Transactions as if such transactions had occurred on    
January 1, 1996. The acquisition adjustments and offering adjustments are       
based upon historical financial information of Kevco, Bowen, Consolidated       
Forest, PSI and Shelter and certain assumptions that management of Kevco        
believes are reasonable. The Kevco Acquisitions, the PSI Acquisition and the    
Shelter Acquisition are accounted for under the purchase method of accounting.  
Under this method of accounting, the purchase price has been allocated to the   
assets and liabilities acquired based on preliminary estimates of fair value.   
The actual fair value is determined as of the consummation of each of the       
acquisitions. The pro forma financial data does not necessarily reflect the     
results of operations or the financial position of Kevco that actually would    
have resulted had the Pro Forma Transactions occurred at the date indicated,    
or project the results of operations or financial position of Kevco for any     
future date or period.                                                          

The unaudited pro forma condensed combined financial data should be read in 
conjunction with the consolidated financial statements of Kevco, Bowen,         
Consolidated Forest and Shelter and the notes thereto included elsewhere in     
this Prospectus.                                                                

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)

                                                                [Download Table]

                                                         SHELTER               
                                  KEVCO     SHELTER    ACQUISITION    PRO FORMA
                                HISTORICAL HISTORICAL ADJUSTMENTS(1)    TOTAL  
                                                                               
            ASSETS                                                             
Current Assets:                                                                
  Cash and cash equivalents....  $     77   $ 13,139     $(13,139)(2) $     77 
  Trade accounts receivable,                                                   
   net.........................    25,190     33,010          --        58,200 
  Inventories..................    34,988     43,001          --        77,989 
  Other current assets.........     1,447      3,327          --         4,774 
                                 --------   --------     --------     -------- 
    Total current assets.......    61,702     92,477      (13,139)     141,040 
Property and equipment, net....    18,563     25,929          --        44,492 
Intangible assets, net.........    33,600     13,126      (13,126)(3)  127,549 
                                                           88,024 (3)          
                                                            5,925 (4)          
Other assets...................       713      1,322          --         2,035 
                                 --------   --------     --------     -------- 
    Total assets...............  $114,578   $132,854     $ 67,684     $315,116 
                                 ========   ========     ========     ======== 
        LIABILITIES AND                                                        
      STOCKHOLDERS' EQUITY                                                     
Current Liabilities:                                                           
  Trade accounts payable.......  $ 22,245   $ 33,079     $    --      $ 55,324 
  Accrued liabilities..........     4,050      7,279          --        11,329 
  Current portion of long-term                                                 
   debt........................       112      3,007       (2,271)(5)      848 
  Other liabilities                   168      1,023          935 (6)    2,126 
                                 --------   --------     --------     -------- 
    Total current liabilities..    26,575     44,388       (1,336)      69,627 
Long-term debt, less current                                                   
 portion.......................    45,737     17,208      (14,444)(7)  202,255 
                                                          153,754 (7)          
Other liabilities..............     1,869        968          --         2,837 
                                 --------   --------     --------     -------- 
  Total liabilities............    74,181     62,564      137,974      274,719 
  Total stockholders' equity...    40,397     70,290      (70,290)(8)   40,397 
                                 --------   --------     --------     -------- 
    Total liabilities and                                                      
     stockholders' equity......  $114,578   $132,854     $ 67,684     $315,116 
                                 ========   ========     ========     ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET 
SEPTEMBER 30, 1997  
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)  

(1) The Shelter Acquisition was accounted for using the purchase method of      
accounting. The aggregate purchase price was determined as follows:     

                                                                [Download Table]
                                                                           
Shares outstanding at September 30, 1997........................     7,765 
Options outstanding at September 30, 1997.......................       376 
                                                                  -------- 
  Total.........................................................     8,141 
Purchase price per share........................................  $  17.50 
                                                                  -------- 
                                                                  $142,468 
Exercise of options outstanding(a)..............................    (3,625)
                                                                  -------- 
Purchase price..................................................  $138,843 
Acquisition costs(b)............................................     5,410 
                                                                  -------- 
  Total purchase price..........................................  $144,253 
                                                                  ======== 

(a) Represents cash to be received by Kevco in settlement of stock options  
 outstanding as of September 30, 1997 (options outstanding to purchase
   376,000 shares of Shelter Common Stock at an average price of $9.64 per
share).                                                             
(b) Represents fees and costs directly associated with the Shelter          
Acquisition consisting of investment banking, legal and other       
professional costs.                                                 

(2) Reflects the utilization of existing cash to finance a portion of the       
Shelter Acquisition.                                                    

(3) Goodwill was adjusted to reflect (i) the elimination of existing goodwill   
  of Shelter and (ii) the excess of purchase cost over the fair value of net
assets acquired which amount will be amortized on a straight line basis 
over an estimated life of 40 years.                                     

(4) Intangibles were adjusted to reflect the capitalization of financing costs  
  that will be amortized over the life of the Senior Credit Facility and the
Notes.                                                                  

(5) Current portion of long-term debt was adjusted to reflect the retirement    
of a portion of long-term debt of Shelter. See note (7).                

(6) The adjustment reflects accrued severance costs related to the involuntary  
termination of employees resulting from the Shelter Acquisition.        
(7) Long-term debt was adjusted to reflect gross proceeds of $105,000 from the  
  issuance of the Notes and additional borrowings of $48,754 from the Senior
Credit Facility, net of $14,444 of long-term debt of Shelter that was   
retired.                                                                

(8) The adjustment reflects the elimination of the stockholders' equity of      
Shelter.                                                                

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME  
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                          KEVCO    SHELTER                                         
                           PRO       PRO                     THE OLD       KEVCO   
                          FORMA     FORMA      SHELTER        NOTES       COMBINED 
                          TOTALS    TOTALS   ACQUISITION    OFFERING        PRO    
                           (A)        (B)    ADJUSTMENTS   ADJUSTMENTS     FORMA   
                                                                                   
Net sales............... $384,269  $470,907   $     --      $     --      $855,176 
Cost of sales...........  330,583   404,977         --            --       735,560 
                         --------  --------   --------      --------      -------- 
  Gross profit..........   53,686    65,930         --            --       119,616 
Commission income.......    6,224     2,706         --            --         8,930 
                         --------  --------   --------      --------      -------- 
                           59,910    68,636         --            --       128,546 
Selling, general and                                                               
 administrative                                                                    
 expenses...............   41,035    54,356    (5,346)(1)                   91,014 
                                               (1,232)(2)                          
                                                2,201 (3)                          
                         --------  --------   --------      --------      -------- 
  Operating income......   18,875    14,280      4,377            --        37,532 
Interest expense........   (4,068)   (1,039)        --       (18,580)(4)   (19,536)
                                                               4,862 (4)           
                                                                (711)(4)           
Other income............      174       447         --            --           621 
                         --------  --------   --------      --------      -------- 
  Income before income                                                             
   taxes................   14,981    13,688      4,377       (14,429)       18,617 
Income taxes                5,992     5,267      1,751(5)     (4,632)(5)     8,378 
                         --------  --------   --------      --------      -------- 
  Net income............ $  8,989  $  8,421   $  2,626      ($ 9,797)     $ 10,239 
                         ========  ========   ========      ========      ======== 
Earnings per share...... $   1.30                                         $   1.48 
                         ========                                         ======== 
Weighted average shares                                                            
outstanding.............    6,916                                            6,916 
                         ========                                         ======== 
OTHER DATA:                                                                        
  Operating income...... $ 18,875  $ 14,280   $  4,377      $     --      $ 37,532 
  Depreciation and                                                                 
   amortization.........    3,346     3,839        969            --         8,154 
                         --------  --------   --------      --------      -------- 
  EBITDA (6)............ $ 22,221  $ 18,119   $  5,346      $     --      $ 45,686 
                         ========  ========   ========      ========      ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Public Offering and the Kevco          
Acquisitions. See details in "Unaudited Pro Forma Financial Data,"      
beginning on page P-1.                                                  
(B) Includes the pro forma effect of the sale of the operations and certain     
assets of Danube and the PSI Acquisition. See details in "Unaudited Pro 
Forma Financial Data," beginning on page P-1.                           

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of  
$4,862 to be repaid from the proceeds of the Senior Credit Facility and 
(iii) the amortization of financing costs of $711 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                               THE OLD               
                           KEVCO     SHELTER     SHELTER        NOTES         KEVCO  
                         PRO FORMA  PRO FORMA  ACQUISITION    OFFERING      COMBINED 
                         TOTALS(A)  TOTALS(B)  ADJUSTMENTS   ADJUSTMENTS    PRO FORMA
                                                                                     
Net sales............... $289,952   $362,139     $   --       $    --       $652,091 
Cost of sales...........  250,896    311,329         --            --        562,225 
                         --------   --------     -------      --------      -------- 
  Gross profit..........   39,056     50,810         --            --         89,866 
Commission income.......    4,506      2,074         --            --          6,580 
                         --------   --------     -------      --------      -------- 
                           43,562     52,884         --            --         96,446 
Selling, general and                                                                 
 administrative                                                                      
 expenses...............   30,667     41,239      (3,597)(1)       --         69,077 
                                                    (883)(2)                         
                                                   1,651 (3)                         
                         --------   --------     -------      --------      -------- 
  Operating income......   12,895     11,645       2,829           --         27,369 
Interest expense........   (2,869)      (612)        --        (13,935)(4)   (14,652)
                                                                 3,297 (4)           
                                                                  (533)(4)           
Other income............       52        447         --            --            499 
                         --------   --------     -------      --------      -------- 
  Income before income                                                               
   taxes................   10,078     11,480       2,829       (11,171)       13,216 
Income taxes............    4,031      4,422       1,054 (5)    (3,561)(5)     5,946 
                         --------   --------     -------      --------      -------- 
  Net income............ $  6,047   $  7,058     $ 1,775      $ (7,610)     $  7,270 
                         ========   ========     =======      ========      ======== 
Earnings per share...... $   0.87                                           $   1.05 
                         ========                                           ======== 
  Weighted average                                                                   
   shares outstanding...    6,916                                              6,916 
                         ========                                           ======== 
OTHER DATA:                                                                          
  Operating income...... $ 12,895   $ 11,645     $ 2,829      $    --       $ 27,369 
  Depreciation and                                                                   
   amortization.........    2,455      2,864         768           --          6,087 
                         --------   --------     -------      --------      -------- 
  EBITDA(6)............. $ 15,350   $ 14,509     $ 3,597      $    --       $ 33,456 
                         ========   ========     =======      ========      ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Kevco Acquisitions. See details in     
"Unaudited Pro Forma Financial Data," beginning on page P-1.            

(B) Includes the pro forma effect of the PSI Acquisition. See details in        
"Unaudited Pro Forma Financial Data," beginning on page P-1.            

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 
NINE MONTHS ENDED SEPTEMBER 30, 1997  
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $13,935 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of  
 $3,297 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $533 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME  
YEAR ENDED DECEMBER 31, 1996  
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                               THE OLD              
                           KEVCO     SHELTER     SHELTER        NOTES        KEVCO  
                         PRO FORMA  PRO FORMA  ACQUISITION    OFFERING     COMBINED 
                         TOTALS(A)  TOTALS(B)  ADJUSTMENTS   ADJUSTMENTS   PRO FORMA
                                                                                    
Net sales............... $401,119   $454,567     $  --         $   --      $855,686 
Cost of sales...........  341,473    391,440        --             --       732,913 
                         --------   --------     ------        -------     -------- 
  Gross profit..........   59,646     63,127        --             --       122,773 
Commission income.......    6,900      2,459        --             --         9,359 
                         --------   --------     ------        -------     -------- 
                           66,546     65,586        --             --       132,132 
Selling, general and                                                                
 administrative                                                                     
 expenses...............   42,264     50,553     (4,914)(1)        --        88,722 
                                                 (1,382)(2)                         
                                                  2,201 (3)                         
                         --------   --------     ------        -------     -------- 
  Operating income......   24,282     15,033      4,095            --        43,410 
Interest expense........   (4,420)    (1,994)        --        (18,580)(4)  (19,536)
                                                                 6,169 (4)          
                                                                  (711)(4)          
Other income............       61        --         --             --            61 
                         --------   --------     ------        -------     -------- 
  Income before income                                                              
   taxes................   19,923     13,039      4,095        (13,122)      23,935 
Income taxes............    7,969      5,072      1,535(5)      (3,805)(5)   10,771 
                         --------   --------     ------        -------     -------- 
  Net income............ $ 11,954   $  7,967     $2,560        $(9,317)    $ 13,164 
                         ========   ========     ======        =======     ======== 
Earnings per share...... $   1.73                                          $   1.90 
                         ========                                          ======== 
Weighted average shares                                                             
 outstanding............    6,911                                             6,911 
                         ========                                          ======== 
OTHER DATA:                                                                         
  Operating income...... $ 24,282   $ 15,033     $4,095        $   --      $ 43,410 
  Depreciation and                                                                  
   amortization.........    3,418      3,596        819            --         7,833 
                         --------   --------     ------        -------     -------- 
  EBITDA(6)............. $ 27,700   $ 18,629     $4,914        $   --      $ 51,243 
                         ========   ========     ======        =======     ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Public Offering and the Kevco          
Acquisitions. See details in "Unaudited Pro Forma Financial Data,"      
beginning on page P-1.                                                  
(B) Includes the pro forma effect of the sale of Danube and the PSI             
Acquisition. See details in "Unaudited Pro Forma Financial Data,"       
beginning on page P-1.                                                  

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 
YEAR ENDED DECEMBER 31, 1996  
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8% (ii) the elimination of interest on existing debt of   
 $6,169 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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SELECTED CONSOLIDATED FINANCIAL DATA OF KEVCO 

The selected consolidated financial data for the five years ended December  
31, 1996 are derived from Kevco's audited consolidated financial statements.    
The financial data for the nine months ended September 30, 1996 and 1997 are    
derived from Kevco's unaudited consolidated financial statements, which in the  
opinion of management reflect all adjustments (consisting of only normal        
recurring adjustments) necessary for a fair presentation of results for such    
periods. Results for the nine months ended September 30, 1997 are not           
necessarily indicative of the results that may be expected for the full year.   
In the second quarter of fiscal 1997, Kevco changed the method of accounting    
for its inventories from the last-in, first-out method to the first-in, first-  
out method. Financial results for all periods presented prior to the change     
have been restated to effect the new method of accounting for inventories. The  
selected consolidated financial data should be read in conjunction with         
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and the financial statements and notes thereto included elsewhere   
in this Prospectus.                                                             

                                                        [Enlarge/Download Table]

                                                                        NINE MONTHS ENDED  
                                  YEAR ENDED DECEMBER 31,                 SEPTEMBER 30,    
                         ---------------------------------------------  ------------------ 
                           1996      1995     1994     1993     1992      1997      1996   
                                           (DOLLARS IN THOUSANDS)                          
                                                                                           
INCOME STATEMENT DATA:                                                                     
Net sales............... $267,344  $182,519  $99,279  $80,257  $61,169  $271,957  $205,048 
Cost of sales...........  226,653   155,641   83,356   67,884   50,530   235,138   174,055 
                         --------  --------  -------  -------  -------  --------  -------- 
  Gross profit..........   40,691    26,878   15,923   12,373   10,639    36,819    30,993 
Commission income.......    5,497     2,610    1,066    1,274    1,234     4,413     4,100 
                         --------  --------  -------  -------  -------  --------  -------- 
                           46,188    29,488   16,989   13,647   11,873    41,232    35,093 
Selling, general and                                                                       
 administrative                                                                            
 expenses...............   29,723    20,889   11,941   10,550    9,491    28,738    22,590 
                         --------  --------  -------  -------  -------  --------  -------- 
  Operating income......   16,465     8,599    5,048    3,097    2,382    12,494    12,503 
Other income............      --        --       800      --       --        --        --  
Interest expense, net...   (2,058)   (1,337)    (281)    (342)    (334)   (2,354)   (1,626)
                         --------  --------  -------  -------  -------  --------  -------- 
  Income before income                                                                     
   taxes................   14,407     7,262    5,567    2,755    2,048    10,140    10,877 
Income taxes............    1,695        45       51      --       --      4,056        30 
                         --------  --------  -------  -------  -------  --------  -------- 
  Net income............ $ 12,712  $  7,217  $ 5,516  $ 2,755  $ 2,048  $  6,084  $ 10,847 
                         ========  ========  =======  =======  =======  ========  ======== 
OTHER DATA:                                                                                
EBITDA(1)............... $ 18,257  $  9,640  $ 5,447  $ 3,406  $ 2,645  $ 14,666  $ 13,821 
Ratio of earnings to                                                                       
 fixed charges(2).......     5.1x      3.8x     5.8x     4.0x     3.6x      3.7x      4.9x 

                                       DECEMBER 31,                       SEPTEMBER 30,    
                         ---------------------------------------------  ------------------ 
                           1996      1995     1994     1993     1992      1997      1996   
                                                                                           
BALANCE SHEET DATA:                                                                        
Working capital......... $ 24,526  $ 19,744  $ 5,078  $ 4,363  $ 5,640  $ 35,127  $ 17,729 
Total assets............   55,739    55,669   18,067   15,365   12,007   114,578    61,772 
Total debt..............    9,831    31,263    6,385    5,547    1,815    45,849    25,428 
Stockholders' equity....   34,193     9,556    6,094    3,850    6,169    40,397    15,190 

---------------------                                                           
(1) EBITDA for any relevant period presented above is defined as net income     
  plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
  EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by      
operating activities, which are determined in accordance with generally 
accepted accounting principles. EBITDA is included because management   
believes that certain readers may find it to be a useful tool for       
analyzing operating performance, leverage, liquidity, and a company's   
  ability to service debt. See Kevco's Consolidated Financial Statements and
the Notes thereto included elsewhere in this Prospectus.                
(2) Ratio of earnings to fixed charges is computed by dividing fixed charges    
  into income before income taxes and minority interests plus fixed charges.
  Fixed charges consist of interest expense, amortization of financing costs
and the estimated interest component of rent expense.                   

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SELECTED CONSOLIDATED FINANCIAL DATA OF SHELTER 

The selected consolidated financial data for the five years ended December  
31, 1996 are derived from Shelter's audited consolidated financial statements.  
The financial data for the nine months ended September 30, 1996 and 1997 are    
derived from Shelter's unaudited consolidated financial statements, which in    
the opinion of management reflect all adjustments (consisting of only normal    
recurring adjustments) necessary for a fair presentation of results for such    
periods. Results for the nine months ended September 30, 1997 are not           
necessarily indicative of the results that may be expected for the full year.   
The selected consolidated financial data should be read in conjunction with     
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and the financial statements and notes thereto included elsewhere   
in this Prospectus.                                                             

                                                        [Enlarge/Download Table]

                                                                           NINE MONTHS ENDED  
                                   YEAR ENDED DECEMBER 31,                   SEPTEMBER 30,    
                         ------------------------------------------------  ------------------ 
                           1996      1995      1994      1993      1992      1997      1996   
                                             (DOLLARS IN THOUSANDS)                           
                                                                                              
INCOME STATEMENT DATA:                                                                        
Net sales............... $521,022  $462,323  $333,104  $236,958  $193,627  $357,879  $397,065 
Cost of goods sold......  447,701   393,775   281,808   198,311   161,448   307,906   339,549 
                         --------  --------  --------  --------  --------  --------  -------- 
 Gross profit...........   73,321    68,548    51,296    38,647    32,179    49,973    57,516 
Commission income.......    2,459     3,005     3,111     1,851     1,151     2,074     1,827 
                         --------  --------  --------  --------  --------  --------  -------- 
                           75,780    71,553    54,407    40,498    33,330    52,047    59,343 
Selling, general and                                                                          
 administrative                                                                               
 expenses...............   60,194    52,709    39,136    29,120    25,165    40,810    44,291 
                         --------  --------  --------  --------  --------  --------  -------- 
 Operating income.......   15,586    18,844    15,271    11,378     8,165    11,237    15,052 
Other income (expense)                                                                        
 Interest income........      177       142        38        80        47       755       102 
 Interest expense.......   (1,831)   (2,472)   (1,035)     (696)   (1,212)   (1,219)   (1,398)
 Gain on sale of                                                                              
  assets................    5,919       --        --        --        --        447       --  
                         --------  --------  --------  --------  --------  --------  -------- 
  Total other income                                                                          
   (expense)............    4,265    (2,330)     (997)     (616)   (1,165)      (17)   (1,296)
                         --------  --------  --------  --------  --------  --------  -------- 
  Income before income                                                                        
   taxes................   19,851    16,514    14,274    10,762     7,000    11,220    13,756 
Income taxes............    8,153     6,476     5,577     4,200     2,780     4,320     5,365 
                         --------  --------  --------  --------  --------  --------  -------- 
  Net income............ $ 11,698  $ 10,038  $  8,697  $  6,562  $  4,220  $  6,900  $  8,391 
                         ========  ========  ========  ========  ========  ========  ======== 
OTHER DATA:                                                                                   
EBITDA(1)...............  $18,936   $21,741   $17,303  $ 12,818  $  9,785  $ 13,691  $ 17,497 

                                         DECEMBER 31,                        SEPTEMBER 30,    
                         ------------------------------------------------  ------------------ 
                           1996      1995      1994      1993      1992      1997      1996   
                                                                                              
BALANCE SHEET DATA:                                                                           
Working capital......... $ 50,084  $ 41,729  $ 40,776  $ 22,998  $ 21,148  $ 48,089  $ 45,621 
Total assets............  120,910   107,414    87,332    61,917    47,647   132,854   126,321 
Total debt..............   24,543    26,328    23,634    13,442     9,782    20,215    20,651 
Stockholders' equity....   62,780    51,168    38,116    29,729    23,336    70,290    59,598 

---------------------                                                           
(1) EBITDA for any relevant period presented above is defined as net income     
  plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
  EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by      
operating activities, which are determined in accordance with generally 
accepted accounting principles. EBITDA is included because management   
believes that certain readers may find it to be a useful tool for       
analyzing operating performance, leverage, liquidity, and a company's   
ability to service debt. See Shelter's Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus.            

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 

GENERAL                                                                         

From 1992 through 1996 Kevco experienced significant growth in earnings.    
This growth was the result of internal expansion, including the opening of new  
distribution centers, as well as the acquisition of distribution and            
manufacturing facilities from Service Supply Systems, Inc. ("Service Supply")   
in June 1995, for approximately $17.7 million in cash. In 1997, Kevco has       
continued its expansion strategy through the acquisitions of Consolidated       
Forest on February 27, 1997 and Bowen on February 28, 1997. The aggregate       
purchase price for the Consolidated Forest and Bowen acquisitions was $33.5     
million, including $31.0 million in cash. Through the Bowen and Consolidated    
Forest acquisitions and the opening of one new distribution facility and one    
new manufacturing facility, Kevco has increased the number of its distribution  
and manufacturing facilities to 26 and five, respectively, from 21 and three    
on December 31, 1996.                                                           

Shelter has experienced significant growth in sales and earnings from 1991  
through 1996. This growth was the result of internal expansion, including       
opening new distribution and manufacturing facilities and adding new product    
lines. Shelter has also made several strategic acquisitions over this period    
including acquisitions of Design Components, Inc., a wallboard laminating       
company, in 1993; acquisitions of two distributors of products to the           
manufactured housing and RV industries, TATCO, Inc. in 1994 and BABSCO, Inc.    
("BABSCO") in 1995; and the June 1997 acquisition of PSI, a manufacturer of     
injection molded plastic components. As a result, Shelter has increased the     
number of its distribution and manufacturing facilities to 21 and nine,         
respectively. In December 1996, Shelter sold the operations and certain assets  
of its Danube subsidiary.                                                       

The Company's revenue and earnings growth are affected by changes in the    
volume of industry-wide shipments of manufactured housing and RVs as well as    
its ability to increase penetration of these markets. From 1992 through 1996,   
manufactured housing shipments grew from approximately 211,000 to               
approximately 363,400, a compound annual growth rate of 14.6%. Over the same    
period, Kevco's sales grew from $61.2 million to $267.3 million, a compound     
annual growth rate of 44.6%, and Shelter's sales grew from $193.6 million to    
$521.0 million, a compound annual growth rate of 28.1%. The Company strives to  
achieve revenue growth in excess of manufactured housing industry shipment      
growth. The Company has been able to accomplish this growth by increasing its   
product offerings, entering new markets, completing strategic acquisitions and  
by developing strong customer relationships through its service-oriented        
approach.                                                                       

Management expects the consolidation of the two companies' operations to    
result in substantial cost savings over time. The Company will seek to          
capitalize on the significant common geographic presence of Kevco and Shelter   
and shared customer relationships to obtain distribution and sales cost         
reductions. In addition, the Company will seek to obtain greater utilization    
of its existing corporate administrative resources to reduce the combined       
overhead expense. The Company intends to eliminate redundant corporate          
administrative functions and reduce warehousing and distribution staffs,        
resulting in an estimated annual reduction in employee compensation of $5.3     
million. The Company also intends to pursue opportunities to achieve greater    
benefits over time through (i) the combination of multiple warehouse            
facilities in single, larger facilities in certain markets, and (ii) achieving  
economies of scale in purchasing materials and supplies as a larger combined    
entity. There can be no assurances that the cost savings discussed here or      
elsewhere will be realized or that there will not be significant delays in      
achieving such cost savings.                                                    

The Company recognizes revenues from product sales at the time of shipment  
(or the time of product receipt, in the case of direct shipments from           
suppliers to customers). In some cases the Company sells on a commission        
basis. Commissions are recognized when earned and represent amounts earned in   
selling, warehousing and delivering products for certain manufacturers of       
building products with which the Company has distribution agreements.           
Commission arrangements do not require inventory investments or receivable      
financing, and therefore are significantly less expensive to the Company than   
traditional sales. To the extent the volume of items warehoused and shipped     
under commission arrangements increases faster or slower than the volume of     
items related to traditional sales, changes in net sales may not be             
representative of actual shipment volume increases or decreases.                

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RESULTS OF OPERATIONS                                                           

KEVCO                                                                           

The following table sets forth, for the periods indicated, certain          
Statements of Income data and that data as a percentage of Kevco's net sales.   

                                                        [Enlarge/Download Table]

                                                                            NINE MONTHS ENDED SEPTEMBER     
                                   YEAR ENDED DECEMBER 31,                              30,                 
                         ------------------------------------------------  -------------------------------- 
                              1996             1995            1994             1997             1996       
                                                  (DOLLARS IN THOUSANDS)                                    
                                                                                                            
Net sales............... $267,344  100.0% $182,519  100.0% $99,279  100.0% $271,957  100.0% $205,048  100.0%
Cost of sales...........  226,653   84.8   155,641   85.3   83,356   84.0   235,138   86.5   174,055   84.9 
                         --------  -----  --------  -----  -------  -----  --------  -----  --------  ----- 
 Gross profit...........   40,691   15.2    26,878   14.7   15,923   16.0    36,819   13.5    30,993   15.1 
Commission income.......    5,497    2.1     2,610    1.4    1,066    1.1     4,413    1.6     4,100    2.0 
                         --------  -----  --------  -----  -------  -----  --------  -----  --------  ----- 
                           46,188   17.3    29,488   16.1   16,989   17.1    41,232   15.1    35,093   17.1 
Selling, general and                                                                                        
 administrative                                                                                             
 expenses...............   29,723   11.1    20,889   11.4   11,941   12.0    28,738   10.5    22,590   11.0 
                         --------  -----  --------  -----  -------  -----  --------  -----  --------  ----- 
Operating income........   16,465    6.2     8,599    4.7    5,048    5.1    12,494    4.6    12,503    6.1 
Other income............      --     0.0       --     0.0      800    0.8       --     0.0       --     0.0 
Interest expense, net...   (2,058)  (0.8)   (1,337)  (0.7)    (281)  (0.3)   (2,354)  (0.9)   (1,626)  (0.8)
                         --------  -----  --------  -----  -------  -----  --------  -----  --------  ----- 
 Income before income                                                                                       
  taxes................. $ 14,407    5.4% $  7,262    4.0% $ 5,567    5.6% $ 10,140    3.7% $ 10,877    5.3%
                         ========  =====  ========  =====  =======  =====  ========  =====  ========  ===== 

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996                   

Net sales increased by $67.0 million, or 32.7%, to $272.0 million for the   
nine month period ended September 30, 1997 from $205.0 million for the          
comparable 1996 period. The net sales increase primarily resulted from the      
effect of the Kevco Acquisitions in February 1997. However, net sales, without  
the effect of the Kevco Acquisitions, decreased from $205.0 million to $196.6   
million, a decrease of 4.1%, which is comparable to the reported manufacturing  
housing shipment decline of 3.4% from January through August 1997, as compared  
to the prior period. Sales to the manufactured housing industry represented     
approximately 90% of net sales for the nine months ended September 30, 1997.    

Gross profit increased by $5.8 million, or 18.7%, to $36.8 million for the  
nine month period ended September 30, 1997 from $31.0 million for the           
comparable 1996 period due primarily to the Kevco Acquisitions. Gross profit,   
as a percent of net sales, decreased to 13.5% for the nine month period ended   
September 30, 1997 from 15.1% for the comparable 1996 period. The decrease in   
gross profit, as a percent of net sales, is a result of lower gross margins     
associated with the Consolidated Acquisition and lower margin dollars earned    
from wood products as a whole due to declining lumber prices throughout the     
nine months ended September 30, 1997 (such wood products represent              
approximately 38% of net sales). To a lesser extent, gross margins from non-    
lumber related business decreased primarily as a result of temporary price      
increases of a major product line.                                              

Commission income increased by $0.3 million, or 7.3%, to $4.4 million for   
the nine month period ended September 30, 1997 from $4.1 million for the        
comparable 1996 period. The increase was primarily attributable to Kevco's      
expansion in commission-based distribution arrangements.                        

Selling, general and administrative expenses increased by $6.1 million, or  
27.0%, to $28.7 million for the nine month period ended September 30, 1997      
from $22.6 million for the comparable 1996 period. The increase was primarily   
due to increased sales volume related to the Kevco Acquisitions. Selling,       
general and administrative expenses, as a percent of net sales, decreased to    
10.5% for 1997 from 11.0% for the comparable 1996 period. The decrease          
reflects Kevco's continued efforts in increasing efficiency.                    

Net income decreased by $0.6 million, or 9.0%, to $6.1 million for the nine 
months ended September 30, 1997 from $6.7 million for the comparable 1996       
period on a pro forma basis giving effect to Kevco's conversion from an S       
corporation to a C corporation. The decrease in net income is primarily         
attributable to lower gross margins as discussed above.                         

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COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995                          

Net sales increased by $84.8 million, or 46.5%, to $267.3 million in 1996   
from $182.5 million in 1995. The increase in net sales was primarily            
attributable to the inclusion of a full year of sales from the Service Supply   
acquisition in 1996 compared to six months of sales from the Service Supply     
acquisition in 1995. However, net sales, on a combined basis as if the          
acquisition of Service Supply had occurred on January 1, 1995, increased from   
$241.8 million in 1995 to $267.3 million in 1996, an increase of 10.5%. The     
increase in net sales on such a combined basis primarily resulted from an       
increase in the volume and variety of products sold. Management believes the    
increase in the volume and variety of products sold was primarily the result    
of the establishment of national plumbing products accounts with several        
customers, sales of Kevco product lines to existing Service Supply customers    
(as well as sales of Service Supply product lines to existing Kevco customers)  
and improved customer demand. The increase in net sales, on such a combined     
basis, was in excess of the 6.9% increase in reported manufactured home         
shipments in 1996 compared to 1995 (approximately 363,400 homes reported        
shipped in 1996 compared to approximately 340,000 homes reported shipped in     
1995). Sales to the manufactured housing industry represented approximately     
90% of Kevco's net sales in 1996.                                               

Gross profit increased by $13.8 million, or 51.3%, to $40.7 million in 1996 
from $26.9 million in 1995. This increase in gross profit was primarily         
attributable to the inclusion of a full year of gross profit from the Service   
Supply acquisition in 1996 compared to six months gross profit from the         
Service Supply acquisition in 1995. Gross profit, on a combined basis as if     
the acquisition of Service Supply had occurred on January 1, 1995, increased    
from $34.0 million in 1995 to $40.6 million in 1996, an increase of 19.4%.      
This increase in gross profit on such a combined basis resulted primarily from  
an overall increase in the volume of net sales. Actual gross profit, as a       
percent of actual net sales, increased to 15.2% in 1996 from 14.7% in 1995.     
This increase was primarily the result of improving margins associated with     
Service Supply's sales. Gross profit, as a percent of net sales, on a combined  
basis as if the acquisition of Service Supply had occurred on January 1, 1995,  
increased from 14.1% in 1995 to 15.2% in 1996. Management believes that both    
the increase in actual gross profit, as a percent of net sales, and the         
increase in gross profit, as a percent of net sales, on a combined basis are a  
direct result of Kevco's ability to take advantage of purchasing opportunities  
following the acquisition of Service Supply.                                    

Commission income increased by $2.9 million, or 111.5%, to $5.5 million in  
1996 from $2.6 million in 1995. Although a portion of the increase resulted     
from the inclusion of a full year of commission income from the Service Supply  
acquisition in 1996 compared to six months of commission income from the        
Service Supply acquisition in 1995, the most significant factor in the          
increase was that Kevco entered into commission-based distribution              
arrangements with two manufacturers of component products.                      

Selling, general and administrative expenses increased by $8.8 million, or  
42.1%, to $29.7 million in 1996 from $20.9 million in 1995. The increase was    
primarily related to the inclusion of a full year of selling, general and       
administrative expenses from the Service Supply acquisition in 1996 compared    
to six months of selling, general and administrative expenses in 1995 and, to   
a lesser extent, the increased expenses related to the overall net sales        
increase. Selling, general and administrative expenses, as a percent of net     
sales, decreased to 11.1% in 1996 from 11.4% in 1995, reflecting the reduction  
of redundant overhead and warehousing costs associated with Service Supply      
and, generally, Kevco's ability to increase sales without a proportionate       
increase in related operating expenses.                                         

Net income increased by $7.1 million, or 97.3%, to $14.4 million in 1996    
from $7.3 million in 1995. The increase was primarily a result of the           
inclusion of a full year of gross profit from the Service Supply acquisition    
in 1996 compared to six months of gross profit from the Service Supply          
acquisition in 1995, and the remainder of the increase was attributable to the  
increase in net sales without a proportionate increase in operating expenses.   
The increase in net income was net of additional interest expense incurred of   
$0.5 million in 1996 related to the term loan associated with the acquisition   
of Service Supply, outstanding for a full year period compared to six months    
in 1995.                                                                        

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COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994                          

Net sales increased by $83.2 million, or 83.8%, to $182.5 million in 1995   
from $99.3 million in 1994. The increase in net sales was primarily             
attributable to the inclusion of six months of sales from the Service Supply    
facilities in 1995. However, net sales, on a combined basis as if the           
acquisition of Service Supply had occurred on January 1, 1994, also increased   
in 1995 to $241.8 million from $200.2 million in 1994, an increase of 20.8%.    
The increase in net sales on such a combined basis primarily resulted from an   
increase in the volume and variety of products sold. Management believes the    
increase in the volume and variety of products sold was primarily the result    
of the establishment of national plumbing products accounts with several        
customers, sales of Kevco product lines to existing Service Supply customers    
(as well as sales of Service Supply product lines to existing Kevco customers)  
and improved customer demand. The increase in net sales, on such a combined     
basis, was in excess of the 11.8% increase in reported manufactured home        
shipments in 1995 compared to 1994 (approximately 340,000 homes reported        
shipped in 1995 compared to approximately 304,000 homes reported shipped in     
1994). Sales to the manufactured housing industry represented approximately     
85% of Kevco's net sales in 1995.                                               

Gross profit increased by $11.0 million, or 69.2%, to $26.9 million in 1995 
from $15.9 million in 1994. This increase in gross profit was primarily         
attributable to the inclusion of six months of gross profit from the Service    
Supply facilities in 1995. Gross profit, on a combined basis as if the          
acquisition of Service Supply had occurred on January 1, 1994, increased in     
1995 to $34.0 million from $28.5 million in 1994, an increase of 19.3%. This    
increase in gross profit on such a combined basis resulted primarily from an    
overall increase in the volume of net sales. Actual gross profit, as a percent  
of actual sales, decreased to 14.7% in 1995 from 16.0% in 1994. This decrease   
was primarily the result of lower margins associated with Service Supply's      
sales. Gross profit, as a percent of sales, on a combined basis as if the       
acquisition of Service Supply had occurred on January 1, 1994, decreased to     
14.1% in 1995 from 14.3% in 1994, a decrease which management believes was      
primarily the result of competition from other suppliers attempting to          
increase their market shares.                                                   

Commission income increased by $1.5 million, or 136.4%, to $2.6 million in  
1995 from $1.1 million in 1994. A significant amount of the increase resulted   
from the inclusion of six months of commission income from the Service Supply   
facilities in 1995. An additional significant factor in this increase was the   
increase in sales volume for which Kevco is compensated on a commission basis.  

Selling, general and administrative expenses increased by $9.0 million, or  
75.6%, to $20.9 million in 1995 from $11.9 million in 1994. The increase was    
primarily related to the inclusion of six months of selling, general and        
administrative expenses from the Service Supply facilities in 1995 and, to a    
lesser extent, the increased expenses related to the overall net sales          
increase. Selling, general and administrative expenses, as a percent of sales,  
decreased to 11.4% in 1995 from 12.0% in 1994, reflecting the reduction of      
redundant overhead and warehousing costs associated with Service Supply and,    
generally, Kevco's ability to increase sales without a proportionate increase   
in related operating expenses.                                                  

Net income increased by $1.7 million, or 30.4%, to $7.3 million in 1995 from
$5.6 million in 1994. Excluding insurance proceeds of $0.8 million recognized   
as income in 1994 related to a former officer's disability, the increase in     
net income from 1994 to 1995 would have been 59.1%. The increase was primarily  
a result of the inclusion of six months of gross profit from the Service        
Supply facilities in 1995, and the remainder of the increase was attributable   
to the increase in net sales without a proportionate increase in operating      
expenses. Also, the increase in net income was net of additional interest       
expense incurred of $0.6 million in 1995 related to the term loan associated    
with the acquisition of Service Supply.                                         

RECENT OPERATING RESULTS                                                      

The Company believes that Kevco's net sales for the three months ending     
December 31, 1997 are likely to be lower than its net sales for the three       
months ended December 31, 1996 (on a pro forma basis after giving effect to     
the Kevco Acquisitions), primarily as a result of reduced shipments of          
manufactured housing units by Kevco's customers. Operating income is expected   
to decrease for the three months ending December 31, 1997, as compared to the   
three months ended December 31, 1996 (on a pro forma basis after giving effect  
to the Kevco                                                                    

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Acquisitions), primarily as a result of reduced margins on sales of wood        
products, which as previously discussed, declined in the third quarter of 1997  
due to a prolonged decrease in lumber prices during the period. While lumber    
prices and wood margins have stabilized and improved slightly in October and    
in the first part of November from the three months ended September 30, 1997,   
Kevco's wood margins will most likely be below fourth quarter levels of 1996.   
Operating income will also likely be reduced from the decline in industry       
shipments.                                                                      

SHELTER                                                                         

SIGNIFICANT FACTORS                                                           

The 1995 and 1996 results include the acquired electrical distribution      
operations of BABSCO, acquired on January 1, 1995. Pro forma information        
regarding the 1994 results of this acquisition is reflected in Note 9 of the    
Notes to Consolidated Financial Statements.                                     

The results for the three years ended December 31, 1996 also include the    
operations of Danube, Shelter's wholly-owned carpet manufacturing and yarn      
processing subsidiary, the operations and certain assets of which were sold on  
December 31, 1996. Historical financial information regarding Danube's results  
of operations is reflected in Note 10 of the Notes to Consolidated Financial    
Statements.                                                                     

RESULTS OF OPERATIONS                                                         

The following table sets forth, for the periods indicated, certain          
Statements of Income data and that data as a percentage of Shelter's net        
sales.                                                                          

                                                        [Enlarge/Download Table]


                                        YEAR ENDED DECEMBER 31,              NINE MONTHS ENDED SEPTEMBER 30, 
                         -------------------------------------------------  -------------------------------- 
                              1996             1995             1994             1997             1996       
                                                   (DOLLARS IN THOUSANDS)                                    
                                                                                                             
Net sales............... $521,022  100.0% $462,323  100.0% $333,104  100.0% $357,879  100.0% $397,065  100.0%
Cost of sales...........  447,701   85.9   393,775   85.2   281,808   84.6   307,906   86.0   339,549   85.5 
                         --------  -----  --------  -----  --------  -----  --------  -----  --------  ----- 
 Gross profit...........   73,321   14.1    68,548   14.8    51,296   15.4    49,973   14.0    57,516   14.5 
Commission income.......    2,459    0.5     3,005    0.7     3,111    0.9     2,074    0.5     1,827    0.4 
                         --------  -----  --------  -----  --------  -----  --------  -----  --------  ----- 
                           75,780   14.6    71,553   15.5    54,407   16.3    52,047   14.5    59,343   14.9 
Selling, general and                                                                                         
 administrative                                                                                              
 expenses...............   60,194   11.6    52,709   11.4    39,136   11.7    40,810   11.4    44,291   11.1 
                         --------  -----  --------  -----  --------  -----  --------  -----  --------  ----- 
Operating income........   15,586    3.0    18,844    4.1    15,271    4.6    11,237    3.1    15,052    3.8 
Interest expense, net...   (1,654)  (0.3)   (2,330)  (0.5)     (997)  (0.3)     (464)  (0.1)   (1,296)  (0.3)
Gain on sale of assets..    5,919    1.1        --     --        --     --       447    0.1        --     -- 
                         --------  -----  --------  -----  --------  -----  --------  -----  --------  ----- 
 Income before income                                                                                        
  taxes................. $ 19,851    3.8% $ 16,514    3.6% $ 14,274    4.3% $ 11,220    3.1% $ 13,756    3.5%
                         ========  =====  ========  =====  ========  =====  ========  =====  ========  ===== 

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996                   

Net sales decreased by $39.2 million, or 9.9%, to $357.9 million for the    
nine month period ended September 30, 1997 from $397.1 million for the          
comparable 1996 period. On a comparable operations basis (excluding Danube      
from 1996) net sales increased by $18.8 million, or 5.5%. Shelter's             
distribution sales increased by 7.1% while (comparable operations)              
manufacturing sales declined by 2.4%. Shelter increased its market share in     
electrical, plumbing and doors distributed during the period to overcome the    
3.4% decline in manufactured homes shipped through August 1997 compared to the  
same period in 1996.                                                            

Gross profit decreased $7.5 million, or 13.0%, to $50.0 million for the nine
month period ended September 30, 1997 from $57.5 million for the comparable     
1996 period. Gross profit margin for the nine month period ended September 30,  
1997 was 14.0% compared to 14.5% for the first nine months of 1996. Excluding   
Danube, gross profit margin was 13.8% for the first nine months of 1996.        
Shelter experienced higher gross margin as certain lower manufacturing raw      
material costs contributed to the improvements. Shelter has also begun to       
realize some of the labor and overhead efficiencies anticipated in recent       
investments in new equipment at certain                                         

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manufacturing operations. Improvements in manufacturing gross margin were       
partially offset by an increase in lower margin distribution sales as a         
percentage of total sales.                                                      

Operating expenses decreased $3.5 million, or 7.9%, to $40.8 million for the
nine month period ended September 30, 1997 from $44.3 million for the           
comparable 1996 period. As a percent of net sales, operating expenses           
increased to 11.4% for the nine month period ended September 30, 1997 from      
11.1% for the comparable 1996 period. Pro forma operating expenses were 10.8%   
of net sales for the first nine months of 1996. The increase in this            
percentage reflects higher self-insured medical claims in 1997 as well as the   
absorption of fixed administrative overhead costs by the remaining operations   
subsequent to the December 1996 sale of Danube's operations and the             
amortization of goodwill from the June 1997 purchase of the net assets and      
operations of PSI.                                                              

Interest income increased $0.7 million to $0.8 million for the nine month   
period ended September 30, 1997 from $0.1 million for the comparable 1996       
period, due to the income earned on funds available from the December 1996      
sale of Danube's operations.                                                    

Interest expense decreased by $0.2 million, or 14.3%, to $1.2 million for   
the nine month period ended September 30, 1997 from $1.4 million for the        
comparable 1996 period, due to the elimination of short-term borrowing          
requirements using funds available from the December 1996 sale of Danube's      
operations, coupled with scheduled principal reductions in long-term debt.      
1997 interest expense includes charges accrued for the $3.5 million notes       
issued in connection with the June 1997 purchase of the net assets and          
operations of PSI.                                                              

Income taxes as a percentage of income before income taxes decreased to     
38.5% for the nine month period ended September 30, 1997 from 39.0% for the     
comparable 1996 period, due to strategies implemented by Shelter to reduce its  
overall state and local tax burdens.                                            

Net income decreased $1.5 million, or 17.9%, to $6.9 million for the nine   
month period ended September 30, 1997 from $8.4 million for the comparable      
1996 period. As a percent of net sales, net income decreased to 1.9% for the    
nine month period ended September 30, 1997 from 2.1% for the comparable 1996    
period. Pro forma net income was 1.9% of pro forma net sales for the first      
nine months of 1996. The 1997 results include gains on the sale of certain      
excess real estate totaling $0.4 million (pre-tax) which had a 0.1% favorable   
impact on net income as a percentage of net sales.                              

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995                          

Net sales increased by $58.7 million, or 12.7%, to $521.0 million in 1996   
from $462.3 million in 1995. Sales to the manufactured housing industry         
represented approximately 75% of consolidated net sales in 1996. The            
manufactured housing industry recorded a 6.9% increase in homes shipped in      
1996 (363,400 homes) compared to 1995 (340,000 homes). With the exception of    
carpeting, Shelter improved its market share in all major product categories    
during 1996 to account for the total sales increase in excess of increased      
industry demand. During the year, Shelter was particularly successful at        
improving its market share in electrical products, stemming from the January    
1, 1995 acquisition of BABSCO. Shelter's sales also benefitted from new         
regional distribution operations added in 1995 in Arizona, Minnesota, and       
Pennsylvania, where Shelter has established its presence. Management estimates  
that less than 2% of the sales increase during 1996 compared with 1995 was due  
to selling price increases.                                                     

Gross profit increased by $4.8 million, or 7.0%, to $73.3 million in 1996   
from $68.5 million in 1995. Gross profit margin decreased from 14.8% in 1995    
to 14.1% in 1996. Of the 0.7% decrease in gross profit margin as a percentage   
of net sales, 0.6% relates to Shelter's carpet manufacturing operations and     
0.1% is attributed to the remaining operations. During 1996, the finishing      
operation of the carpet mill reached production levels in excess of "efficient  
capacity" and required a percentage of the finishing to be outsourced at a      
cost considerably higher than the internal cost of this process. It was         
discovered that the inventory costing system did not adequately recognize       
these higher costs and a negative year-end adjustment was necessary, adversely  
impacting Shelter's consolidated results for the fourth quarter of 1996.        

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In addition to the decreased margins from the carpet manufacturing          
operations, Shelter experienced a reduction in gross profit margins at its      
Design Components laminating operations. This reduction was due to strong       
competition in the marketplace combined with increases in the cost of gypsum    
during 1996. Shelter's distribution operations experienced a modest decline in  
gross margins primarily due to an increase in lower margin "direct ship"        
business (for truckload quantities) as a percentage of all distributed product  
sales.                                                                          

Commission income is earned by Shelter's distribution operations from       
selling, warehousing and delivery services to certain product manufacturers.    
Commission income decreased by $0.5 million, or 16.7%, from $3.0 million in     
1995 to $2.5 million in 1996 primarily due to a decrease in the commission      
rate received for warehousing and delivery of wood molding products and a       
change to a buy-sell arrangement on certain plumbing products.                  

Selling, general and administrative expenses increased $7.5 million, or     
14.2%, to $60.2 million in 1996 from $52.7 million in 1995. As a percent of     
net sales, selling, general and administrative expenses increased to 11.6% in   
1996 from 11.4% in 1995. Management has begun to implement strategies to        
reduce its selling, general, and administrative expenses as a percentage of     
net sales including efforts to eliminate duplicate costs as well as reviewing   
staffing levels and incentive systems.                                          

Interest expense decreased $0.7 million, or 28.0%, from $2.5 million in 1995
to $1.8 million in 1996, due to strong cash flows during 1996 which resulted    
in a reduction in average borrowings outstanding on Shelter's $25 million bank  
revolving line of credit during the year. Shelter increased its average         
accounts payable balance with certain vendors by negotiating more favorable     
payment terms, thus reducing the need for bank borrowings. In addition,         
Shelter negotiated lower market-based rates on its bank revolver.               

Income taxes increased $1.7 million, or 26.2%, to $8.2 million in 1996 from 
$6.5 million in 1995. Income taxes as a percentage of income before income      
taxes, increased from 39.2% in 1995 to 41.1% in 1996. The increase in the       
effective rate in 1996 is due to the write-off of $800,000 of non-deductible    
goodwill in connection with the sale of the carpet and yarn operations.         

Net income increased $1.7 million, or 17.0%, to $11.7 million in 1996 from  
$10.0 million in 1995. The 1996 results include a $3.2 million (after-tax)      
gain on the sale of the carpet manufacturing and yarn processing operations.    
Net income for 1996, exclusive of this gain, was 1.6% of net sales. Net         
income, as a percent of net sales, exclusive of both the carpet and yarn        
operations and the gain on the sale thereof, decreased from 1.9% in 1995 to     
1.8% in 1996. The reduction in this percentage, exclusive of the gain on the    
sale of the carpet operations, is primarily due to poor performance             
experienced in Shelter's carpet manufacturing operations in 1996, and other     
factors as discussed above.                                                     

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994                          

Net sales increased by $129.2 million, or 38.8%, to $462.3 million in 1995  
from $333.1 million in 1994. The increase consisted of 18% attributable to the  
acquired electrical distribution operations of BABSCO and 21% by the other      
operating units of Shelter. The 21% increase in comparable sales compared       
favorably with the 12% increase in manufactured homes shipped in 1995 compared  
to 1994, which reported 340,000 homes shipped in 1995 compared to 304,000       
homes shipped in 1994. Sales to the manufactured housing industry represented   
approximately 75% of Shelter's net sales in 1995. Shelter improved its market   
share in 1995, particularly in decorative wallboard (produced by Design         
Components) and in Shelter's building products distribution operations, as      
sales in new territories continued to grow.                                     

Management estimates that less than 3% of the sales increase during 1995    
compared with 1994, was due to selling price increases.                         

Gross profit increased $17.2 million, or 33.5%, to $68.5 million in 1995    
from $51.3 million in 1994. Gross profit margin decreased from 15.4% in 1994    
to 14.8% in 1995. The reduction of gross profit margin in 1995 reflects the     
increased sales of lower margin laminated decorative wallboard and other        
building products at a faster growth rate than certain of Shelter's other       
products. Also, the increased demand for truckload quantities of product on a   
"direct ship" basis had a slightly adverse impact on overall gross margin.      

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Commission income decreased $0.1 million, or 3.2%, from $3.1 million in 1994
to $3.0 million in 1995 primarily due to a decrease in the commission rate on   
certain products distributed by Shelter for unaffiliated manufacturers.         

Selling, general and administrative expenses increased $13.6 million, or    
34.8%, to $52.7 million in 1995 from $39.1 million in 1994. As a percent of     
sales, selling, general and administrative expenses decreased from 11.7% in     
1994 to 11.4% in 1995. The reduction in this percentage reflected Shelter's     
capacity to increase sales without a proportionate increase in fixed costs.     

Interest expense increased $1.5 million, or 150.0%, to $2.5 million in 1995 
from $1.0 million in 1994 due to the debt incurred and assumed in connection    
with the January 1995 acquisition of the operations and net assets of BABSCO.   
The increase also reflected higher prevailing short-term borrowing rates on     
working capital debt outstanding during 1995 as compared to short-term          
borrowing rates in 1994.                                                        

Income taxes as a percentage of income before income taxes were 39% for 1995
and 1994.                                                                       

Net income increased $1.3 million, or 14.9%, to $10.0 million in 1995 from  
$8.7 million in 1994. As a percent of net sales, net income decreased from      
2.6% for 1994 to 2.2% for 1995, respectively. The primary cause of the decline  
in this percentage was the acquisition of BABSCO in 1995. BABSCO accounted for  
13% of 1995 net sales and less than 2% of net income. The addition of these     
operations had a 0.3% adverse effect on 1995 net income as a percentage of net  
sales. The remaining decline of 0.1% was a result of the decline in gross       
margins as a percentage of net sales, as discussed above.                       

LIQUIDITY AND CAPITAL RESOURCES                                                 

Historically, Kevco's growth has been financed through cash flow from       
operations, borrowings under its bank credit facilities, proceeds from the      
November 1996 initial public offering and the expansion of trade credit. Net    
cash provided by operating activities was $12.2 million, $8.4 million and $3.1  
million in 1996, 1995 and 1994, respectively. Kevco's capital expenditures      
were $1.6 million, $2.8 million and $0.4 million in 1996, 1995 and 1994,        
respectively. For the nine months ended September 30, 1997, cash flow from      
operations and capital expenditures were $6.2 million and $2.0 million,         
respectively. In November 1996, Kevco raised approximately $26.0 million        
through its initial public offering, a portion of the proceeds of which were    
used to repay all of its then outstanding debt. Kevco is also obligated to      
make payments on various capital leases in varying amounts, maturing through    
2007. Additionally, Kevco is obligated to make payments under non-compete and   
consulting agreements, related to the Service Supply acquisition, in varying    
amounts, maturing through 1999. See Notes 4 and 6 to Kevco's Consolidated       
Financial Statements.                                                           

Shelter has historically funded its growth through cash flow from           
operations, borrowings under various credit facilities and the December 1996    
sale of the operations and certain assets of its Danube subsidiary. Net cash    
provided (used) by operating activities was $15.0 million, $11.9 million and    
($6.8) million in 1996, 1995 and 1994, respectively. Shelter's capital          
expenditures were $8.4 million, $2.8 million and $2.1 million in 1996, 1995     
and 1994, respectively. For the nine months ended September 30, 1997, cash      
flow from operations and capital expenditures were $7.4 million and $6.2        
million, respectively. In 1996, Shelter generated $16.4 million in proceeds     
from the sale of the operations and net assets of Danube (net of expenses paid  
in 1996 in connection with the divestiture).                                    

As a result of the Transactions, the Company has a substantial amount of    
indebtedness. As of September 30, 1997, after giving pro forma effect to the    
Transactions, the Company had consolidated debt of $203.1 million consisting    
of: (i) $1.4 million in capital lease obligations; (ii) $3.5 million of long-   
term notes payable; (iii) $3.2 million outstanding under the Revolving Credit   
Facility; (iv) $90.0 million under the Term Loan Facility; and (v) $105.0       
million of the Notes. See "Capitalization" and "The Transactions."              

In addition, the Indenture contains certain covenants, including, but not   
limited to, covenants prohibiting or limiting: (i) the incurrence by the        
Company and its Restricted Subsidiaries (as defined in the Indenture) of        
additional Indebtedness (as defined in the Indenture); (ii) the payment of      
dividends or the making of other                                                

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restricted payments by the Company; (iii) the creation of liens by the Company  
and its Restricted Subsidiaries; (iv) the creation or existence of              
restrictions on the ability of Restricted Subsidiaries to pay dividends or      
make other payments to the Company; (v) transactions by the Company and its     
Restricted Subsidiaries with affiliates; (vi) certain sales of assets by the    
Company and its Restricted Subsidiaries; (vii) the ability of the Company and   
the Restricted Subsidiaries to engage in certain lines of business; and (viii)  
the Company's ability to consolidate or merge with or into, or transfer all or  
substantially all of its assets to, another person.                             

The Company's primary capital requirements following completion of the      
Transactions are for working capital, capital expenditures and payments of      
interest expense. The Company expects combined capital expenditures before any  
acquisitions of approximately $9.0 million in 1997 and ranging from $8.5        
million to $9.5 million in 1998.                                                

On December 1, 1997, Kevco entered into an amended and restated $125.0      
million credit facility (the "Senior Credit Facility"), with NationsBank of     
Texas, N.A. as lender and administrative agent and certain other banks          
consisting of a $90.0 million term loan and a $35.0 million revolving credit    
facility. See "Description of Senior Credit Facility."                          

The Company intends to increase the number of its manufacturing, and to a   
lesser extent, distribution facilities, primarily through acquisitions.         
Management believes there are currently a number of acquisition opportunities   
in the manufactured housing and RV industries, and from time to time            
additional opportunities will arise. On December 12, 1997, the Company          
acquired the inventory and certain distribution rights of certain building      
products distributed by the Manufactured Housing and Recreational Vehicle       
division of Shepherd Products Company for a cash purchase price payable at      
closing of $5.9 million, with an additional $2.0 million payable over a five-   
year period following the acquisition.                                          

The Company believes that cash flow from operations, plus, if necessary,    
additional borrowings under the Senior Credit Facility, will be sufficient to   
meet its capital and operating needs and debt service requirements through the  
end of 1998.                                                                    

ASSET MANAGEMENT                                                                

The Company actively manages its assets and liabilities. All corporate and  
profit center managers participate in an incentive-based compensation plan      
that measures the individual's effectiveness in net asset control and return    
on net assets employed. Managers are rewarded for receivables collection,       
inventory control and profits in relation to these and other net assets         
employed.                                                                       

For Kevco as of December 31, 1996, days sales in average receivables was    
approximately 22 days, days sales in average inventory was approximately 33     
days and days sales in average payables was approximately 27 days. For Shelter  
as of December 31, 1996, days sales in average receivables was approximately    
17 days, days sales in average inventory was approximately 37 days and days     
sales in average payables was approximately 19 days.                            

INFLATION                                                                       

Generally, inflation and changing prices have had a minimal impact on the   
Company's operating results, as increases in the sales prices of products have  
closely followed increases in materials costs.                                  

SEASONALITY                                                                     

The business and results of the Company are seasonal. Historically,         
manufactured housing shipments have been strongest in the spring and summer     
and weaker in the winter as a result of the impact of adverse weather on        
retail sales of manufactured homes. Accordingly, the Company usually            
experiences higher levels of revenue in the second and third fiscal quarters    
and relatively lower levels of revenue in the first and fourth fiscal           
quarters.                                                                       

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QUARTERLY RESULTS                                                               

The following table represents certain unaudited historical financial       
information for the quarters indicated and does not include pro forma           
adjustments.                                                                    

                                                        [Enlarge/Download Table]

                                                                  NINE MONTHS ENDED    
                            YEAR ENDED DECEMBER 31, 1996         SEPTEMBER 30, 1997    
                         ----------------------------------- --------------------------
                           1ST      2ND      3RD      4TH      1ST      2ND      3RD   
                         QUARTER  QUARTER  QUARTER  QUARTER  QUARTER  QUARTER  QUARTER 
                                             (DOLLARS IN THOUSANDS)                    
KEVCO                                                                                  
-----                                                                                  
                                                                                       
  Net Sales............. $ 64,234 $ 71,364 $ 69,449 $ 62,297 $ 72,099 $101,305 $ 98,553
  Gross profit..........    9,488   10,853   10,652    9,698   10,123   13,871   12,825
  Operating income......    3,552    4,521    4,434    3,958    3,721    5,402    3,371
  EBITDA................    4,019    4,957    4,849    4,432    4,301    6,208    4,157
SHELTER                                                                                
-------                                                                                
  Net Sales............. $119,796 $137,958 $139,311 $123,957 $106,532 $122,801 $128,546
  Gross profit..........   17,516   19,681   20,319   15,805   15,281   16,889   17,803
  Operating income......    4,182    5,140    5,730      534    2,801    4,201    4,235
  EBITDA................    4,914    5,913    6,670    1,439    3,512    4,987    5,192

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In February 1997, the Financial Accounting Standards Board ("FASB") issued  
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS  
128"). SFAS 128 simplifies the standards for computing earnings per share       
("EPS") previously found in APB Opinion No. 15, Earnings Per Share              
("Opinion 15"), and makes them comparable to international EPS standards. SFAS  
128 is effective for financial statements issued for periods ending after       
December 15, 1997, including interim periods; earlier application is not        
permitted. SFAS 128 requires restatement of all prior-period EPS data           
presented. The Company is currently evaluating SFAS 128. However, management    
does not believe that it will have a material impact on the consolidated        
financial statements of the Company.                                            

In February 1997, The FASB issued Statement of Financial Accounting         
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS   
No. 129"). SFAS No. 129 establishes standards for disclosing information about  
an entity's capital structure and applies to all entities. This statement is    
effective for financial statements for periods ending after December 15, 1997.  
It is not expected that the Company will experience any material revision in    
its disclosures when SFAS No. 129 is adopted.                                   

In June 1997, the FASB issued Statement of Financial Accounting Standards   
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130        
establishes standards for reporting and display of comprehensive income and     
its components (revenues, expenses, gains and losses) in a full set of general  
purpose financial statements. This statement is effective for fiscal years      
beginning after December 15, 1997. Reclassification of financial statements     
for earlier periods provided for comparative purposes is required. This         
statement has no impact on the financial condition or results of operations of  
the Company, but may require changes to the Company's disclosure requirements.  

In June 1997, the FASB issued Statement of Financial Accounting Standards   
No. 131, "Disclosures About Segments of an Enterprise and Related Information"  
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public    
business enterprises report information about operating segments in annual      
financial statements and requires that those enterprises report selected        
information about operating segments in interim financial reports issued to     
shareholders. This statement is effective for fiscal years beginning after      
December 15, 1997. This statement has no impact on the financial condition or   
results of operations of the Company, but may require changes in the Company's  
disclosure requirements.                                                        

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BUSINESS  

THE COMPANY                                                                     

The Company believes it is the largest wholesale distributor of building    
products to the United States manufactured housing industry. Through its 47     
distribution centers, the Company provides national distribution of more than   
75,000 items to approximately 530 manufactured housing (79% of 1996 net sales)  
and recreational vehicle ("RV") and other manufacturing facilities (21% of      
1996 net sales) throughout the United States. In addition to its distribution   
activities, the Company manufactures wood products, laminated wallboard and     
thermoformed bathtubs and shower enclosures for the manufactured housing        
industry. The Company believes that the combination of Kevco and Shelter        
results in substantial operating synergies due to their complementary product   
lines, overlapping marketing functions and national distribution networks, and  
significant economies of scale. During the latest twelve months ended           
September 30, 1997, the Company's pro forma net sales and EBITDA were $855.2    
million and $45.7 million, respectively.                                        

The manufactured housing industry has experienced significant growth over   
the last several years. Since 1992, the number of manufactured home shipments   
has experienced a compound annual growth rate of approximately 14.6%, growing   
from 210,787 homes shipped in 1992 to 363,411 homes shipped in 1996, which      
resulted in approximately $14 billion in retail sales in 1996. As a result of   
this growth, manufactured housing has outpaced traditional site-built housing   
growth, and increased as a percentage of total new single family houses sold,   
growing from 25.7% in 1992 to 32.4% in 1996. The Company believes that demand   
for manufactured housing has grown and will continue to grow due to: (i) the    
increased quality of manufactured homes and the accompanying widespread         
consumer acceptance of manufactured homes; (ii) steady employment and economic  
growth in key regions; (iii) greater availability of mortgage financing for     
manufactured homes; and (iv) continued substantial price advantages of          
manufactured homes compared to site-built homes.                                

Suppliers and customers have been increasingly relying on distributors in an
attempt to focus on their core businesses and improve inventory management.     
Larger, national distributors, like the Company, have benefited from trends in  
(i) suppliers and customers reducing the number of distributors they use to     
increase operating efficiencies and reduce costs; (ii) suppliers and            
manufacturers selecting distributors that are able to serve their needs         
through national distribution networks; and (iii) manufacturers requiring       
distributors to carry more comprehensive product lines. In addition, the        
Company believes it leads the industry in providing value-added services to     
its customers, including inventory management, product support and training,    
and implementation of cost saving measures, all of which are services the       
Company believes its suppliers cannot directly provide manufacturers in a       
cost-effective manner.                                                          

Since its founding in 1964 by Jerry E. Kimmel, the Company's majority       
shareholder, Chairman, Chief Executive Officer and President, the Company has   
experienced substantial growth. In addition to positive manufactured housing    
industry trends which favor larger distributors, the Company has primarily      
grown through: (i) completing eight complementary acquisitions since the        
beginning of 1993; (ii) adding distribution and manufacturing facilities to     
serve new markets; and (iii) increasing sales to existing customers by          
distributing additional product lines. As a result, the Company has increased   
net sales at a compound annual growth rate of 35.4% since 1992, from $254.8     
million on a historical combined basis in 1992 to $855.7 million on a pro       
forma combined basis in 1996. During the same time period, EBITDA grew at a     
compound annual growth rate of 42.3% from $12.4 million on a historical         
combined basis in 1992 to $51.2 million on a pro forma combined basis in 1996.  

SHELTER ACQUISITION BENEFITS                                                    

The Company expects the following strategic and operating benefits as a     
result of the Shelter Acquisition:                                              

.  INDUSTRY LEADERSHIP. The Company believes that the Shelter Acquisition   
improves its competitive position by making it the largest wholesale  
distributor of building products to the United States manufactured    
housing industry, based on total sales. The Company expects to benefit
from its                                                              

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improved competitive position by: (i) better serving its customers    
 through its enhanced national distribution network; (ii) serving as the
exclusive distributor for certain of its suppliers that are seeking to
consolidate distributors of their products to the manufactured housing
and RV industries; and (iii) continuing to be a leader in the         
consolidation of the industry.                                        

.  ACQUISITION OF COMPLEMENTARY PRODUCT LINES. While Shelter and Kevco      
served a similar customer base, each company primarily distributed and
manufactured product lines with little overlap. Kevco had significant 
market share in plumbing fixtures and supplies and wood products,     
including wood trusses and cut lumber. Shelter had significant market 
share in electrical products, exterior building products, laminated   
wallboards, thermoformed products and hardware.                       

.  SUBSTANTIAL COST REDUCTION OPPORTUNITIES. The Company believes the       
Shelter Acquisition affords it substantial opportunities to eliminate 
certain administrative and corporate positions and expenses. In       
addition, the Company believes that it will be able to reduce selling 
 expense by consolidating its sales operations as both Kevco and Shelter
  maintain active relationships with approximately 90% of all manufactured
housing production facilities. As the largest wholesale distributor in
the industry, the Company believes that it will be able to obtain     
 economies of scale through its increased purchasing volume. The Company
believes it will be able to increase the volume of purchases by       
consolidating its purchases from suppliers where it has overlapping   
product lines and by increasing sales from cross-selling its product  
lines.                                                                

.  RATIONALIZATION OF NATIONAL DISTRIBUTION NETWORKS. The Company believes  
that it will be able to reduce operating costs by consolidating       
distribution facilities and reducing overhead at such facilities.     
  Substantially all of Kevco's and Shelter's distribution facilities serve
the same geographic regions. On a pro forma combined basis, 45 of the 
Company's 47 total distribution facilities serve overlapping markets  
 providing the Company significant opportunities to realize distribution
efficiencies over time.                                               

BUSINESS STRATEGY                                                               

The Company's primary objective is to maintain and strengthen its position  
as the leading national distributor of building products to the manufactured    
housing and RV industries. The Company intends to continue to pursue this       
objective through internal growth and opportunistic acquisitions. To achieve    
its objective, the Company has adopted a strategy based on the following key    
elements:                                                                       

.  PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its         
emphasis on customer service differentiates it from other distributors
and fosters long-term relationships with its customers. The Company is
 committed to a Total Quality Management program to serve its customers'
needs and to work in partnership with its suppliers and customers to  
improve their operations. The Company seeks to be an integral part of 
its customers' inventory management activities and manufacturing      
  process. The Company has received several industry awards in recognition
of its high level of customer service.                                

.  LEVERAGE NATIONAL DISTRIBUTION NETWORK. The Company will continue to use 
its national distribution network as a platform for growth and        
 profitability. The Company believes that its national presence provides
it with a significant competitive advantage due to its ability to     
  service the nationwide needs of its customers' manufacturing facilities.
 The Company believes that its national distribution network has allowed
it to develop close relationships with its product suppliers and to   
become the exclusive supplier of certain product lines.               

.  INCREASE CUSTOMER PENETRATION AND PRODUCT OFFERINGS. The Company         
supplies over 90% of all manufactured housing plants in the United    
States with one or more product lines. This established customer base 
 provides the Company with a significant opportunity to supply a greater
 portion of its customers' building products needs as the customers seek
  to reduce the number of their suppliers. The Company also intends to add
new product lines through internal growth and opportunistic           
acquisitions. With its existing national distribution infrastructure, 
the Company believes that additional product lines can be offered to  
existing customers, thereby increasing net sales without adding       
significant costs.                                                    

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.  EXPAND MANUFACTURING CAPABILITIES. The Company intends to expand its     
manufacturing capabilities through internal growth and opportunistic  
  vertical acquisitions. By manufacturing certain of its own products, the
Company believes it can achieve greater profitability from its sales, 
while obtaining direct control over product availability and quality. 
The Company currently operates five wood products manufacturing       
facilities and plans to expand to new markets, including opening new  
manufacturing facilities in Arizona and North Carolina by the second  
quarter of 1998. Through the Shelter Acquisition, the Company obtained
additional manufacturing platforms, including plastic thermoforming,  
injection molding and laminated wallboard operations. The Company     
believes that there are significant opportunities to grow its         
manufacturing business through additional acquisitions and new        
facilities.                                                           

.  PURSUE OPPORTUNISTIC ACQUISITIONS. The Company intends to selectively    
explore the acquisition of other distributors and manufacturers of    
  building products. The Company seeks to acquire distributors, that offer
  complementary product lines to extend its existing offerings and realize
significant operating synergies.                                      

GENERAL                                                                         

On November 6, 1996, Kevco consummated its initial public offering of       
2,100,000 shares (and an additional 315,000 shares in connection with the       
exercise of the underwriter over-allotment option on December 3, 1996) of the   
common stock, par value $.01 per share.                                         

Jerry E. Kimmel, the Company's Chairman of the Board, Chief Executive       
Officer and President, has over 35 years of experience in the industry. The     
other members of Kevco's senior management have an average of more than 10      
years of experience in the industry.                                            

The Company's principal executive offices are located at University Centre  
I, 1300 S. University Drive, Suite 200, Fort Worth, Texas 76107. The Company's  
telephone number is (817) 332-2758.                                             

RECENT ACQUISITIONS                                                             

On February 27, 1997, Kevco consummated the acquisition of substantially all
of the assets, and assumed certain liabilities, of Consolidated Forest (a       
manufacturer of wood products for the manufactured housing industry) in         
exchange for approximately $13.0 million in cash and two promissory notes in    
the aggregate original principal amount of approximately $1.0 million. On       
February 28, 1997, Kevco consummated the acquisition of all of the outstanding  
stock of Bowen (a wholesale distributor of building products to the             
manufactured housing and RV industries) in exchange for approximately $18.0     
million in cash and three promissory notes in the aggregate original principal  
amount of $2.5 million. On June 27, 1997, Shelter consummated the acquisition   
of the net assets of PSI, a manufacturer of injection molded plastic parts,     
for approximately $0.9 million in cash and $3.5 million in convertible notes    
payable to the sellers. On December 1, 1997, Kevco consummated the acquisition  
of approximately 95.5% of the then issued and outstanding shares of Shelter     
Common Stock pursuant to the Tender Offer. Kevco acquired the remaining         
outstanding shares of Shelter Common Stock by merger on January 16, 1998. On    
December 12, 1997, the Company consummated the acquisition of the inventory     
and certain distribution rights of certain building products distributed by     
the Manufactured Housing and Recreational Vehicle division of Shepherd          
Products Company for a cash purchase price payable at closing of $5.9 million,  
with an additional $2.0 million payable over a five year period following the   
acquisition.                                                                    

INDUSTRY                                                                        

For the year ended December 31, 1996, approximately 79% of the Company's net
sales were to producers of manufactured homes. A manufactured home is a         
complete single-family residence that is built in a factory and transported to  
a site. Manufactured homes offer most of the amenities of, and are generally    
built with the same materials as, site-built homes. Unless otherwise noted,     
statistics in this Prospectus were obtained from the Manufactured Housing       
Institute ("MHI") and Recreational Vehicle Industry Association ("RVIA"). MHI   
and RVIA compile data from the U.S. Department of Commerce, Bureau of the       
Census, National Conference of States, Building Codes and Standards, and other  
industry sources.                                                               

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Manufactured housing has historically served as one of the most affordable  
alternatives for the home buyer. In 1996, the average cost per square foot was  
$25.18 for a single-section manufactured home and $29.56 for a multi-section    
manufactured home, as compared to an average cost of $58.66 per square foot     
for a site-built home, each excluding land costs. In 1996, reported retail      
sales of new manufactured homes totaled approximately $14.0 billion.            
Approximately 363,400 manufactured homes were reported as shipped in 1996       
(which represents approximately 32.4% of all new single family homes sold in    
1996). Reported shipments of new manufactured homes experienced compound        
annual growth of approximately 14.6% for the four years ended December 31,      
1996.                                                                           

The Company believes steady employment growth, reduced inventories of       
repossessed homes, greater availability of retail financing for the home buyer  
and enhanced quality of manufactured homes have contributed to improved         
industry conditions. Although the manufactured housing industry has             
experienced significant growth over the past five years, the industry is        
cyclical and is affected by many of the same factors that influence the         
housing industry generally, including inflation, interest rates, availability   
of financing, regional economic and demographic conditions and consumer         
confidence levels, as well as the affordability and availability of             
alternative housing, such as apartments, condominiums and conventional, site-   
built homes.                                                                    

The ten highest volume producers of manufactured homes in 1996 reportedly   
accounted for approximately 71% of total manufactured home shipments in that    
year. Management believes that only a few distributors are capable of           
distributing a broad line of building products to meet the needs of these       
manufacturers on a national basis.                                              

For the year ended December 31, 1996, approximately 21% of the Company's net
sales were to producers of RVs and to other industries. RVs are motorized and   
non-motorized vehicles that provide comfortable, self-contained living          
facilities for short periods of time, but are not generally designed for        
permanent living. RV shipments to retailers reportedly totaled approximately    
$12.4 billion (at retail) in 1996. Although reported RV shipments declined      
approximately 1.8% in 1996, the RV industry has experienced compound annual     
growth in reported shipments of approximately 9.7% since 1992. Historically,    
demand for RVs has been influenced by a number of factors, including the        
availability and terms of financing to dealers and retail purchasers, the       
abundance of motor vehicle fuels and fuel prices, as well as general economic   
conditions.                                                                     

The Company believes that the acquisition of Shelter enables the Company:   
(i) to better serve its customers by supplying a more expansive product line    
as Kevco's and Shelter's products have minimal overlap; (ii) to expand upon     
Shelter's customer relationships through the application of Kevco's dedication  
to Total Quality Management; (iii) to capitalize through the contacts of the    
combined sales force on cross selling opportunities within the combined         
product line; (iv) to further its goal of selective vertical integration        
through the addition of manufacturing platforms in thermoforming bathtubs,      
shower enclosures and tub wall surrounds for manufactured homes and RVs as      
well as in laminated wall shelving systems for the retail home improvement      
industry and (v) to realize economies of scale through centralized              
distribution efficiencies and increased volume of purchases.                    

SUPPLIER AND CUSTOMER RELATIONSHIPS                                             

The Company acts with its suppliers and customers to provide value-added    
services in the distribution of manufactured home and RV building products by   
managing inventories, providing product support and training, introducing cost  
saving measures and providing a marketing and distribution network with         
warehousing capabilities. The Company believes that the specialized product     
knowledge and high level of service provided by the Company results in strong   
ties between the Company and its customers and suppliers.                       

.  INVENTORY MANAGEMENT. The Company's customers generally attempt to       
minimize inventories and maximize the use of their facilities for the 
assembly of manufactured homes and RVs. For this reason, the Company  
actively manages customers' inventories of products supplied by the   
 Company. The Company's sales representatives generally visit customers'
  plants weekly to count inventories, review production schedules, prepare
purchase orders and schedule deliveries in order to achieve the       

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  Company's goal of being a just-in-time supplier. In addition, because of
their detailed awareness of existing building codes for manufactured  
homes and RVs, the Company's sales representatives are able to assist 
customers in planning for, and maintaining product inventories in     
accordance with, building code changes.                               

.  PRODUCT SUPPORT AND TRAINING. At their weekly visits, sales              
representatives also take the opportunity to resolve product problems 
  and train customer employees in the proper installation of products. The
  Company has found that its willingness and availability to solve product
problems has resulted in its customers first turning to Company       
representatives, rather than the Company's suppliers, when they have  
problems with or questions about products. This benefits both the     
 Company's customers and suppliers in that the Company provides customer
support that the supplier might otherwise have to provide in order to 
achieve the same level of customer satisfaction, and the Company's    
  customers receive support from individuals with expertise in serving the
 manufactured housing and RV industries. The Company has also found that
its customers benefit from the training given by sales representatives
in the proper installation of products, since the Company's sales     
  representatives generally have significant expertise in the installation
and service of the products they sell. Sales representatives also take
the opportunity during their weekly visits to promote other Company   
products, thus educating customers as to additional products the      
customers can purchase from the Company and receive similar product   
support.                                                              

.  COST SAVING MEASURES. The Company's sales force also works with the      
Company's customers and suppliers in suggesting and implementing cost 
saving measures. The Company actively works to find ways for producers
  of manufactured homes or RVs to reduce the number of stock-keeping units
("SKUs") they use in production in order to further reduce their      
inventories. In its wood products operations, the Company also builds 
steel forms to its customers' specifications to ensure the dimensional
tolerances of the roof trusses it manufactures, as strict adherence to
design specifications translates into reduced manufacturing costs for 
the Company's customers.                                              

.  MARKETING AND DISTRIBUTION NETWORK. The Company believes that its        
suppliers also benefit by utilizing the Company's extensive marketing 
  and distribution network. The Company also believes that it is generally
not cost effective for its suppliers to provide the same level of     
service and delivery responsiveness as the Company to producers of    
manufactured homes and RVs.                                           

TOTAL QUALITY MANAGEMENT                                                        

The Company is committed to maintaining Total Quality Management throughout 
its operations. The key elements of this operating philosophy are: (i) to       
increase customer satisfaction by seeking to meet or exceed all customer        
requirements and ensuring that all associates are "customer focused," which     
the Company believes results in the Company becoming the supplier of choice;    
(ii) to create the mindset and awareness within all of its associates that      
each is responsible and accountable for the results of the Company's            
operations; and (iii) to work with the Company's suppliers and customers to     
create an environment where all are working together to improve the value of    
the products supplied to the manufactured home or RV consumer. The Company's    
executive office and profit centers hold weekly Total Quality Management        
meetings attended by all employees. The meetings focus on training and on       
reaffirming the Company's mission, quality and value statements in order to     
achieve the goal of being the distributor, customer and employer of choice. An  
integral part of the entire quality process is creating a culture where         
communication can flourish among all internal and external parties, including   
associates, customers and suppliers.                                            

PRODUCTS                                                                        

The Company distributes one of the most comprehensive product lines to the  
manufactured housing and RV industries. Kevco is a leading industry             
participant in its core manufactured housing/RV plumbing products distribution  
business, while Shelter is a market leader in the manufactured housing/RV       
electrical products, exterior building products and hardware distribution       
segment. Prior to the Shelter Acquisition, Kevco distributed approximately      
17,000 SKUs and Shelter distributed approximately 62,000 SKUs. Some of Kevco's  
and Shelter's                                                                   

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SKUs overlap, and the Company intends to rationalize and reduce total SKUs as   
Shelter is integrated into the Company's operations.                            

KEVCO PRODUCT LINES                                                           

Plumbing Products. Kevco distributes a wide variety of plumbing fixtures and
supplies including tubs, toilets, faucets, ABS pipe, connectors and fittings.   
Kevco supplies substantially everything necessary to carry water into and out   
of a manufactured home or RV. For 1996, Kevco's plumbing products represented   
18.3% of the Company's combined historical net sales.                           

Wood Products. At its five manufacturing facilities, Kevco manufactures roof
trusses and lumber cut to customer specifications for use in manufactured       
homes. Roof trusses are rectangular or triangular structures that form the      
principal roof support for a manufactured home. Kevco also distributes plywood  
and mill direct lumber. For 1996, Kevco's wood products represented 8.1% of     
the Company's combined historical net sales.                                    

Other Building Products. Kevco distributes other building products,         
including insulation, roof shingles, patio doors, aluminum and wood windows,    
vinyl siding, fireplaces, kitchen cabinetry, aluminum siding, water heaters     
(under an exclusive arrangement with State Industries) and electrical products  
(including load-centers, circuit breakers and copper wire). For 1996, Kevco's   
other building products represented 11.3% of the Company's combined historical  
net sales.                                                                      

SHELTER PRODUCT LINES                                                         

Building Products. Shelter distributes a wide variety of building products, 
including vinyl windows, wood moulding, exterior wood and vinyl siding,         
visqueen, gypsum board, parquet wood flooring, and windows. For 1996,           
Shelter's building products represented 24.2% of the Company's combined         
historical net sales.                                                           

Hardware, Fasteners, Power Tools and Mill Supplies. Shelter distributes     
screws, bolts and nuts of various sizes and dimensions, lock sets, cabinet      
door pulls, hinges, door slides and drapery hardware, stationary power tools,   
table saws, hoists and related equipment used in the manufactured home and RV   
manufacturing cycle, including complete plant set-ups, plastic film, tape,      
glue, caulking, chemicals and abrasives. For 1996, Shelter's hardware,          
fasteners, power tools and mill supplies represented 8.6% of the Company's      
combined historical net sales.                                                  

Electrical Components. Shelter distributes electrical components, including 
wire, wiring devices, power generators, circuit breakers, panels, air           
conditioners, mill supplies and machinery. For 1996, Shelter's electrical       
components represented 10.7% of the Company's combined historical net sales.    

Plumbing Products. Shelter also distributes drain waste vent systems,       
potable water systems and fixtures. For 1996, Shelter's plumbing products       
represented 4.7% of the Company's combined historical net sales.                

Thermoformed Products. Shelter manufactures and distributes bathtubs, shower
enclosures and tub wall surrounds for the manufactured housing and RV industry  
using the thermoforming process. For 1996, Shelter's thermoformed products      
represented 6.2% of the Company's combined historical net sales.                

Laminated Wallboards. Shelter manufactures and distributes laminated        
wallboard products primarily for the manufactured housing and RV industries     
and, to a lesser extent, manufactures laminated wall shelving systems for the   
retail home improvement industry. For 1996, Shelter's laminated wallboards      
represented 7.9% of the Company's combined historical net sales.                

SALES AND MARKETING                                                             

The Company's marketing programs center on fostering strong customer        
relationships and providing superior customer service. The Company believes     
its competitive advantage lies in its breadth of product offerings, the         
knowledge and expertise of its sales representatives and its just-in-time       
delivery capabilities,                                                          

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regular calling program, dedication to Total Quality Management and             
competitive pricing. To certain producers of manufactured homes and RVs, the    
Company is the sole provider of certain core product lines on a national        
basis.                                                                          

Kevco's national accounts are supported by a profit center manager and by   
Kevco's management. Each potential customer within a distribution center's      
geographic reach is regularly contacted by a sales representative, usually at   
the purchasing manager level. Because of the specific nature of the wood        
products business, these sales forces generally work independently. Each sales  
representative works within an assigned sales territory associated with one of  
Kevco's distribution centers or manufacturing facilities and is actively        
supported by a manager at such distribution center or facility. Kevco intends   
to integrate Shelter's sales force into a similar structure.                    

As of December 31, 1996, the Company marketed its products through 266 sales
representatives. Sales representatives, consisting of salespersons and sales    
managers, are all Company employees and are generally compensated on a salary   
and incentive based compensation arrangement. The incentive portion of the      
salespersons' compensation is based on a percentage of the profits of the       
sales region "profit center" in which that salesperson operates. The incentive  
portion of the sales manager's compensation is determined by a variety of       
factors, which include the profit center's sales and return as well as a        
discretionary element.                                                          

The Company maintains active customer relationships with approximately 530  
manufactured home production plants and RV production plants in 45 states. The  
Company's two largest customers, Champion Enterprises, Inc. and Fleetwood       
Enterprises, Inc., accounted for approximately 14% and 12%, respectively, of    
the Company's combined historical net sales in 1996. Although the Company has   
ongoing supply relationships with these customers, it does not have a formal    
supply contract with these customers or most of its other customers. The        
Company's business could be adversely affected if these customers, or other     
major customers, substantially reduced or discontinued purchases from the       
Company. Further, the Company can give no assurance that its sales to such      
customers will continue at historical levels. The Company believes that it has  
good relationships with its manufactured home and RV customers.                 

DISTRIBUTION                                                                    

The Company maintains a national distribution network covering all of the   
major locations in which manufactured homes are built. The Company's            
facilities are strategically located near its customers' manufacturing plants   
in order to provide prompt delivery and responsive customer service. In most    
cases, the Company's desired service area is within a 250-mile radius of each   
distribution center. As Kevco's 26 and Shelter's 21 distribution facilities     
have significant geographical overlap, the Company expects to achieve           
synergies through warehouse and management consolidation.                       

The Company generally uses a decentralized management structure that        
emphasizes individual distribution center profit-and-loss responsibility. A     
distribution center is typically comprised of warehouse and receiving space,    
secure outdoor holding space and office space. Local sales efforts are          
coordinated and supported at the distribution centers. The remaining            
distribution center activities relate to receiving, storing and delivering      
products.                                                                       

Substantially all of Kevco's distribution centers are equipped with real-   
time management information systems. In addition, Shelter is currently          
enhancing its own management information system. The Company intends to         
evaluate both management information systems with a view of integrating them    
into a single, company-wide system. Kevco's system allows the distribution      
centers to control and monitor inventory levels, perform invoicing and order    
entry, and establish delivery schedules and routes. Corporate management also   
uses Kevco's information system to monitor sales, inventory and profitability   
by distribution center. By utilizing its computerized inventory management      
system, Kevco is able to accurately predict inventory turns and minimize        
inventory levels. Each morning, management is supplied with detailed accounts   
receivable aging and inventory status reports from each distribution center.    
Kevco is currently implementing an improved management information system with  
a particular focus on inventory management, which will allow managers to        
create                                                                          

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customized, Microsoft Windows-based reports and to obtain faster access to      
detailed inventory data. The Company anticipates that the upgrade will be       
completed within the next year.                                                 

Kevco's inventories are kept on the perpetual method, with daily physical   
counts of at least five items in each warehouse and a complete physical         
inventory count performed twice a year. Shelter manages its inventory in a      
similar manner, and the Company anticipates integrating Shelter into its        
inventory management system. For book and tax purposes, the Company records     
purchased inventories under the FIFO method.                                    

In most cases the Company warehouses products before distributing them to   
customers. The Company delivers the products it sells either by Company truck   
or common carrier. Delivery is a key component of the Company's dedication to   
customer service and is a competitive requirement. In some instances,           
suppliers will "drop ship" products directly to the Company's customers, with   
the Company retaining responsibility for selling, billing and collection.       
Also, under certain arrangements, the Company receives fees for warehousing,    
delivering, selling or other services without taking title to the products.     
The Company records such fees as commission income.                             

PURCHASING AND SUPPLIERS                                                        

Inasmuch as the Company believes it is the largest distributor of building  
products to the manufactured housing industry, the Company anticipates that it  
will be able to achieve economies of scale in its purchasing. As a              
distributor, the Company plays a valued role in linking product manufacturers   
with customers and provides the level of customer service and just-in-time      
delivery its customers require. The Company's position in the marketplace and   
financial condition have enabled it to take advantage of volume discounts,      
product promotions and other buying opportunities from suppliers, which allow   
the Company to market a wide variety of products to its customers at            
attractive prices.                                                              

The Company generally sells products from manufacturers on a non-exclusive  
basis without geographical restrictions. In certain limited instances, a        
supplier will grant the Company the exclusive right to market its products in   
the manufactured housing or RV industries. Management believes that its         
increased size, its national distribution capability and general industry       
trends toward such exclusive relationships will allow the Company to increase   
the number of products it distributes on a national and/or exclusive basis.     

The Company generally negotiates the price and other purchase terms with its
vendors on a company-wide or regional basis. Payment, discount and volume       
purchase programs are negotiated directly by the Company with its major         
suppliers, with a significant portion of the Company's purchases made from      
suppliers offering these programs. Distribution center managers are             
responsible for inventory selection and ordering on terms negotiated            
centrally, so that the Company remains responsive to local market demand.       
Distribution center managers are also responsible for inventory management.     

The Company continuously seeks to expand the variety of products it sells.  
While the loss of a major supplier could have a material adverse effect on the  
Company's business, the Company believes alternative suppliers for similar      
products in each of its product lines are available. In addition, raw material  
used by the Company for its manufactured products are generally available from  
a number of sources and the loss of any one source would not have a material    
adverse effect on the Company. The Company believes its relations with its      
suppliers are good.                                                             

The Company has established a Supplier Certification Program, in which the  
Company identifies the performance level of a supplier to the Company and       
benchmarks such performance on a regular basis. Such benchmarking criteria      
include minimum order fill rates and other factors.                             

MANUFACTURING                                                                   

The Company manufactures wood products, laminated wallboard products,       
plastic injection molded products and thermoformed bathtubs, shower enclosures  
and tub wall surrounds.                                                         

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The Company manufactures wood products for distribution principally to      
producers of manufactured homes. The Company's wood products include roof       
trusses and lumber cut to customer specifications for structural support        
within the manufactured home unit. Each of the Company's roof trusses are       
built to meet the customer's specific requirements.                             

The Company utilizes automated saws to reduce the cutting time needed to    
process raw wood, and fabricates steel forms based on customer specifications   
in order to ensure the dimensional tolerances of its roof trusses. The quality  
and structural strength of roof trusses are monitored closely by manufactured   
home producers. Wind zone construction standards require that roof trusses      
sold for use in certain regions meet increased strength benchmarks. Roof        
trusses that meet exacting specifications can reduce customer installation      
costs. The Company believes that its ability to produce roof trusses of         
consistent quality that adhere to customer specifications provides a            
competitive advantage.                                                          

The Company's wood products customers include producers of manufactured     
homes as well as contract, "cut-to-order" customers outside of the              
manufactured housing industry. Substantially all of the Company's wood product  
sales are to manufactured home producers. The Company has roof truss            
manufacturing facilities in Spruce Pine, Alabama; Ashburn, Georgia; Waco,       
Texas; Haleyville, Alabama; and Baxter, Tennessee. The Company is planning to   
open new facilities in Arizona and North Carolina by the end of the second      
quarter of 1998.                                                                

The Company manufactures laminated wallboard products primarily for the     
manufactured housing and RV industries and, to a lesser extent, manufactures    
laminated wall shelving systems for the retail home improvement industry.       
Decorative paper or vinyl wall coverings are laminated onto 48 x 88 sheets of   
gypsum, MDF or lauan and are shipped directly to the customers from one of      
Shelter's five manufacturing facilities located in Indiana, Georgia,            
Tennessee, and Texas (two plants).                                              

Further, the Company manufactures bathtubs, shower enclosures and tub wall  
surrounds for the manufactured housing and RV industry using the thermoforming  
process. Thermoforming is the heating of plastic sheet to a softening           
temperature and forcing the hot flexible material over a mold by the use of     
mechanical and vacuum pressure. Allowed to cool, the plastic retains the shape  
and detail of the mold.                                                         

The Company has developed such manufacturing operations in furtherance of   
its vertical integration strategy. In June 1995, the Company acquired Sunbelt,  
which added wood products manufacturing for the manufactured housing and RV     
industries to its operations. In February 1997, the Company acquired            
Consolidated Forest, which substantially strengthened the Company's position    
in this wood products industry. The acquisition of Shelter furthers the         
Company's vertical integration strategy through the addition of manufacturing   
platforms in laminated wallboard products, plastic injection molded products    
and thermoformed bath products. The Company intends to continue to seek         
vertical acquisitions on a selective basis as opportunities arise.              

WARRANTY AND RETURNS                                                            

The Company's customers generally rely on the warranties issued by the      
manufacturer of the products sold by the Company. The Company generally         
provides a one year limited warranty on the products it sells, which warranty   
covers the product and service calls. The Company's warranty on the product     
itself is generally not utilized because the product manufacturer provides a    
more comprehensive warranty. The Company's warranty expense in 1996 was         
negligible. The Company also has an informal, unwritten return policy under     
which, for one year following sale, the Company will generally accept the       
nonwarranty return of unused products, after inspection by the Company          
personnel, for a restocking charge.                                             

In the event a manufactured home experiences a failure of a roof truss      
manufactured by the Company, the Company will inspect the home to determine     
whether there is a covered defect in the roof truss. If a covered defect is     
discovered, the Company generally pays to replace the roof truss and the roof.  
The Company has only had one such claim in the past three years. The Company    
also maintains a limited warranty on its thermoformed products, which           
generally ranges from one to five years, covers defects in materials and        
workmanship by repair or replacement of the defective item and excludes labor   
and consequential damages.                                                      

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FACILITIES                                                                      

The following table sets forth certain information with respect to Kevco's  
and Shelter's distribution and manufacturing facilities, which are leased       
unless otherwise indicated. Kevco also leases its executive offices of          
approximately 12,000 square feet in Fort Worth, Texas. Further, Shelter owns    
its executive offices of approximately 19,000 square feet in Elkhart, Indiana.  

                                                                [Download Table]

                                                       APPROXIMATE              
                   LOCATION                    COMPANY SQUARE FEET   FUNCTION   
                                                                                
Alabama                                                                         
 Bear Creek*..................................   Kevco    50,000   Distribution 
 Bear Creek*.................................. Shelter    90,000   Distribution 
 Haleyville*..................................   Kevco    86,000   Distribution 
 Haleyville...................................   Kevco   146,000   Manufacturing
 Haleyville...................................   Kevco    44,000   Manufacturing
 Phil Campbell................................   Kevco    30,000   Manufacturing
 Spruce Pine*.................................   Kevco    54,000   Manufacturing
Arizona                                                                         
 Phoenix......................................   Kevco    70,000   Distribution 
 Phoenix...................................... Shelter    59,000   Distribution 
California                                                                      
 Riverside.................................... Shelter    35,000   Distribution 
 San Bernardino...............................   Kevco    42,000   Distribution 
 Woodland.....................................   Kevco    18,000   Distribution 
Colorado                                                                        
 Fort Morgan..................................   Kevco    13,000   Distribution 
Florida                                                                         
 Lakeland..................................... Shelter    36,000   Distribution 
 Ocala*.......................................   Kevco    50,000   Distribution 
Georgia                                                                         
 Americus.....................................   Kevco     6,000   Distribution 
 Ashburn*.....................................   Kevco   100,000   Manufacturing
 Cordele*.....................................   Kevco    60,000   Distribution 
 Douglas......................................   Kevco    72,000   Distribution 
 Tifton*...................................... Shelter    22,000   Manufacturing
 Valdosta..................................... Shelter    73,000   Distribution 
Idaho                                                                           
 Caldwell.....................................   Kevco    24,000   Distribution 
Indiana                                                                         
 Elkhart......................................   Kevco    61,000   Distribution 
 Elkhart......................................   Kevco    90,000   Distribution 
 Elkhart......................................   Kevco    35,000   Distribution 
 Elkhart......................................   Kevco    57,000   Distribution 
 Elkhart*..................................... Shelter    94,000   Distribution 
 Elkhart...................................... Shelter    15,000   Distribution 
 Elkhart*..................................... Shelter    65,000   Distribution 
 Elkhart*..................................... Shelter    70,000   Distribution 
 Elkhart*..................................... Shelter    27,000   Distribution 
 Elkhart...................................... Shelter     8,000   Distribution 
 Elkhart*..................................... Shelter    74,000   Manufacturing
 Elkhart*..................................... Shelter    20,000   Manufacturing
 Plymouth..................................... Shelter     5,000   Distribution 
 SouthBend.................................... Shelter    43,000   Manufacturing
 Warsaw....................................... Shelter    10,000   Distribution 

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                                                                [Download Table]

                                                       APPROXIMATE              
                   LOCATION                    COMPANY SQUARE FEET   FUNCTION   
                                                                                
Kansas                                                                          
 Newton.......................................   Kevco    38,000   Distribution 
 Newton*...................................... Shelter    85,000   Distribution 
Michigan                                                                        
 Edwardsburg*................................. Shelter    70,000   Manufacturing
 Edwardsburg.................................. Shelter     7,000   Manufacturing
Minnesota                                                                       
 Redwood Falls*............................... Shelter    24,000   Distribution 
 Worthington..................................   Kevco    15,000   Distribution 
New Mexico                                                                      
 Albuquerque..................................   Kevco    16,000   Distribution 
 Albuquerque.................................. Shelter    15,000   Distribution 
North Carolina                                                                  
 Albemarle....................................   Kevco    62,000   Distribution 
 Concord*..................................... Shelter    65,000   Distribution 
 Richfield*...................................   Kevco    44,000   Distribution 
Oregon                                                                          
 Milwaukee.................................... Shelter    38,000   Distribution 
 Tigard.......................................   Kevco    23,000   Distribution 
Pennsylvania                                                                    
 Lancaster.................................... Shelter   119,000   Distribution 
 Leola........................................   Kevco    11,000   Distribution 
 Leola........................................   Kevco    26,000   Distribution 
Tennessee                                                                       
 Baxter.......................................   Kevco    55,000   Manufacturing
 Cookeville...................................   Kevco    30,000   Distribution 
 Madisonville................................. Shelter    38,000   Manufacturing
 Morristown................................... Shelter    42,000   Distribution 
Texas                                                                           
 Fort Worth................................... Shelter   110,000   Distribution 
 Hillsboro*...................................   Kevco    48,000   Distribution 
 Mansfield*................................... Shelter    25,000   Manufacturing
 Temple....................................... Shelter    44,000   Manufacturing
 Waco.........................................   Kevco    90,000   Distribution 
 Waco.........................................   Kevco   135,000   Manufacturing
 Waxahachie*.................................. Shelter   192,000   Manufacturing

---------------------                                                           
* Company owned facility.                                                       

COMPETITION                                                                     

The Company believes it is the largest distributor of building products to  
the manufactured housing industry; however, the building products wholesale     
distribution industry is highly competitive. Numerous companies, both public    
and private, are in direct competition with the Company and many of those       
competitors have longer operating histories and greater financial and other     
resources than the Company. The Company believes its prices, wide array of      
products and ability to deliver on short notice are competitive.                

The Company believes that its business strategy has permitted it to compete 
effectively in its marketing areas. While price is an important competitive     
factor in the Company's business, the Company believes that its sales are       
principally dependent upon its service, technical expertise, reputation and     
experience. The Company's principal competitive strengths include (i) quality   
assurance, service and installation support, (ii) a wide array of               

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products and product availability due to the Company's ability to attract       
major product manufacturers and (iii) the prompt and reliable delivery of       
products to customers.                                                          

Certain product manufacturers sell and distribute their products directly to
producers of manufactured homes and RVs. However, the Company believes that,    
for most product manufacturers, providing the same level of service and         
offering the same delivery responsiveness as the Company is not cost-           
effective.                                                                      

EMPLOYEES                                                                       

As of December 31, 1997, Kevco employed 899 persons. Kevco is a party to one
collective bargaining agreement, which covered, as of December 31, 1997, 10     
employees at one of the Company's facilities in Elkhart, Indiana. Kevco has     
not experienced any work stoppages as a result of labor disputes and the        
Company considers its employee relations to be good.                            

As of December 31, 1997, Shelter had 1,208 full-time employees. Shelter has 
experienced no work stoppage arising from labor disputes and considers          
employee relations to be good. None of Shelter's employees are covered by       
collective bargaining agreements, except that effective February 1, 1997,       
certain employees at Shelter's plastics operation in Texas are covered by a     
two-year collective bargaining agreement.                                       

LITIGATION                                                                      

The Company is, and may be in the future, party to litigation arising in the
course of its business. While the Company has no reason to believe that any     
pending claims are material, there can be no assurance that the Company's       
insurance coverage will be adequate to cover all liabilities arising out of     
such claims or that any such claims will be covered by the Company's            
insurance. Any material claim that is not covered by insurance may have an      
adverse effect on the Company's business. Claims against the Company,           
regardless of their merit or outcome, may also have an adverse effect on the    
Company's reputation and business.                                              

REGULATION                                                                      

The Company's suppliers and customers are subject to a variety of federal,  
state and local laws and regulations. The National Manufactured Housing         
Construction and Safety Standards Act of 1974 and regulations promulgated       
thereunder by HUD impose comprehensive national construction standards for      
manufactured homes and preempt conflicting state and local regulations. HUD     
has adopted regulations that divide the United States into three "Wind Zones"   
and impose more stringent construction standards for homes to be sold in areas  
designated as Wind Zones II or Ill. These regulations have resulted in higher   
manufacturing and dealer costs. The Company cannot predict if additional        
regulations will be adopted or the effect any such regulations would have on    
the Company. To the extent regulations make manufactured housing less           
competitive with other housing alternatives, the Company's operations could be  
negatively impacted.                                                            

The Company's operations are also subject to federal, state and local laws  
and regulations relating to the generation, storage, handling, emission,        
transportation and discharge of materials into the environment. Governmental    
authorities have the power to enforce compliance with their regulations, and    
violations may result in the payment of fines, the entry of injunctions or the  
imposition of other requirements necessary to achieve compliance. While the     
Company does not believe it will be required under existing environmental laws  
and enforcement policies to expend amounts which will have a material adverse   
effect on its operations or financial condition, the Company is unable to       
predict the ultimate cost of compliance with environmental laws and             
enforcement policies. From time to time, the Company has taken remedial         
actions with respect to environmental conditions at certain of its properties,  
and it is likely that the Company will continue to do so from time to time in   
the future. In connection with a pending contract to transfer certain Company   
properties to a third party, the Company has agreed to oversee any required     
remedial actions in connection with the properties to be transferred. The       
Company is currently engaged in discussions with the proposed transferee of     
such properties, as well as with environmental consultants, to determine the    
extent of the required remediation at such properties. Although the Company     
does not anticipate that costs incurred in connection with any required         
remediation will be material, there can be no assurance that such will be the   
case.                                                                           

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MANAGEMENT  

The following table sets forth certain information concerning the Company's 
directors, certain officers and certain key employees. Inclusion in this list   
as an officer or officer nominee is not intended to act as an admission that    
such individual is or will become subject to Section 16 under the Exchange      
Act.                                                                            

                                                        [Enlarge/Download Table]


NAME                     AGE POSITION                                                       
                                                                                            
Jerry E. Kimmel......... 60  Chairman of the Board, Chief Executive Officer and President   
Clyde A. Reed, Jr. ..... 62  Executive Vice President, Chief Operating Officer and Director 
Ellis L. McKinley, Jr... 46  Vice President, Chief Financial Officer, Treasurer and Director
Richard S. Tucker....... 53  Secretary and Director                                         
C. Lee Denham........... 49  President, Sunbelt                                             
Gregory G. Kimmel....... 29  Vice President, Corporate Development and Director             
Martin C. Bowen......... 54  Director                                                       
Richard Nevins.......... 50  Director                                                       

Jerry E. Kimmel is a founder of the Company and has spent his entire career 
in this industry. Mr. Kimmel has served as President of Kevco since 1978 and    
has served as Chairman of the Board and Chief Executive Officer of the Company  
since 1993. In 1992, Mr. Kimmel was inducted into the MH/RV Hall of Fame.       
Mr. Kimmel served as the Chairman of the Board of Governors of the              
Manufactured Housing Institute, a leading manufactured housing trade group, in  
1983 and 1984, and has served in various other Manufactured Housing Institute   
board capacities. Mr. Kimmel's term of office as a director of the Company      
will expire in the year 2000.                                                   

Clyde A. Reed joined the Company in 1965 and has served as Executive Vice   
President since 1986 and Chief Operating Officer since 1991. From 1978 to       
1986, Mr. Reed served as Vice President of the Company. Mr. Reed has been a     
director of the Company since November 1996. Mr. Reed's term of office as a     
director of the Company will expire in 1999.                                    

Ellis L. McKinley, Jr. joined the Company in 1995, has served as Vice       
President and Chief Financial Officer since such time and has served as a       
director and Treasurer of the Company since November 1996. From 1994 to 1995,   
Mr. McKinley was Vice President of Finance, Chief Financial Officer, Secretary  
and Treasurer of Renters Choice, Inc. From 1976 until 1994, Mr. McKinley was    
employed with Grant Thornton, a public accounting firm in Dallas, Texas, where  
he served as an audit partner from 1987 through 1994. Mr. McKinley received     
his B.B.A. in Accounting from the University of Texas in 1976. Mr. McKinley's   
term of office as a director of the Company will expire in 1999.                

Richard S. Tucker has served as a director of the Company since 1976, as an 
assistant secretary of the Company since 1988, and as the Secretary of the      
Company since November 1996. Since 1995, Mr. Tucker has been a partner in the   
law firm of Jackson Walker L.L.P., the Company's outside legal counsel. From    
1984 to 1995, Mr. Tucker was a member of the law firm of Simon, Anisman, Doby   
& Wilson, a Professional Corporation, located in Fort Worth, Texas. Mr. Tucker  
received his B.B.A. in Accounting from the University of Texas in 1966 and his  
J.D. from Southern Methodist University School of Law in 1969. Mr. Tucker's     
term of office as a director of the Company will expire in the year 2000.       

C. Lee Denham has served as President of Kevco's Sunbelt subsidiary since   
November 1996 and as Vice President of the Sunbelt division of Kevco from 1995  
to November 1996. Mr. Denham was division manager of Sunbelt from 1991 to       
1995. From 1981 to 1991, Mr. Denham was President of Sunbelt. From 1970 until   
founding Sunbelt in 1981, Mr. Denham was employed by Universal Forest           
Products, Inc. Mr. Denham received his B.B.A. in Marketing from the University  
of Georgia in 1970.                                                             

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Gregory G. Kimmel joined the Company in 1994 and has served as Vice         
President since January 1996, as Vice President, Corporate Development since    
August 1997 and as a director of the Company since May 1997. Mr. Kimmel         
received his B.S. in Education from McMurry University in 1994. Gregory G.      
Kimmel is the son of Jerry E. Kimmel, the Chairman, President and Chief         
Executive Officer of the Company. Mr. Kimmel's term of office as a director of  
the Company will expire in the year 2000.                                       

Martin C. Bowen has served as a director of the Company since November 1996.
Mr. Bowen has served as President and Chief Executive Officer of Performing     
Arts Fort Worth, Inc. since 1993, Vice President of Fine Line, Inc. since       
January 1996 and as a director of Aztec Manufacturing Company since November    
1993. From 1989 to 1992 he was Chairman of the Fort Worth Region for Team       
Bank. From 1987 to 1989, Mr. Bowen served as Chairman & CEO of Texas American   
Bank/Houston. From 1985 to 1987 he served as Executive Vice President of Texas  
American Bank/Fort Worth. Mr. Bowen received his B.B.A. in Finance from Texas   
A&M University in 1964 and his Bachelor of Foreign Trade degree from the        
American Institute of Foreign Trade, Phoenix, Arizona, in 1968. Additionally,   
he received his J.D. from Baylor University School of Law in 1973. Mr. Bowen's  
term of office as a director of the Company will expire in 1998.                

Richard Nevins has served as a director of the Company since November 1996. 
Since 1992, Mr. Nevins has served as President of Richard Nevins & Associates,  
a financial advisory firm. Mr. Nevins was elected as a director of Fruehauf     
Trailer Corporation ("Fruehauf") in 1995 and was elected as Chairman of         
Fruehauf's executive committee in August 1996. On October 7, 1996, Fruehauf     
filed for relief under Chapter 11 of the Bankruptcy Code of the United States.  
Together with the other members of the Fruehauf board who had been elected by   
the shareholders, Mr. Nevins resigned his positions with Fruehauf effective     
October 9, 1996. During 1996, Mr. Nevins has served as acting Chief Operating   
Officer and Chief Restructuring Officer for Sun World International, a          
California agricultural firm, following the filing of a petition in bankruptcy  
by Sun World International. From 1995 to 1996, Mr. Nevins served as a director  
of Ampex Corporation and from 1993 to 1995 he served as a director of The       
Actava Group (now Metromedia International Group). From 1990 to 1992 he was a   
Managing Director of Smith Barney Harris Upham & Co. Mr. Nevins received his    
B.A. in Economics from the University of California, Riverside in 1972 and his  
M.B.A. from Stanford Graduate School of Business in 1975. Mr. Nevin's term of   
office as a director of the Company will expire in 1998.                        

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MANAGEMENT COMPENSATION 

SUMMARY COMPENSATION TABLE                                                      

The following table sets forth certain information regarding compensation   
paid during each of Kevco's last three fiscal years to Kevco's Chief Executive  
Officer and each of Kevco's four other most highly compensated executive        
officers, based on salary and bonus earned during 1997.                         

                                                        [Enlarge/Download Table]

                                                          LONG TERM                   
                                      ANNUAL            COMPENSATION                  
                                   COMPENSATION            AWARDS                     
                                ------------------       SECURITIES                   
NAME AND PRINCIPAL       FISCAL                          UNDERLYING       ALL OTHER   
POSITION                  YEAR  SALARY($) BONUS($)     OPTIONS/SARS(#) COMPENSATION(5)
                                                                                      
Jerry Kimmel, ..........  1997  $250,000  $174,312(12)        --           $13,593(1) 
 Chairman of the Board,   1996  $366,271  $249,600            --           $17,163(2) 
 President and Chief      1995  $398,479  $191,530            --           $19,643(3) 
 Executive Officer                                                                    
Clyde A. Reed, Jr. .....  1997  $204,540  $ 33,361(12)        --           $12,655(4) 
 Executive Vice                                                                       
  President               1996  $188,088  $ 96,667         11,750          $29,756(5) 
 and Chief Operating                                                                  
  Officer                 1995  $179,737  $154,007          7,096          $26,440(6) 
Ellis L. McKinley,                                                                    
 Jr. ...................  1997  $162,975  $ 11,120(12)        --           $ 1,047(7) 
 Vice President,          1996  $145,980  $ 29,167         14,400          $ 1,057(7) 
 Chief Financial Officer  1995  $ 54,527  $ 25,000          7,050              --     
 and Treasurer                                                                        
C. Lee Denham,..........  1997  $114,095  $ 42,806(12)        --           $ 1,594(8) 
 President, Sunbelt       1996  $ 95,850  $222,221          9,400          $ 1,434(9) 
                          1995  $ 39,000  $110,000                         $ 4,292(10)
M. O'Neal Miller........  1997  $144,711       --             --           $ 5,000(11)
                          1996       --        --             --               --     
                          1995       --        --             --               --     

---------------------                                                           
(1) Consists of $12,546, representing personal use of a Company supplied car  
  and $1,047, representing the Company's contribution to such individual's
401(k) Plan account.                                                  
(2) Consists of $12,546, representing personal use of a Company supplied car, 
$3,560, representing payments by the Company for medical insurance    
premiums and $1,057, representing the Company's contribution to such  
individual's 401(k) Plan account.                                     
(3) Consists of $12,546, representing personal use of a Company supplied car, 
$3,866, representing payments by the Company for medical insurance    
premiums and $3,051, representing the Company's contribution to such  
individual's 401(k) Plan account.                                     
(4) Consists of $3,851, representing personal use of a Company supplied car,  
 $7,757, representing expense recognized by the Company in 1997 relating
   to future payments to be made under a deferred compensation agreement and
$1,047, representing the Company's contribution to such individual's  
401(k) Plan account.                                                  
(5) Consists of $4,518, representing personal use of a Company supplied car,  
  $24,181, representing expense recognized by the Company in 1996 relating
   to future payments to be made under a deferred compensation agreement and
$1,057, representing the Company's contribution to such individual's  
401(k) Plan account.                                                  
(6) Consists of $2,491, representing personal use of a Company supplied car,  
  $20,898, representing expense recognized by the Company in 1995 relating
   to future payments to be made under a deferred compensation agreement and
$3,051, representing the Company's contribution to such individual's  
401(k) Plan account.                                                  
(7) Represents the Company's contribution to such individual's 401(k) Plan    
account.                                                              

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(8) Consists of $547, representing personal use of a Company supplied car and 
$1,047, representing the Company's contribution to such individual's  
401(k) Plan account.                                                  
(9) Consists of $377, representing personal use of a Company supplied car and 
$1,057, representing the Company's contribution to such individual's  
401(k) Plan account.                                                  
(10) Consists of $1,241, representing personal use of a Company supplied car    
  and $3,051, representing the Company's contribution to such individual's
401(k) Plan account.                                                  
(11) Represents personal use of a Company supplied car.                         
(12) Excludes a portion of such individual's bonus earned in 1997 that is       
based on Company year end operating results that have not yet been    
computed.                                                             

YEAR END OPTION VALUES                                                          

The following table presents the information regarding the value of stock   
options outstanding at December 31, 1997 held by each of the Named Executive    
Officers. No stock options were exercised by the Named Executive Officers in    
1997.                                                                           

                                                                [Download Table]

                           NUMBER OF SECURITIES       VALUE OF UNEXERCISED   
                          UNDERLYING UNEXERCISED    IN-THE-MONEY OPTIONS/SARS
                         OPTIONS/SARS AT FY-END(#)       AT FY-END($)(1)     
                         -------------------------- -------------------------
NAME                     EXERCISABLE  UNEXERCISABLE EXERCISABLE UNEXERCISABLE
                                                                             
Jerry E. Kimmel.........      --            --            --           --    
Clyde A. Reed, Jr. .....   18,846(2)        --       $139,690          --    
C. Lee Denham...........    9,400(3)        --       $ 50,102          --    
Ellis L. McKinley,                                                           
 Jr. ...................   16,950(4)      4,500(5)   $128,165      $13,500   
M. O'Neal Miller........      --            --            --           --    

---------------------                                                           
(1) The closing price for the Kevco's Common Stock as reported through The      
Nasdaq National Market on December 31, 1997, was $16.50. Value is       
calculated on the basis of the difference between the option exercise   
price and $16.50 multiplied by the number of shares of Common Stock     
underlying the option.                                                  

(2) Consists of options to acquire 7,096 shares of Common Stock at $5.64 per    
share and options to acquire 11,750 shares of Common Stock at $11.17 per
share.                                                                  

(3) Consists of options to acquire 9,400 shares of Common Stock at $11.17 per   
share.                                                                  

(4) Consists of options to acquire 7,050 shares of Common Stock at $5.64 per    
  share, options to acquire 9,400 shares of Common Stock at $11.17 per share
and options to acquire 500 shares of Common Stock at $13.50 per share.  

(5) Consists of options to acquire shares of Common Stock at $13.50 per share,  
  vesting 10% on each December 16 up to and including December 16, 2006, the
date the options expire.                                                

COMPENSATION OF DIRECTORS                                                       

Directors who are employees of the Company do not receive additional        
compensation for serving as directors. Each director who is not an employee of  
the Company receives a fee of $1,000 for attendance at each Board of Directors  
meeting and $500 for attendance at each Board committee meeting (unless held    
on the same day as a Board of Directors meeting). All directors of the Company  
are reimbursed for out-of-pocket expenses incurred in attending meetings of     
the Board of Directors or committees thereof, and for other out-of-pocket       
expenses incurred in their capacity as directors of the Company.                

EMPLOYMENT AGREEMENTS                                                           

Mr. Kimmel has entered into a five year employment agreement with the       
Company providing for an annual base salary of $250,000. In addition to base    
salary, Mr. Kimmel, through his employment agreement, is eligible for an        
annual bonus equal to 2.4% of the Company's income before income taxes for the  
year provided that income before income taxes is at least $5.0 million. Such    
salary and bonus are subject to increase, but not                               

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decrease, by the Company. Increases in Mr. Kimmel's compensation will be        
reviewed annually by the Company's Compensation Committee in a manner so as to  
qualify under the performance based compensation provisions of the Internal     
Revenue Code. Under the agreement, Mr. Kimmel has agreed to perform services    
on behalf of the Company and its subsidiaries in Fort Worth, Texas as he        
reasonably determines are necessary to carry out his duties under the           
agreement. Mr. Kimmel, his spouse and dependents are, until the death of the    
survivor of Mr. Kimmel and his spouse, entitled to participate at the           
Company's expense in health programs offered to Company employees generally     
or, if insurance coverage is not available, to have their health care costs     
reimbursed by the Company. Upon the death of Mr. Kimmel, the Company must       
continue to pay his base salary for the remainder of the then existing          
agreement term. The agreement can be terminated by the Company only for cause   
(as defined in such agreement). The employment agreement, which is guaranteed   
by the subsidiaries of the Company, is automatically extended for an            
additional year at the end of each year's service.                              

Effective May 24, 1977, Mr. Reed entered into a retirement agreement with   
the Company that generally provides that the Company will pay Mr. Reed or his   
beneficiaries $55,000 per year for 10 years if Mr. Reed is employed with the    
Company at age 65 or upon death or disability. Such agreement also provides     
for a smaller lump sum payment that the Company will make upon Mr. Reed's       
termination of employment prior to age 65, death or disability. Such lesser     
amount equals approximately $14,000 for each year following the effective date  
of the agreement, up to such termination.                                       

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

The Company leases three of its warehouse locations from an affiliated      
partnership (K&E Land & Leasing, a Texas general partnership) of which Mr.      
Kimmel is a managing partner. The Company also leases computer equipment from   
K&E Land & Leasing. These leases (i) expire in November 2003, April 2005,       
October 2007 and October 2003, respectively, (ii) provide for total future      
(i.e. post 1997) base rent payments of approximately $758,000, $670,000, $2.3   
million and $1.3 million, respectively, and (iii) require payments to be made   
in equal monthly amounts. As of December 31, 1997, Jerry Kimmel's indirect      
interest in such leases was 38.0% and Gregory G. Kimmel's aggregate beneficial  
interest in such leases was 4%. As of December 31, 1997, Mr. Kimmel's           
immediate family members (including Gregory G. Kimmel's beneficial interest)    
owned indirect interests in such leases of 12.0%. Aggregate expenditures by     
the Company under such leases in 1997 were approximately $672,000, of which     
approximately $255,000 was indirectly attributable to Jerry Kimmel's interests  
in such partnership (excluding immediate family members' interests) and of      
which approximately $27,000 was indirectly attributable to Gregory G. Kimmel's  
beneficial interest. It is anticipated that aggregate expenditures by the       
Company under such leases for the remainder of their terms will be              
approximately $5.0 million, of which approximately $1.9 million will be         
indirectly payable (less partnership expenses) to Jerry Kimmel (excluding       
immediate family members' interests) and of which approximately $200,000 will   
be indirectly payable (less partnership expenses) to Gregory G. Kimmel. The     
Company believes that the amounts it has paid or will pay under such leases     
have not been and the Company believes will not be less favorable to the        
Company than had the leases been negotiated on an arms-length basis. Two of     
the leased warehouses were financed through economic development and            
industrial revenue bonds; one series of which was issued by Newton, Kansas in   
the original principal amount of $575,000, and with respect to which the        
Company is the sub-lessee of the premises and a co-guarantor, and one series    
of which was issued by Elkhart, Indiana in the original principal amount of     
$400,000, and with respect to which the Company is the lessee of the premises   
and had agreed to perform the obligation of the lessor contained in the         
mortgage.                                                                       

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Prior to October 26, 1993, Billy T. Everett owned 50% of the then           
outstanding common stock of Kevco and served as its Chairman of the Board.      
Effective October 26, 1993, Kevco repurchased 13% of Mr. Everett's Common       
Stock holdings in exchange for the issuance of a promissory note in the         
original principal amount of $747,500 and bearing interest at a floating rate,  
which was 6% per annum on the date of the note; such note was retired in 1994.  
Also effective October 26, 1993, Mr. Kimmel purchased Mr. Everett's remaining   
Common Stock holdings in exchange for approximately $5.0 million cash and, in   
order to facilitate such purchase, the Company loaned Mr. Kimmel $5.0 million.  
The loan is payable in monthly principal installments of $62,500 plus interest  
at 9% per annum as of December 31, 1995 with the final installment due in       
November 1997. As of June 30, 1996, $3.1 million remained outstanding under     
such loan, and effective as of such date the note evidencing this loan was      
distributed to Kevco's shareholders.                                            

Gregory G. Kimmel and James Kimmel, Jerry Kimmel's brother, earned, in the  
aggregate, approximately $143,000 and $137,000 in compensation in 1997 and      
1996, respectively. Mr. Tucker, Secretary and a director of the Company, is a   
partner in Jackson Walker L.L.P., which is the Company's principal outside      
legal counsel.                                                                  

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PRINCIPAL SHAREHOLDERS  

The following table sets forth information with respect to beneficial       
ownership of Common Stock as of January 12, 1998 and includes (i) all persons   
known to the Company to be the beneficial owner of 5% or more of the Common     
Stock, (ii) each director of the Company, (iii) the chief executive officer     
and each of the Company's four other most highly compensated executive          
officers whose total annual compensation for 1997 based on salary and bonus     
earned during 1997 exceeded $100,000 (the "Named Executive Officers"), and      
(iv) all the Company directors and executive officers as a group. This table    
does not include shares of Common Stock that may be purchased pursuant to       
options not exercisable within 60 days of January 12, 1998. All persons listed  
have sole voting and investment power with respect to their shares unless       
otherwise indicated. As of January 12, 1998, Kevco had 6,828,809 shares of      
Common Stock issued and outstanding.                                            

                                                                [Download Table]


NAME OF BENEFICIAL OWNER OR            AMOUNT AND NATURE                    
NUMBER OF PERSONS IN GROUP          OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
                                                                            
Jerry E. Kimmel(1)................         3,744,760(2)           54.8%     
Clyde A. Reed, Jr.................            30,014(3)             *       
Ellis L. McKinley, Jr.............            21,950(4)             *       
Richard S. Tucker.................             5,500(5)             *       
Martin C. Bowen...................             3,000(5)             *       
M. O'Neal Miller..................             5,100(7)             *       
Richard Nevins....................             7,405(5)             *       
C. Lee Denham.....................             9,400(6)             *       
Gregory G. Kimmel.................           221,086(9)            3.2%     
All directors and executive                                                 
 officers as a group (8 persons)..         4,043,115(8)           58.6%     

---------------------                                                           
* Less than 1%                                                              
(1) The address of Mr. Kimmel is University Centre I, 1300 S. University        
Drive, Suite 200, Fort Worth, Texas 76107.                              
(2) Excludes 626,386 shares of outstanding Common Stock and 15,299 shares of    
Common Stock issuable upon exercise of options beneficially owned by Mr.
Kimmel's adult children and his brother. Mr. Kimmel disclaims beneficial
ownership of such shares.                                               
(3) Includes 18,846 shares of Common Stock subject to presently exercisable     
options.                                                                
(4) Includes 16,950 shares of Common Stock subject to presently exercisable     
options, or options exercisable within 60 days.                         
(5) Includes 2,500 shares of Common Stock subject to presently exercisable      
options.                                                                
(6) Consists of 9,400 shares of Common Stock subject to presently exercisable   
options.                                                                
(7) Includes 2,100 shares of Common Stock beneficially owned by such            
individual's spouse.                                                    
(8) Includes 65,644 shares of Common Stock subject to presently exercisable     
options and excludes 5,100 shares of Common Stock attributable to M.    
O'Neal Miller, who is no longer an executive officer of the Company.    
(9) Includes 12,949 shares of Common Stock subject to presently exercisable     
options and excludes 2,406 shares of Common Stock held as custodian for 
such individual's children.                                             

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DESCRIPTION OF SENIOR CREDIT FACILITY 

General. On December 1, 1997, Kevco entered into an amended and restated    
$125 million credit facility with Nations Bank of Texas, N.A., as lender and    
administrative agent, and certain other banks, consisting of $90 million in     
aggregate principal amount of term loans (the "Term Loan Facility"), which      
facility includes a $40 million tranche A term loan subfacility and a $50       
million tranche B term loan subfacility and a $35 million revolving credit      
facility (the "Revolving Credit Facility"), which facility includes a sublimit  
for letters of credit. The Company has used the Term Loan Facility and a        
portion of the Revolving Credit Facility to refinance indebtedness of Kevco     
Delaware, Inc. to NationsBank of Texas, N.A. and the lenders under an Amended   
and Restated Credit Agreement, dated February 27, 1997, as amended, and to      
provide a portion of the funds necessary to consummate the Transactions. See    
"Use of Proceeds." This information relating to the Senior Credit Facility is   
qualified in its entirety by reference to the complete text of the Senior       
Credit Facility a copy of which is filed as an exhibit to the Exchange Offer    
Registration Statement of which this Prospectus is a part. The following is a   
description of the general terms of the Senior Credit Facility.                 

Security. Indebtedness of the Company under the Senior Credit Facility is   
guaranteed by each of Kevco's domestic subsidiaries (direct or indirect),       
thereafter acquired, and is secured by: (i) a first priority security interest  
in substantially all of the assets and properties (including, without           
limitation, accounts receivable, inventory, real property, machinery,           
equipment, contracts and contract rights, trademarks, copyrights, patents,      
license agreements and general intangibles) of the Company and each of its      
domestic subsidiaries (direct or indirect) then existing or thereafter          
acquired; (ii) a first priority perfected pledge of all capital stock of each   
of Kevco's domestic subsidiaries (direct or indirect) then existing or          
thereafter acquired (other than SCCAC and Shelter until the merger of SCCAC     
with and into Shelter); and (iii) a first priority perfected pledge of 65% of   
the capital stock of foreign subsidiaries of Kevco or any of its domestic       
subsidiaries.                                                                   

Interest. Indebtedness under the Senior Credit Facility bears interest at a 
floating rate. Indebtedness under the Term Loan Facility and the Revolving      
Credit Facility initially bear interest at a rate based (at the Company's       
option) upon (i) LIBOR for one, two, three or six months, plus 2.25% with       
respect to the Tranche A Term Loan Facility and the Revolving Credit Facility   
or plus 2.75% with respect to the Tranche B Term Loan Facility, or (ii) the     
Alternate Base Rate (as defined in the Senior Credit Facility) plus 0.75% with  
respect to the Tranche A Term Loan Facility and the Revolving Credit Facility   
or plus 1.25% with respect to the Tranche B Term Loan Facility; provided,       
however, the interest rates are subject to several quarter point reductions in  
the event the Company meets certain performance targets.                        

Maturity. The Tranche B Term Loan Facility will mature on December 31, 2004.
The Tranche A Term Loan Facility and the Revolving Credit Facility will mature  
on December 31, 2003. The Term Loan Facility is subject to repayment according  
to quarterly amortization of principal based upon a schedule specified in the   
Senior Credit Facility.                                                         

Prepayments. The Senior Credit Facility provides for mandatory prepayments  
of the Term Loan Facility and the Revolving Credit Facility. Prepayments on     
the Term Loan Facility will be applied pro rata to reduce scheduled             
amortization payments as provided in the Senior Credit Facility. The mandatory  
prepayments defined in the Senior Credit Facility include the lesser of (1) an  
amount, if any, which would result in the leverage ratio being 3.5 to 1 after   
such pre-payment and (2) each of the following as applicable, (a) 100% of the   
net cash proceeds received by the Company or any subsidiary from asset sales    
(including the capital stock of any subsidiary) in excess of $500,000 each      
fiscal year, subject to de minimis baskets, certain exceptions, and             
reinvestment provisions and net of selling expenses and taxes to the extent     
such taxes are paid; (b) 75% of Excess Cash Flow pursuant to an annual cash     
sweep arrangement; (c) 100% of the net cash proceeds from the issuance of debt  
(excluding the Notes and certain other debt proceeds) by the Company, or any    
subsidiary; and (d) 50% of the net cash proceeds from the sale or disposition   
by the Company or any of its subsidiaries to any Person of any capital stock    
of the Company (other than proceeds that are concurrently applied to complete   
a permitted Acquisition (as defined therein)). In addition, the Company may     
prepay the Senior Credit Facility in whole or in part at any time without       
penalty, subject to reimbursement of certain costs of the Lenders.              

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Fees. The Company is required to pay to the Lenders in the aggregate a      
commitment fee equal to 0.50 per annum on the committed undrawn amount of the   
Revolving Credit Facility during the preceding quarter; provided that this fee  
may be subject to reduction in the event the Company meets certain performance  
targets. The Company also is required to pay to the Lenders participating in    
the Revolving Credit Facility letter of credit fees, due quarterly in arrears,  
equal to 100% of the applicable margin over LIBOR (being LIBOR for loans under  
the Revolving Credit Facility) for standby letters of credit issued under the   
Revolving Credit Facility or 50% of the applicable margin over LIBOR (being     
LIBOR for loans under the Revolving Credit Facility) for commercial letters of  
credit issued under the Revolving Credit Facility, plus a fronting fee payable  
to the issuing bank equal to the greater of (a) $250 or (b) the product of      
0.125% times the face amount of the letter of credit being issued. Fees to      
Lenders participating in letters of credit will be calculated on the aggregate  
undrawn portion of each letter of credit for the duration thereof.              

Covenants. The Senior Credit Facility requires the Company to meet certain  
financial tests, including a minimum fixed charge coverage ratio, maximum       
leverage ratio and maintenance of a minimum net worth amount. The Senior        
Credit Facility also contains covenants which include, without limitation (i)   
delivery of financial statements and other reports; (ii) delivery of            
compliance certificates; (iii) notices of default, material litigation and      
material governmental and environmental proceedings; (iv) compliance with       
laws; (v) payment of taxes; (vi) maintenance of insurance; (vii) limitation on  
liens; (viii) limitations on mergers, consolidations and sales of assets; (ix)  
limitations on incurrence of debt; (x) limitations on dividends and stock       
redemptions and the redemption and/or prepayment of other debt; (xi)            
limitations on investments; (xii) ERISA (as defined) matters; (xiii)            
limitation on transactions with affiliates; (xiv) limitations on acquisitions;  
(xv) limitation on sale and leasebacks; (xvi) limitation on sale or discount    
of receivables; and (xvii) limitation on capital expenditures.                  

Default. The Senior Credit Facility provides for certain customary events of
default, including an event of default upon the occurrence of a change of       
control of the Company.                                                         

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THE EXCHANGE OFFER  

PURPOSE AND EFFECT OF THE EXCHANGE OFFER                                        

The Old Notes were originally sold by the Company on December 1, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers   
subsequently resold the Old Notes to qualified institutional buyers in          
reliance on Rule 144A under the Securities Act. As a condition to the           
completion of the Old Notes Offering, the Company entered into the              
Registration Rights Agreement with the Initial Purchasers pursuant to which     
the Company agreed to use its reasonable best efforts to cause to be filed      
with the Commission the Exchange Offer Registration Statement on the            
appropriate form under the Securities Act with respect to an offer to exchange  
the Old Notes for Exchange Notes. The Exchange Notes will be substantially      
identical to the Old Notes, except that the Exchange Notes will bear a Series   
B designation and will have been registered under the Securities Act and        
therefore will not contain terms with respect to transfer restrictions (other   
than those that might be imposed by state securities laws) and will not be      
entitled to registration rights or other rights under the Registration Rights   
Agreement.                                                                      

Under existing interpretations of the staff of the Commission, the Exchange 
Notes would, in general, be freely tradeable after the Exchange Offer without   
further registration under the Securities Act. However, any purchaser of Old    
Notes who is an "affiliate" of the Company or intends to participate in the     
Exchange Offer for the purpose of distributing the Exchange Notes (i) will not  
be able to rely on the interpretations of the staff of the Commission, (ii)     
will not be able to tender its Old Notes in the Exchange Offer and (iii) must   
comply with the registration and prospectus delivery requirements of the        
Securities Act in connection with any sale or transfer of the Old Notes,        
unless such sale or transfer is made pursuant to an exemption from such         
requirements.                                                                   

Each Holder who wishes to exchange such Old Notes for Exchange Notes in the 
Exchange Offer will be required to make certain representations, including      
representations that (i) it is not an affiliate of the Company, (ii) it is not  
engaged in, and does not intend to engage in, and has no arrangement or         
understanding with any person to participate in, a distribution of the          
Exchange Notes and (iii) it is acquiring the Exchange Notes in the ordinary     
course of its business. In addition, broker-dealers receiving Exchange Notes    
in the Exchange Offer will have a prospectus delivery requirement with respect  
to resales of Exchange Notes. The Commission has taken the position that such   
broker-dealers may fulfill their prospectus delivery requirements with respect  
to the Exchange Notes (other than a resale of an unsold allotment from the      
original sale of Old Notes) with the prospectus contained in the Exchange       
Offer Registration Statement. Under the Registration Rights Agreement, the      
Company is required to allow such broker-dealers to use the prospectus          
contained in the Exchange Offer Registration Statement in connection with the   
resale of such Exchange Notes for a period of one year after the Expiration     
Date (or such shorter period during which all such resales have occurred).      

The Registration Rights Agreement provides that if (i) the Exchange Offer is
not permitted by applicable law or (ii) if any Holder of Old Notes shall        
notify the Company within 20 Business Days following the Expiration Date that   
(A) such Holder was prohibited by law or Commission policy from participating   
in the Exchange Offer or (B) such Holder may not resell the Exchange Notes to   
the public without delivering a prospectus and the Prospectus relating to the   
Exchange Offer is not appropriate or available for such resales by such Holder  
or (C) such Holder is a Broker-Dealer and holds Old Notes acquired directly     
from the Company or any of its affiliates, then the Company and the Guarantors  
shall: (1) cause to be filed, on or prior to 45 days after the earlier of (i)   
the date on which the Company determines that the Exchange Offer is not         
permitted by applicable law and (ii) the date on which the Company receives     
such notice from a Holder, a Shelf Registration Statement, relating to all Old  
Notes, and (2) shall use their respective reasonable best efforts to cause      
such Shelf Registration Statement to become effective on or prior to 120 days   
after the date on which the obligation of the Company and the Subsidiary        
Guarantors to file the Shelf Registration Statement arises.                     

The Company and the Subsidiary Guarantors shall use their respective        
reasonable best efforts to keep any Shelf Registration Statement continuously   
effective for a maximum of two years (or such shorter period in which all Old   
Notes covered by such Shelf Registration Statement have been sold).             

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If (i) the Company fails to file any of the registration statements required
by the Registration Rights Agreement on or prior to the date specified for      
such filing, (ii) any of such registration statements are not declared          
effective by the Commission on or prior to the date specified for such          
effectiveness (the "Effectiveness Target Date"), (iii) the Company fails to     
consummate the Exchange Offer on or prior to 30 days after the Effectiveness    
Target Date with respect to the Exchange Offer Registration Statement (if the   
Company is required by the Registration Rights Agreement to complete the        
Exchange Offer), or (iv) the Shelf Registration Statement or the Exchange       
Offer Registration Statement is declared effective but thereafter ceases to be  
effective or usable during the periods specified in the Registration Rights     
Agreement (each such event referred to in clauses (i) through (iv) above, a     
"Registration Default"), then the Company will be required to pay Liquidated    
Damages to each Holder affected by such Registration Default on each interest   
payment date. Liquidated Damages shall accrue from and after the date of each   
Registration Default, and shall continue to accrue thereafter until such        
Registration Default has been cured or waived as set forth in the Registration  
Rights Agreement, in an amount equal to, with respect to the first 90-day       
period immediately following the occurrence of such Registration Default,       
$0.05 per week per $1,000 principal amount of Notes held by such Holder. The    
amount of the Liquidated Damages will increase by an additional $0.05 per week  
per $1,000 principal amount of Notes with respect to each subsequent 90-day     
period until all Registration Defaults have been cured, up to a maximum amount  
of Liquidated Damages, if any, of $0.30 per week per $1,000 principal amount    
of such Notes. All accrued Liquidated Damages, if any, will be paid by the      
Company on each Damages Payment Date (as defined in the Registration Rights     
Agreement) to the Global Note Holder by wire transfer of immediately available  
funds or by federal funds check and to Holders of Certificated Securities by    
wife transfer to the accounts specified by them or by mailing checks to their   
registered addresses if no such accounts have been specified. At such time as   
all Registration Defaults have been cured, the accrual of Liquidated Damages,   
if any, will cease.                                                             

The summary herein of certain provisions of the Registration Rights         
Agreement does not purport to be complete and is subject to, and is qualified   
in its entirety by, all the provisions of the Registration Rights Agreement, a  
copy of which is filed as an exhibit to the Exchange Offer Registration         
Statement of which this Prospectus is a part.                                   

Following the consummation of the Exchange Offer, Holders of the Old Notes  
who were eligible to participate in the Exchange Offer but who did not tender   
their Old Notes will not have any further registration rights and such Old      
Notes will continue to be subject to certain restrictions on transfer.          
Accordingly, the liquidity of the market for such Old Notes could be adversely  
affected.                                                                       

TERMS OF THE EXCHANGE OFFER                                                     

Upon the terms and subject to the conditions set forth in this Prospectus   
and in the Letter of Transmittal, the Company will accept any and all Old       
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York time, on  
the Expiration Date. The Company will issue $1,000 principal amount of          
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old  
Notes accepted in the Exchange Offer. Holders may tender some or all of their   
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered    
only in integral multiples of $1,000.                                           

The form and terms of the Exchange Notes are the same as the form and terms 
of the Old Notes except that (i) the Exchange Notes bear a Series B             
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange  
Notes have been registered under the Securities Act and hence will not bear     
legends restricting the transfer thereof and (iii) the holders of the Exchange  
Notes will not be entitled to certain rights under the Registration Rights      
Agreement, including the provisions providing for an increase in the interest   
rate on the Old Notes in certain circumstances relating to the timing of the    
Exchange Offer, all of which rights generally will terminate when the Exchange  
Offer is terminated. The Exchange Notes will evidence the same debt as the Old  
Notes and will be entitled to the benefits of the Indenture.                    

As of the date of this Prospectus, $105,000,000 aggregate principal amount  
of Old Notes were outstanding. The Company has fixed the close of business on   
January 30, 1998 as the record date for the Exchange Offer                      

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for purposes of determining the persons to whom this Prospectus and the Letter  
of Transmittal will be mailed initially.                                        

Holders of Old Notes do not have any appraisal or dissenters rights under   
the Texas Business Corporation Act or the Indenture in connection with the      
Exchange Offer. The Company intends to conduct the Exchange Offer in            
accordance with the applicable requirements of the Exchange Act and the rules   
and regulations of the Commission thereunder.                                   

The Company shall be deemed to have accepted validly tendered Old Notes     
when, as and if the Company has given oral or written notice thereof to the     
Exchange Agent. The Exchange Agent will act as agent for the tendering holders  
for the purpose of receiving the Exchange Notes from the Company.               

If any tendered Old Notes are not accepted for exchange because of an       
invalid tender, the occurrence of certain other events set forth herein or      
otherwise, any such unaccepted Old Notes will be returned, without expense, to  
the tendering holder thereof as promptly as practicable after the Expiration    
Date.                                                                           

Holders who tender Old Notes in the Exchange Offer will not be required to  
pay brokerage commissions or fees or, subject to the instructions in the        
Letter of Transmittal, transfer taxes with respect to the exchange of Old       
Notes pursuant to the Exchange Offer. The Company will pay all changes and      
expenses, other than transfer taxes in certain circumstances, in connection     
with the Exchange Offer. See "Fees and Expenses."                               

EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                         

The term "Expiration Date" shall mean 5:00 p.m., New York time, on March 4, 
1998, unless the Company, in its sole discretion, extends the Exchange Offer,   
in which case the term "Expiration Date" shall mean the latest date and time    
to which the Exchange Offer is extended.                                        

In order to extend the Exchange Offer, the Company will notify the Exchange 
Agent of any extension by oral or written notice and will mail to the           
registered holders an announcement thereof, each prior to 9:00 a.m., New York   
time, on the next business day after the previously scheduled expiration date.  

INTEREST ON THE EXCHANGE NOTES                                                  

The Exchange Notes will bear interest from the most recent date to which    
interest has been paid or duly provided for on the Old Note surrendered in      
exchange for such Exchange Note or, if no interest has been paid or duly        
provided for on such Old Note, from December 1, 1997. Interest on the Exchange  
Notes is payable semi-annually on each June 1 and December 1, commencing on     
June 1, 1998.                                                                   

Holders of Old Notes whose Old Notes are accepted for exchange will not     
receive accrued interest on such Old Notes for any period from and after the    
last date to which interest has been paid or duly provided for on the Old       
Notes prior to the original issue date of the Exchange Notes or, if no such     
interest has been paid or duly provided for, will not receive any accrued       
interest on such Old Notes, and will be deemed to have waived, the right to     
receive any interest on such Old Notes accrued from and after the last date to  
which interest has been paid or duly provided for on the Old Notes or, if no    
such interest has been paid or duly provided for, from and after December 1,    
1997.                                                                           

PROCEDURES FOR TENDERING                                                        

For a holder of Old Notes to tender Old Notes validly pursuant to the       
Exchange Offer, a properly completed and duly executed Letter of Transmittal    
(or facsimile thereof), with any required signature guarantee, or (in the case  
of a book-entry transfer), an Agent's Message in lieu of the Letter of          
Transmittal, and any other required documents, must be received by the          
Exchange Agent at the address set forth in the Letter of Transmittal prior to   
5:00 p.m., New York time, on the Expiration Date. In addition, prior to 5:00    
p.m., New York time, on the                                                     

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Expiration Date, either (a) certificates for tendered Old Notes must be         
received by the Exchange Agent at such address or (b) such Old Notes must be    
transferred pursuant to the procedures for book-entry transfer described below  
(and a confirmation of such tender received by the Exchange Agent, including    
an Agent's Message if the tendering holder has not delivered a Letter of        
Transmittal).                                                                   

The term "Agent's Message" means a message transmitted by the Depository,   
received by the Exchange Agent and forming part of the confirmation of a book-  
entry transfer, which states that the Depository has received an express        
acknowledgment from the participant in the Depository tendering Old Notes       
which are the subject of such book-entry confirmation that such participant     
has received and agrees to be bound by the terms of the Letter of Transmittal   
and that the Company may enforce such agreement against such participant. In    
the case of an Agent's Message relating to guaranteed delivery, the term means  
a message transmitted by the Depository and received by the Exchange Agent,     
which states that the Depository has received an express acknowledgment from    
the participant in the Depository tendering Old Notes that such participant     
has received and agrees to be bound by the Notice of Guaranteed Delivery.       

By tendering Old Notes pursuant to the procedures set forth above, each     
holder will make to the Company the representations set forth above in the      
third paragraph under the heading "--Purpose and Effect of the Exchange         
Offer."                                                                         

The tender by a holder and the acceptance thereof by the Company will       
constitute an agreement between such holder and the Company in accordance with  
the terms and subject to the conditions set forth herein and in the Letter of   
Transmittal.                                                                    

THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL   
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE      
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO  
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME      
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE           
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE        
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL      
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH    
HOLDERS.                                                                        

Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to       
tender should contact the registered holder promptly and instruct such          
registered holder to tender on such beneficial owner's behalf. See              
"Instruction to Registered Holder and/or Book-Entry Transfer Facility           
Participant from Owner" included with the Letter of Transmittal.                

Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)        
unless the Old Notes tendered pursuant thereto are tendered (i) by a            
registered holder who has not completed the box entitled "Special Registration  
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal   
or (ii) for the account of an Eligible Institution. In the event that           
signatures on a Letter of Transmittal or a notice of withdrawal, as the case    
may be, are required to be guaranteed, such guarantee must be by a member firm  
of the Medallion System (an "Eligible Institution").                            

If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or      
accompanied by a properly completed bond power, signed by such registered       
holder as such registered holdees name appears on such Old Notes with the       
signature thereon guaranteed by an Eligible Institution.                        

If the Letter of Transmittal or any Old Notes or bond powers are signed by  
trustees, executors, administrators, guardians, attorneys-in-fact, offices of   
corporations or others acting in a fiduciary or representative capacity, such   
persons should so indicate when signing, and evidence satisfactory to the       
Company of their authority to so act must be submitted with the Letter of       
Transmittal.                                                                    

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The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the     
Old Notes at the book-entry transfer facility, The Depository Trust Company     
("DTC", the "Depositary" or the "Book-Entry Transfer Facility"), for the        
purpose of facilitating the Exchange Offer, and subject to the establishment    
thereof, any financial institution that is a participant in the Book-Entry      
Transfer Facility's system may make book-entry delivery of Old Notes by         
causing such Book-Entry Transfer Facility to transfer such Old Notes into the   
Exchange Agent's account with respect to the Old Notes in accordance with the   
Book-Entry Transfer Facility's procedures for such transfer. Although delivery  
of the Old Notes may be effected through book-entry transfer into the Exchange  
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of   
Transmittal properly completed and duly executed with any required signature    
guarantee, or, in the case of a book-entry transfer, an Agent's Message in      
lieu of the Letter of Transmittal and all other required documents must in      
each case be transmitted to and received or confirmed by the Exchange Agent at  
its address set forth in the Letter of Transmittal on or prior to the           
Expiration Date, or, if the guaranteed delivery procedures described below are  
complied with, within the time period provided under such procedures. Delivery  
of documents to the Book-Entry Transfer Facility does not constitute delivery   
to the Exchange Agent.                                                          

The Exchange Agent and DTC have confirmed that the Exchange Offer is        
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC  
participants may electronically transmit their acceptance of the Exchange       
Offer by causing DTC to transfer Old Notes to the Exchange Agent in accordance  
with DTC's ATOP procedures for transfer. DTC will then send an Agent's Message  
to the Exchange Agent.                                                          

All questions as to the validity, form, eligibility (including time of      
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old       
Notes will be determined by the Company in its sole discretion, which           
determination will be final and binding. The Company reserves the absolute      
right to reject any and all Old Notes not properly tendered or any Old Notes    
the Company's acceptance of which would, in the opinion of counsel for the      
Company, be unlawful. The Company also reserves the right in its sole           
discretion to waive any defects, irregularities or conditions of tender as to   
particular Old Notes. The Company's interpretation of the terms and conditions  
of the Exchange Offer (including the instructions in the Letter of              
Transmittal) will be final and binding on all parties. Unless waived, any       
defects or irregularities in connection with tenders of Old Notes must be       
cured within such time as the Company shall determine. Although the Company     
intends to notify holders of defects or irregularities with respect to tenders  
of Old Notes, neither the Company, the Exchange Agent nor any other person      
shall incur any liability for failure to give such notification. Tenders of     
Old Notes will not be deemed to have been made until such defects or            
irregularities have been cured or waived. Any Old Notes received by the         
Exchange Agent that are not properly tendered and as to which the defects or    
irregularities have not been cure or waived will be returned by the Exchange    
Agent to the tendering holders, unless otherwise provided in the Letter of      
Transmittal, as soon as practicable following the Expiration Date.              

GUARANTEED DELIVERY PROCEDURES                                                  

Holders who wish to tender their Old Notes and (i) whose Old Notes are not  
immediately available, (ii) who cannot deliver their Old Notes, the Letter of   
Transmittal or any other required documents to the Exchange Agent or (iii) who  
cannot complete the procedures for book-entry transfer, prior to the            
Expiration Date, may effect a tender if:                                        

(a) the tender is made through an Eligible Institution;                 

(b) prior to the Expiration Date, the Exchange Agent receives from such 
Eligible Institution a properly completed and duly executed Notice of       
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)      
setting forth the name and address of the holder, the certificate number(s) 
of such Old Notes and the principal amount of Old Notes tendered, stating   
that the tender is being made thereby and guaranteeing that, within five    
New York Stock Exchange trading days after the Expiration Date, the Letter  
of Transmittal (or facsimile thereof) together with the certificate(s)      
representing the Old Notes (or a confirmation of book-entry transfer of     
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer 
Facility), and any other documents required by the Letter of Transmittal    
will be deposited by the Eligible Institution with the Exchange Agent; and  

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(c) such properly completed and executed Letter of Transmittal (or      
facsimile thereof), as well as the certificates representing all tendered   
Old Notes in proper form for transfer (or a confirmation of book-entry      
transfer of such Old Notes into the Exchange Agent's account at the Book-   
Entry Transfer Facility), and all other documents required by the Letter of 
Transmittal are received by the Exchange Agent upon five New York Stock     
Exchange trading days after the Expiration Date.                            

Upon request to the Exchange Agent a Notice of Guaranteed Delivery will be  
sent to holders who wish to tender their Old Notes according to the guaranteed  
delivery procedures set forth above.                                            

WITHDRAWAL OF TENDERS                                                           

Except as otherwise provided herein, tenders of Old Notes may be withdrawn  
at any time prior to 5:00 p.m., New York time, on the Expiration Date.          

To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex, 
letter or facsimile transmission notice of withdrawal must be received by the   
Exchange Agent at its address set forth in the Letter of Transmittal prior to   
5:00 p.m., New York time, on the Expiration Date. Any such notice of            
withdrawal must (i) specify the name of the person having deposited the Old     
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be      
withdrawn (including the certificate number(s) and principal amount of such     
Old Notes, or, in the case of Old Notes transferred by book-entry transfer,     
the name and number of the account at the Book-Entry Transfer Facility to be    
credited), (iii) be signed by the holder in the same manner as the original     
signature on the Letter of Transmittal by which such Old Notes were tendered    
(including, any required signature guarantees) or be accompanied by documents   
of transfer sufficient to have the Trustee with respect to the Old Notes        
register the transfer of such Old Notes into the name of the person             
withdrawing the tender and (iv) specify the name in which any such Old Notes    
are to be registered, if different from that of the Depositor. All questions    
as to the validity, form and eligibility (including time of receipt) of such    
notices will be determined by the Company, whose determination shall be final   
and binding on all parties. Any Old Notes so withdrawn will be deemed not to    
have been validly tendered for purposes of the Exchange Offer and no Exchange   
Notes will be issued with respect thereto unless the Old Notes so withdrawn     
are validly retendered. Any Old Notes that have been tendered but that are not  
accepted for exchange will be returned to the holder thereof without cost to    
such holder as soon as practicable after withdrawal, rejection of tender or     
termination of the Exchange Offer. Properly withdrawn Old Notes may be          
retendered by following one of the procedures described above under             
"Procedures for Tendering" at any time prior to the Expiration Date.            

EXCHANGE AGENT                                                                  

United States Trust Company of New York, N.A. (the "Exchange Agent") has    
been appointed as Exchange Agent for the Exchange Offer. Questions and          
requests for assistance, requests for additional copies of this Prospectus or   
of the Letter of Transmittal and requests for Notice of Guaranteed Delivery     
should be directed to the Exchange Agent at the address indicated in the        
Letter of Transmittal. Delivery to an address other than as set forth in the    
Letter of Transmittal will not constitute a valid delivery.                     

FEES AND EXPENSES                                                               

The expenses of soliciting tenders will be borne by the Company. The        
principal solicitation is being made by mail; however, additional solicitation  
may be made by telegraph, telecopy, telephone or in person by officers and      
regular employees of the Company and its affiliates.                            

The Company has not retained any dealer-manager in connection with the      
Exchange Offer and will not make any payments to brokers, dealers, or others    
soliciting acceptances of the Exchange Offer. The Company, however, will pay    
the Exchange Agent reasonable and customary fees for its services and will      
reimburse it for its reasonable out-of-pocket expenses in connection            
therewith.                                                                      

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The cash expenses to be incurred in connection with the Exchange Offer will 
be paid by the Company. Such expenses include fees and expenses of the          
Exchange Agent and Trustee, accounting and legal fees and printing costs,       
among others.                                                                   

ACCOUNTING TREATMENT                                                            

The Exchange Notes will be recorded at the same carrying value as the Old   
Notes, which is face value, as reflected in the Company's accounting records    
on the date of exchange. Accordingly, no gain or loss for accounting purposes   
will be recognized by the Company. The expenses of the Exchange Offer will be   
expensed over the term of the Exchange Notes.                                   

CONSEQUENCES OF FAILURE TO EXCHANGE                                             

The Old Notes that are not exchanged for Exchange Notes pursuant to the     
Exchange Offer will remain restricted securities. Accordingly, such Old Notes   
may be resold only (i) to the Company (upon redemption thereof or otherwise),   
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,    
to a person inside the United States whom the seller reasonably believes is a   
qualified institutional buyer within the meaning of Rule 144A under the         
Securities Act in a transaction meeting the requirements of Rule 144A, in       
accordance with Rule 144 under the Securities Act, (iii) pursuant to another    
exemption from the registration requirements of the Securities Act (and based   
upon an opinion of counsel, if the Company so requests), (iv) outside the       
United States to a foreign person in a transaction meeting the requirements of  
Rule 904 under the Securities Act, or (v) pursuant to an effective              
registration statement under the Securities Act, in each case in accordance     
with any applicable securities laws of any state of the United States.          

RESALE OF THE EXCHANGE NOTES                                                    

With respect to resales of Exchange Notes, based on interpretations by the  
staff of the Commission set forth in no-action letters issued to third parties  
(for example, the letters of the commission to (i) Exxon Capital Holdings       
Corporation, available May 13, 1988, (ii) Morgan Stanley & Co., Inc. available  
June 5, 1991 and (iii) Shearman & Sterling, available July 2, 1993), the        
Company believes that a holder or other person (other than a person that is an  
affiliate of the Company within the meaning of Rule 405 under the Securities    
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary      
course of business and who is not participating, does not intend to             
participate, and has no arrangement or understanding with any person to         
participate, in the distribution of the Exchange Notes, will be allowed to      
resell the Exchange Notes to the public without further registration under the  
Securities Act and without delivering to the purchasers of the Exchange Notes   
a prospectus that satisfies the requirements of Section 10 of the Securities    
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for   
the purpose of distributing or participating in a distribution of the Exchange  
Notes, such holder cannot rely on the position of the staff of the Commission   
enunciated in such no-action letters or any similar interpretive letters, and   
must comply with the registration and prospectus delivery requirements of the   
Securities Act in connection with any resale transaction, unless an exemption   
from registration is otherwise available. Further, each Participating Broker-   
Dealer that receives Exchange Notes for its own account in exchange for Old     
Notes, where such Old Notes were acquired by such Participating Broker-Dealer   
as a result of market-making activities or other trading activities, must       
acknowledge that it will deliver a prospectus in connection with any resale of  
such Exchange Notes.                                                            

Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to represent that (i) it is not an       
affiliate of the Company, (ii) it is not engaged in, and does not intend to     
engage in, and has no arrangement or understanding with any person to           
participate in, a distribution of the Exchange Notes and (iii) it is acquiring  
the Exchange Notes in its ordinary course of business. Each broker-dealer that  
receives Exchange Notes for its own account pursuant to the Exchange Offer      
must acknowledge that it acquired the Old Notes for its own account as the      
result of market-making activities or other trading activities and must agree   
that it will deliver a prospectus meeting the requirements of the Securities    
Act in connection with any resale of such Exchange Notes. The Letter of         
Transmittal states that by so acknowledging and by                              

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delivering a prospectus, a broker-dealer will not be deemed to admit that it    
is an "underwriter" within the meaning of the Securities Act. Based on the      
position taken by the staff of the Division of Corporation Finance of the       
Commission in the interpretive letters referred to above, the Company believes  
that Participating Broker-Dealers who acquired Old Notes for their own          
accounts as a result of market-making activities or other trading activities    
may fulfill their prospectus delivery requirements with respect to the          
Exchange Notes received upon exchange of such Old Notes (other than Old Notes   
which represent an unsold allotment from the original sale of the Old Notes)    
with a prospectus meeting the requirements of the Securities Act, which may be  
the prospectus prepared for an exchange offer so long as it contains a          
description of the plan of distribution with respect to the resale of such      
Exchange Notes. Accordingly, this Prospectus, as it may be amended or           
supplemented from time to time, may be used by a Participating Broker-Dealer    
during the period referred to below in connection with resales of Exchange      
Notes received in exchange for Old Notes where such Old Notes were acquired by  
such Participating Broker-Dealer for its own account as a result of market-     
making or such other trading activities. Subject to certain provisions set      
forth in the Registration Rights Agreement, the Company has agreed that this    
Prospectus, as it may be amended or supplemented from time to time, may be      
used by a Participating Broker-Dealer in connection with resales of such        
Exchange Notes for a period ending 180 days after the date on which the         
Exchange Offer Registration Statement is declared effective. However, a         
Participating Broker-Dealer who intends to use this Prospectus in connection    
with the resale of Exchange Notes received in exchange for Old Notes pursuant   
to the Exchange Offer must notify the Company, or cause the Company to be       
notified, on or prior to the Expiration Date, that it is a Participating        
Broker-Dealer. Such notice may be given in the space provided for that purpose  
in the Letter of Transmittal or may be delivered to the Exchange Agent at one   
of the addresses set forth in the Letter of Transmittal. See "Plan of           
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the     
Company may not rely on such interpretive letters and must comply with the      
registration and prospectus delivery requirements of the Securities Act in      
connection with any resale transaction.                                         

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DESCRIPTION OF THE NOTES  

GENERAL                                                                         

The Old Notes have been, and the Exchange Notes will be, issued pursuant to 
the Indenture between the Company, the Subsidiary Guarantors and United States  
Trust Company of New York, as trustee (the "Trustee"). The terms of the Notes   
include those stated in the Indenture and those made a part of the Indenture    
by reference to the Trust Indenture Act of 1939, as amended (the "Trust         
Indenture Act"), as in effect on the Issue Date. The Notes are subject to all   
such terms, and the Holders of the Notes are referred to the Indenture and the  
Trust Indenture Act for a statement thereof. The following summary of certain   
provisions of the Indenture does not purport to be complete and is qualified    
in its entirety by reference to the Indenture, including the definitions        
therein of certain terms used below. A copy of the Indenture is filed as an     
exhibit to the Exchange Offer Registration Statement of which this Prospectus   
is a part. The definitions of certain terms used in the following summary are   
set forth below under the caption "--Certain Definitions." As used in this      
"Description of the Notes" section, the "Company" means Kevco, Inc. and not     
any of its Subsidiaries.                                                        

The Company's obligations under the Indenture and the Notes are guaranteed  
on a senior subordinated basis by all of the Company's existing Restricted      
Subsidiaries and, pursuant to the terms of the Indenture, will be jointly and   
severally guaranteed by all future Subsidiaries of the Company not designated   
as Unrestricted Subsidiaries as described under the caption "--Certain          
Covenants--Designation of Restricted and Unrestricted Subsidiaries." See "--    
Subsidiary Guarantees." As of the Issue Date, all of the Company's              
Subsidiaries were Restricted Subsidiaries. Under certain circumstances, the     
Company will be able to designate one or more of its existing or future         
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not   
be subject to many of the restrictive covenants set forth in the Indenture.     

The Notes are limited to $105.0 million in aggregate principal amount. The  
Notes will mature on December 1, 2007. The Notes will bear interest at the      
rate set forth on the front cover of this Prospectus. Interest on the Notes is  
payable semi-annually in cash in arrears on June 1 and December 1 in each       
year, commencing June 1, 1998, to Holders of record of Notes at the close of    
business on the May 15 or November 15 immediately preceding such interest       
payment date. Interest on the Notes will accrue from the most recent date to    
which interest has been paid or, if no interest has been paid, from the Issue   
Date. Interest will be computed on the basis of a 360-day year of twelve 30-    
day months. The Old Notes have been, and the Exchange Notes will be, issued in  
denominations of $1,000 and integral multiples thereof.                         

Principal of, premium, if any, interest and Liquidated Damages, if any, on  
the Notes will be payable, and the Notes may be presented for registration of   
transfer or exchange, at the office of the Paying Agent and Registrar in New    
York, New York. Holders of Notes must surrender their Notes to the Paying       
Agent to collect principal payments, and the Company may pay principal and      
interest by check and may mail checks to a Holder's registered address;         
provided that all payments with respect to Notes, the Holders of which have     
given wire transfer instructions to the Company, will be required to be made    
by wire transfer of immediately available funds to the accounts specified by    
the Holders thereof. The Registrar may require payment of a sum sufficient to   
cover any transfer tax or similar governmental charge payable in connection     
with certain transfers or exchanges. See "--Transfer and Exchange." The         
Trustee will initially act as Paying Agent and Registrar. The Company may       
change the Paying Agent or Registrar without prior notice to Holders of Notes,  
and the Company or any of its Subsidiaries may act as Paying Agent or           
Registrar.                                                                      

SUBORDINATION                                                                   

The payment of principal of and premium, if any, interest and Liquidated    
Damages, if any, on the Notes will be subordinated in right of payment, as set  
forth in the Indenture, to the prior payment in full in cash or Cash            
Equivalents of all Senior Indebtedness, whether outstanding on the date of the  
Indenture or thereafter incurred. The Indenture permits the incurrence of       
additional Senior Indebtedness in the future, subject to provisions of the      
covenant described below under the caption "--Certain Covenants--Limitation on  
Incurrence of Indebtedness."                                                    

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Upon any distribution to creditors of the Company in a liquidation or       
dissolution of the Company or in a bankruptcy, reorganization, insolvency,      
receivership or similar proceeding relating to the Company or its property, an  
assignment for the benefit of creditors or any marshaling of the Company's      
assets and liabilities, the holders of Senior Indebtedness will be entitled to  
receive payment in full in cash or Cash Equivalents of all Obligations due in   
respect of such Senior Indebtedness (including interest after the commencement  
of any such proceeding at the rate specified in the applicable Senior           
Indebtedness) before the Holders of Notes will be entitled to receive any       
payment with respect to the Notes, and until all Obligations with respect to    
Senior Indebtedness are paid in full in cash or Cash Equivalents, any           
distribution to which the Holders of Notes would be entitled shall be made to   
the holders of Senior Indebtedness (except that Holders of Notes may receive    
Junior Securities and payments made from the trust described under the caption  
"--Legal Defeasance and Covenant Defeasance").                                  

The Company also may not make any payment of principal of, premium, if any, 
interest or Liquidated Damages, if any, on the Notes (except in Junior          
Securities or from the trust described under the caption "--Legal Defeasance    
and Covenant Defeasance") if (i) a default in the payment of the principal of   
or premium, if any, or interest on Designated Senior Indebtedness occurs and    
is continuing beyond any applicable period of grace or (ii) any other default   
occurs and is continuing with respect to Designated Senior Indebtedness that    
permits holders of the Designated Senior Indebtedness as to which such default  
relates to accelerate its maturity and the Trustee receives a written notice    
(with a copy to the Company) of such other default (a "Payment Blockage         
Notice") from the Company or the holders of any Designated Senior               
Indebtedness. Payments on the Notes may and shall be resumed (a) in the case    
of a payment default, upon the date on which such default is cured or waived    
and (b) in case of a nonpayment default, the earlier of the date on which such  
nonpayment default is cured or waived or 179 days after the date on which the   
applicable Payment Blockage Notice is received by the Trustee, unless the       
maturity of any Designated Senior Indebtedness has been accelerated. No new     
period of payment blockage may be commenced unless and until (i) 360 days have  
elapsed since the date of receipt by the Trustee of the immediately prior       
Payment Blockage Notice and (ii) all scheduled payments of principal of,        
premium, if any, interest and Liquidated Damages, if any, on the Notes that     
have come due have been paid in cash. No nonpayment default that existed or     
was continuing on the date of delivery of any Payment Blockage Notice to the    
Trustee shall be, or be made, the basis for a subsequent Payment Blockage       
Notice (it being understood that any subsequent action, or any breach of any    
covenant for a period commencing after the date of receipt by the Trustee of    
such Payment Blockage Notice, that, in either case, would give rise to such a   
default pursuant to any provisions under which a default previously existed or  
was continuing shall constitute a new default for this purpose).                

The Indenture further requires that the Company promptly notify holders of  
Senior Indebtedness if payment of the Notes is accelerated because of an Event  
of Default.                                                                     

As a result of the subordination provisions described above, in the event of
a liquidation or dissolution of the Company or in a bankruptcy,                 
reorganization, insolvency, receivership or similar proceeding relating to the  
Company, Holders of Notes may recover less ratably than creditors of the        
Company and the Subsidiary Guarantors who are holders of Senior Indebtedness.   
On a pro forma basis, after giving effect to the Transactions, the aggregate    
principal amount of Senior Indebtedness of the Company on a consolidated basis  
outstanding at September 30, 1997 was approximately $98.1 million and, subject  
to compliance with certain financial ratios, the Company would have had unused  
availability under the Senior Credit Facility of $31.8 million. The Indenture   
and the Senior Credit Facility will limit, subject to certain financial tests,  
the amount of additional Indebtedness, including Senior Indebtedness, that the  
Company and its Restricted Subsidiaries can Incur. See "--Certain Covenants--   
Limitation on Incurrence of Indebtedness."                                      

SUBSIDIARY GUARANTEES                                                           

The Company's obligations under the Indenture and the Notes are jointly and 
severally guaranteed on a senior subordinated basis by all of the Company's     
existing Restricted Subsidiaries and all future Subsidiaries (other than        
Unrestricted Subsidiaries) of the Company in accordance with the covenant       
described below under                                                           

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the caption "--Certain Covenants--Future Subsidiary Guarantors" (each such      
guaranteeing Subsidiary a "Subsidiary Guarantor" and, collectively, the         
"Subsidiary Guarantors"). Each Subsidiary Guarantee will be subordinated to     
the prior payment in full in cash or Cash Equivalents of all Senior             
Indebtedness of each Subsidiary Guarantor (including such Subsidiary            
Guarantor's Obligations under the Senior Credit Facility) to the same extent    
that the Notes are subordinated to Senior Indebtedness of the Company. The      
obligations of any Subsidiary Guarantor under its Subsidiary Guarantee will be  
limited so as not to constitute a fraudulent conveyance under applicable law.   

The Indenture provides that, subject to the provisions described in the next
succeeding paragraph, no Subsidiary Guarantor may consolidate or merge with or  
into (whether or not such Subsidiary Guarantor is the surviving Person), or     
sell, assign, transfer, lease, convey or otherwise dispose of all or            
substantially all of its properties or assets in one or more related            
transactions, to another Person unless (i) the Person formed by or surviving    
any such consolidation or merger (if other than such Subsidiary Guarantor) or   
the Person to which such sale, assignment, transfer, lease, conveyance or       
other disposition shall have been made assumes all the obligations of such      
Subsidiary Guarantor under the Subsidiary Guarantee, in form satisfactory to    
the Trustee; (ii) immediately after such transaction, no Default or Event of    
Default exists; (iii) the Company and its Restricted Subsidiaries would, at     
the time of such transaction and after giving pro forma effect thereto as if    
such transaction had occurred at the beginning of the applicable Reference      
Period, be permitted to Incur at least $1.00 of additional Indebtedness         
pursuant to the Debt Incurrence Ratio test set forth in the first paragraph of  
the covenant described under the caption "--Certain Covenants--Limitation on    
Incurrence of Indebtedness"; (iv) if required by the Trust Indenture Act, the   
Company shall have delivered to the Trustee an Officers' Certificate and an     
Opinion of Counsel; and (v) such Subsidiary Guarantor (if such Subsidiary       
Guarantor is the surviving Person) shall have delivered a written instrument    
in form satisfactory to the Trustee confirming its Subsidiary Guarantee after   
giving effect to such consolidation, merger or transfer. Notwithstanding the    
foregoing, any Subsidiary Guarantor may merge into, consolidate with or         
transfer all or part of its properties or assets to the Company or one or more  
Subsidiary Guarantors or one or more Subsidiaries which become Subsidiary       
Guarantors concurrently therewith.                                              

The Indenture provides that in the event of a sale, assignment, transfer,   
lease, conveyance or other disposition of all of the Equity Interests in, or    
all or substantially all of the assets of, a Subsidiary Guarantor to any        
Person that is not the Company or any of its Restricted Subsidiaries, whether   
by way of merger, consolidation or otherwise, if (i) the Net Proceeds of such   
sale or other disposition are applied in accordance with provisions of the      
Indenture described under the caption "--Certain Covenants--Limitation on Sale  
of Assets and Restricted Subsidiary Stock," (ii) no Default or Event of         
Default exists or would exist under the Indenture after giving effect to such   
transaction, (iii) all obligations of such Subsidiary Guarantor under any       
other Indebtedness of the Company or any of its Restricted Subsidiaries shall   
have been terminated (including, without limitation, all Guarantees of any      
such Indebtedness), (iv) all Liens on assets of such Subsidiary Guarantor that  
secure any other Indebtedness of the Company or any of its Restricted           
Subsidiaries shall have been terminated, and (v) all obligations of the         
Company and its Restricted Subsidiaries under other Indebtedness of such        
Subsidiary Guarantor shall have been terminated (including, without             
limitation, all Guarantees of such Indebtedness), then (A) in the case of such  
a sale or other disposition, whether by way of merger, consolidation or         
otherwise, of all of the Equity Interests in such former Subsidiary Guarantor,  
such former Subsidiary Guarantor will be released and relieved of any           
obligations under its Subsidiary Guarantee, or (B) in the case of a sale or     
other disposition of all or substantially all of the assets of such Subsidiary  
Guarantor, the Person acquiring such assets will not be required to assume the  
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee.        

OPTIONAL REDEMPTION                                                             

The Company does not have the right to redeem any Notes prior to December 1,
2002 (other than out of the Net Proceeds of a Public Equity Offering as         
described in the next paragraph). The Notes are redeemable for cash at the      
option of the Company, in whole or in part, at any time on or after December    
1, 2002, upon not less than                                                     

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30 days nor more than 60 days notice to each Holder of Notes, at the following  
redemption prices (expressed as percentages of the principal amount of the      
Notes) if redeemed during the 12-month period commencing December 1, of the     
years indicated below (subject to the right of Holders of record on a Record    
Date to receive interest due on an Interest Payment Date that is on or prior    
to such Redemption Date), in each case together with accrued and unpaid         
interest and Liquidated Damages, if any, thereon to the Redemption Date:        

                                                                [Download Table]

YEAR                               PERCENTAGE
----                               ----------
                                             
2002..............................  105.188% 
2003..............................  103.458% 
2004..............................  101.729% 
2005 and thereafter...............  100.000% 

Until December 1, 2000, if the Company consummates a Public Equity Offering 
of Common Stock for cash, up to 35% of the aggregate principal amount of the    
Notes originally outstanding may be redeemed at the option of the Company       
within 90 days of such Public Equity Offering, upon not less than 30 days nor   
more than 60 days notice to each Holder of the Notes to be redeemed, using the  
Net Proceeds of such Public Equity Offering, at a redemption price equal to     
110.375% of the principal amount of the Notes (subject to the right of Holders  
of record on a Record Date to receive interest due on an Interest Payment Date  
that is on or prior to such Redemption Date), together with accrued and unpaid  
interest and Liquidated Damages, if any, thereon to the Redemption Date;        
provided, however, that at least 65% of the aggregate principal amount of the   
Notes originally outstanding remain outstanding immediately following such      
redemption.                                                                     

In the case of a partial redemption, the Trustee shall select the Notes or  
portions thereof for redemption on a pro rata basis, by lot or in such other    
manner it deems appropriate and fair. The Notes may be redeemed in part in      
multiples of $1,000 only.                                                       

Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the Holder  
of each Note to be redeemed to such Holder's last address as then shown upon    
the registry books of the Registrar. Any notice which relates to a Note to be   
redeemed in part only must state the portion of the principal amount equal to   
the unredeemed portion thereof and must state that on and after the date of     
redemption, upon surrender of such Note, a new Note or Notes in a principal     
amount equal to the unredeemed portion thereof will be issued. On and after     
the Redemption Date, interest will cease to accrue on the Notes or portions     
thereof called for redemption, unless the Company defaults in the payment       
thereof.                                                                        

MANDATORY REDEMPTION                                                            

Except as set forth below under the captions "--Escrow of Proceeds; Special 
Redemption," "--Certain Covenants--Repurchase of Notes at the Option of the     
Holder Upon a Change of Control" and "--Certain Covenants--Limitation on Sale   
of Assets and Restricted Subsidiary Stock," the Company is not required to      
make any mandatory redemption, repurchase or sinking fund payments with         
respect to the Notes.                                                           

CERTAIN COVENANTS                                                               

REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL      

The Indenture provides that, upon the occurrence of a Change of Control,    
each Holder of Notes shall have the right, pursuant to an irrevocable and       
unconditional offer by the Company (the "Change of Control Offer"), to require  
the Company to repurchase all or any part of such Holder's Notes (provided,     
that the principal amount of such Notes must be $1,000 or an integral multiple  
thereof) on a date (the "Change of Control Purchase Date") that is no later     
than 45 Business Days after the occurrence of such Change of Control, at a      
cash price equal to 101% of the principal amount thereof (the "Change of        
Control Purchase Price"), together with accrued and unpaid interest and         
Liquidated Damages, if any, to the Change of Control Purchase Date. The Change  
of Control                                                                      

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Offer shall be made within 20 Business Days following a Change of Control and   
shall remain open for 20 Business Days following its commencement (the "Change  
of Control Offer Period"). Upon expiration of the Change of Control Offer       
Period, the Company promptly shall purchase all Notes properly tendered in      
response to the Change of Control Offer.                                        

The Senior Credit Facility prohibits the Company from purchasing any Notes  
and also provides that certain change of control events with respect to the     
Company will constitute a default thereunder. Any future credit agreements or   
other agreements relating to Senior Indebtedness to which the Company becomes   
a party may contain similar restrictions and provisions. The Indenture          
provides that in the event a Change of Control occurs at a time when the        
Company is prohibited from purchasing Notes, then prior to purchasing the       
Notes in a Change of Control Offer, the Company shall either repay in full and  
terminate all commitments under all Senior Indebtedness that contains such      
prohibitions or obtain the requisite consents, if any, under all agreements     
governing such Senior Indebtedness. If the Company does not obtain such a       
consent or repay such borrowings, the Company will remain prohibited from       
purchasing Notes. In such case, the Company's failure to purchase all Notes     
validly tendered and not withdrawn under such Change of Control would           
constitute an Event of Default under the Indenture which may, in turn,          
constitute a default under the Senior Credit Facility. In such circumstances,   
the subordination provisions in the Indenture would likely restrict payments    
to the Holders of Notes. See "Risk Factors--Inability to Purchase Notes Upon a  
Change of Control."                                                             

As used herein, a "Change of Control" means the occurrence of any of the    
following: (i) the sale, lease, transfer, conveyance or other disposition       
(other than by way of merger of consolidation), in one or a series of related   
transactions, of all or substantially all of the assets of the Company and its  
Subsidiaries taken as a whole to any "person" (as such term is used in Section  
13(d)(3) of the Exchange Act), except to the Existing Majority Stockholder,     
(ii) the adoption of a plan relating to the liquidation or dissolution of the   
Company, (iii) the consummation of any transaction (including, without          
limitation, any merger or consolidation) the result of which is that any        
"person" (as defined above), other than the Existing Majority Stockholder,      
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule  
13d-5 under the Exchange Act, except that a person shall be deemed to have      
"beneficial ownership" of all securities that such person has the right to      
acquire, whether such right is currently exercisable or is exercisable only     
upon the occurrence of a subsequent condition), directly or indirectly, of      
more than 50% of the Voting Stock of the Company (measured by voting power      
rather than number of shares) or (iv) during any period of 24 consecutive       
months after the Issue Date, individuals who at the beginning of any such 24-   
month period constituted the Board of Directors of the Company (together with   
any new directors whose election by such Board of Directors or whose            
nomination for election by the shareholders of the Company was approved by a    
vote of a majority of the directors then still in office who were either        
directors at the beginning of such period or whose election or nomination for   
election was previously so approved) cease for any reason to constitute a       
majority of the Board of Directors of the Company then in office.               

On or before the Change of Control Purchase Date, the Company will (i)      
accept for payment Notes or portions thereof properly tendered pursuant to the  
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to  
pay the Change of Control Purchase Price (together with accrued and unpaid      
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)     
deliver to the Trustee Notes so accepted together with an Officers'             
Certificate listing the Notes or portions thereof being purchased by the        
Company. The Paying Agent promptly will pay the Holders of Notes so accepted    
an amount equal to the Change of Control Purchase Price (together with accrued  
and unpaid interest and Liquidated Damages, if any), and the Trustee promptly   
will authenticate and deliver to such Holders a new Note equal in principal     
amount to any unpurchased portion of the Note surrendered. Any Notes not so     
accepted will be delivered promptly by the Company to the Holder thereof. The   
Company publicly will announce the results of the Change of Control Offer on    
or as soon as practicable after the Change of Control Purchase Date.            

The phrase "all or substantially all" of the assets of the Company will     
likely be interpreted under applicable state law and will be dependent upon     
particular facts and circumstances. As a result, there may be a degree of       
uncertainty in ascertaining whether a sale or transfer of "all or               
substantially all" of the assets of the Company                                 

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has occurred. In addition, the Company's ability to pay the Change of Control   
Purchase Price is, and may in the future be, limited by the terms of the        
Senior Credit Facility or other agreements relating to Indebtedness that        
constitute Senior Indebtedness. The occurrence of certain of the events that    
would constitute a Change of Control would also constitute a default under the  
Senior Credit Facility. Moreover, the exercise by the Holders of their right    
to require the Company to repurchase the Notes could cause a default under      
Indebtedness constituting Senior Indebtedness, even if the Change of Control    
itself does not, due to the financial effect of such repurchase on the          
Company. Also, the Company's ability to pay cash to Holders of Notes upon a     
Change of Control may be limited by the Company's then existing financial       
resources. No assurances can be given that the Company will be able to acquire  
Notes tendered upon the occurrence of a Change of Control.                      

The Company will comply with the requirements of Rule 14e-1 under the       
Exchange Act and any other securities laws and regulations thereunder to the    
extent such laws and regulations are applicable in connection with the          
repurchase of Notes pursuant to a Change of Control Offer. To the extent that   
the provisions of any securities laws or regulations conflict with the "Change  
of Control" provisions of the Indenture, the Company shall comply with the      
applicable securities laws and regulations and shall not be deemed to have      
breached its obligations under the "Change of Control" provisions of the        
Indenture by virtue thereof.                                                    

LIMITATION ON INCURRENCE OF INDEBTEDNESS                                      

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness  
(including Acquired Indebtedness), except for Permitted Indebtedness;           
provided, however, that the Company and its Restricted Subsidiaries may Incur   
Indebtedness (including Acquired Indebtedness) if, at the time of Incurrence    
of such Indebtedness, after giving pro forma effect to such Incurrence as of    
such date and to the use of proceeds therefrom (including the application or    
the use of the net proceeds therefrom to repay Indebtedness or make any         
Restricted Payment) (i) no Default or Event of Default shall have occurred and  
be continuing at the time of, or would occur after giving effect on a pro       
forma basis to, such Incurrence of Indebtedness and (ii) on the date of such    
Incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the      
Company for the Reference Period immediately preceding the Incurrence Date,     
after giving effect on a pro forma basis to such Incurrence of Indebtedness     
and, to the extent set forth in the definition of Consolidated Coverage Ratio,  
the use of proceeds thereof, would exceed 2.25 to 1 if such date is on or       
prior to the date which is the second anniversary of the Issue Date, or 2.50    
to 1 for any date thereafter (the "Debt Incurrence Ratio").                     

"Permitted Indebtedness" means any and all of the following:                

(i) (A) Indebtedness of the Company and its Restricted Subsidiaries     
pursuant to the Senior Credit Facility (including all Guarantees thereof)   
up to an amount at any time Incurred equal to the greater of (1) $35        
million, less the aggregate amount of all Net Proceeds of Asset Sales       
applied to permanently repay any such Indebtedness or, in the case of any   
such revolving Indebtedness, permanently reduce the commitments therefor    
pursuant to the covenant under the caption "--Certain Covenants--Limitation 
on Sale of Assets and Restricted Subsidiary Stock" and (2) 75% of Eligible  
Receivables and (B) Indebtedness of the Company and its Restricted          
Subsidiaries pursuant to the Senior Credit Facility (including all          
Guarantees thereof) in an aggregate amount not to exceed $90 million        
(which, in the event that and for so long as less than 100% but more than   
50% (on a fully diluted basis) of the Shelter Common Stock is acquired in   
the Tender Offer, shall be reduced by an amount equal to the cash           
consideration necessary to purchase the amount of Shelter Common Stock not  
so acquired until such Shelter Common Stock is so acquired or until the     
merger is consummated with Kevco owning 100% of Shelter), less the          
aggregate amount of all repayments thereof;                                 

(ii) Indebtedness represented by the Notes, the Indenture and the       
Subsidiary Guarantees;                                                      

(iii) intercompany Indebtedness between or among the Company and any of 
its Restricted Subsidiaries; provided that (A) if the Company is an obligor 
on such Indebtedness, such Indebtedness is expressly subordinate to the     
payment in full of all Obligations with respect to the Notes and (B) any    

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subsequent issuance or transfer of Equity Interests that results in any     
such Indebtedness being held by a Person other than the Company or a        
Restricted Subsidiary of the Company, or any sale or other transfer of any  
such Indebtedness to a Person that is not either the Company or a           
Restricted Subsidiary of the Company, shall be deemed to constitute a new   
Incurrence of such Indebtedness by the Company or such Restricted           
Subsidiary, as the case may be;                                             

(iv) Permitted Refinancing Indebtedness Incurred in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,        
defease or refund, (A) Indebtedness (other than Permitted Indebtedness)     
that was Incurred in compliance with the Indenture, (B) Indebtedness        
referred to in clauses (i) or (ii) of the definition of the term "Permitted 
Indebtedness," or (C) Existing Indebtedness (other than Existing            
Indebtedness, if any, related to the Indebtedness refinanced by the Senior  
Credit Facility);                                                           

 (v) Indebtedness of a Restricted Subsidiary of the Company constituting a
Guarantee of Indebtedness of the Company or a Restricted Subsidiary which   
Indebtedness was Incurred pursuant to this definition or the Debt           
Incurrence Ratio test set forth in the first paragraph of the covenant      
described under the caption "--Certain Covenants--Limitation on Incurrence  
of Indebtedness;"                                                           

(vi) the Incurrence by the Company or any Restricted Subsidiary of      
Hedging Obligations of the following types: (A) Interest Rate Hedges with   
respect to any Indebtedness of such Person that is permitted by the terms   
of the Indenture to be outstanding, the notional principal amount of which  
does not exceed the principal amount of the Indebtedness to which such      
Interest Rate Hedge relates, and (B) Currency Hedges that do not increase   
the outstanding loss potential or liabilities other than as a result of     
fluctuations in foreign currency exchange rates;                            

(vii) the Incurrence by the Company or any Restricted Subsidiary, if no 
Default or Event of Default shall have occurred and be continuing, of       
Indebtedness (in addition to Indebtedness permitted by any other clause of  
this paragraph) in an aggregate principal amount at any time outstanding    
not to exceed $25 million (which amount may, but need not, be incurred      
under the Senior Credit Facility); and                                      

(viii) Existing Indebtedness.                                           

Indebtedness of any Person which is outstanding at the time such Person     
becomes a Restricted Subsidiary of the Company (including upon designation of   
any Unrestricted Subsidiary or other Person as a Restricted Subsidiary) or is   
merged with or into or consolidated with the Company or a Restricted            
Subsidiary of the Company shall be deemed to have been Incurred at the time     
such Person becomes such a Restricted Subsidiary of the Company or is merged    
with or into or consolidated with the Company or a Restricted Subsidiary, as    
applicable.                                                                     

LIMITATION ON RESTRICTED PAYMENTS                                             

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any  
dividend or make any other payment or distribution on account of the Company's  
or any Restricted Subsidiary's Equity Interests (including, without             
limitation, any payment in connection with any merger or consolidation) other   
than dividends or distributions (a) paid or payable in Equity Interests (other  
than Disqualified Stock) of the Company or (b) paid or payable to the Company   
or any Wholly Owned Restricted Subsidiary of the Company; (ii) purchase,        
redeem or otherwise acquire or retire for value any Equity Interests of the     
Company or any direct or indirect parent of the Company or other Affiliate of   
the Company or any Restricted Subsidiary of the Company (other than any such    
Equity Interests owned by the Company or any Wholly Owned Restricted            
Subsidiary of the Company); (iii) make any principal payment on, or purchase,   
redeem, defease or otherwise acquire or retire for value prior to the           
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any  
Subordinated Indebtedness (except, if no Default or Event of Default is         
continuing or would result therefrom, any such payment, purchase, redemption,   
defeasance or other acquisition or retirement for value made (a) out of Excess  
Proceeds available for general corporate purposes if (1) such payment or other  
action is required by the indenture or other agreement or instrument pursuant   
to which such Subordinated Indebtedness was issued and (2) the Company has      
purchased all Notes properly tendered pursuant to an Asset Sale Offer required  
under the caption "--Certain Covenants--Limitation on Sale of Assets            

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and Restricted Subsidiary Stock" or (b) upon the occurrence of a Change of      
Control if (1) such payment or other action is required by the indenture or     
other agreement or instrument pursuant to which such Subordinated Indebtedness  
was issued and (2) the Company has purchased all Notes properly tendered        
pursuant to the Change of Control Offer resulting from such Change of           
Control); or (iv) make any Restricted Investment (all such payments and other   
actions set forth in clauses (i) through (iv) above being collectively          
referred to as "Restricted Payments"), unless, at the time of and after giving  
effect to such Restricted Payment:                                              

(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;                                    

(b) the Company would, at the time of such Restricted Payment and after 
giving pro forma effect thereto as if such Restricted Payment had been made 
at the beginning of the applicable Reference Period, have been permitted to 
Incur at least $1.00 of additional Indebtedness pursuant to the Debt        
Incurrence Ratio test set forth in the first paragraph of the covenant      
described under the caption "--Certain Covenants--Limitation on Incurrence  
Indebtedness"; and                                                          

(c) such Restricted Payment, together with the aggregate amount of all  
other Restricted Payments declared or made by the Company and its           
Restricted Subsidiaries after the Issue Date shall not exceed, at the date  
of determination, the sum of (1) 50% of aggregate Consolidated Net Income   
of the Company from the beginning of the first fiscal quarter commencing    
after the Issue Date to the end of the Company's most recently ended fiscal 
quarter for which financial statements are available at the time of such    
Restricted Payment (or, if such aggregate Consolidated Net Income for such  
period is a deficit, less 100% of such deficit), plus (2) 100% of the       
aggregate net cash proceeds received by the Company from the issue or sale  
after the Issue Date of Equity Interests of the Company or of Disqualified  
Stock or debt securities of the Company that have been converted into such  
Equity Interests (other than Equity Interests (or Disqualified Stock or     
convertible debt securities) sold to a Subsidiary of the Company and other  
than Disqualified Stock or debt securities that have been converted into    
Disqualified Stock), plus (3) the aggregate net cash proceeds received by   
the Company as capital contributions to the Company (other than from a      
Subsidiary of the Company) after the Issue Date, plus (4) the amount equal  
to the net reduction in Restricted Investments made after the Issue Date    
resulting from a sale or liquidation of a Restricted Investment for cash,   
to the extent such amount is not included in the Consolidated Net Income of 
the Company, not to exceed the lesser of (A) the Net Proceeds from such     
sale or liquidation to the extent received by the Company or any Restricted 
Subsidiary, and (B) the initial amount of such Restricted Investment, plus  
(5) in the event an Unrestricted Subsidiary is redesignated as a Restricted 
Subsidiary, an amount equal to the net reduction in Restricted Investments  
made in Unrestricted Subsidiaries, not to exceed the lesser of (A) the Fair 
Market Value of such Unrestricted Subsidiary, and (B) the amount of         
Restricted Investments which were made in such Unrestricted Subsidiary.     

The foregoing provisions do not prohibit the following Restricted Payments: 
(i) the payment of any dividend or other distribution within 60 days after the  
date of declaration thereof, if at said date of declaration such payment would  
have complied with the provisions of the Indenture; (ii) the redemption,        
repurchase, retirement or other acquisition of any Equity Interests of the      
Company (other than Disqualified Stock) in exchange for, or out of the          
proceeds of, the substantially concurrent sale (other than to a Subsidiary of   
the Company) of other Equity Interests of the Company (other than Disqualified  
Stock); provided that the amount of any such net cash proceeds that are         
utilized for any such redemption, repurchase, retirement or other acquisition   
shall be excluded from clause (c) of the preceding paragraph (both for          
purposes of determining the aggregate amount of Restricted Payments made and    
for purposes of determining the aggregate amount of Restricted Payments         
permitted); (iii) the payment, purchase, redemption, defeasance or other        
acquisition or retirement for value of Subordinated Indebtedness with the net   
cash proceeds from a substantially concurrent Incurrence of Permitted           
Refinancing Indebtedness or the substantially concurrent sale (in each case     
other than to a Subsidiary of the Company) of Equity Interests of the Company   
(other than Disqualified Stock); provided that the amount of any such net cash  
proceeds that are utilized for any such payment, purchase, redemption,          
defeasance or other acquisition or retirement shall be excluded from clause     
(c) of the preceding paragraph (both for purposes of determining the aggregate  
amount of Restricted Payments made and for purposes of determining the          
aggregate amount of                                                             

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Restricted Payments permitted); (iv) so long as no Default or Event of Default  
is continuing, the repurchase of Equity Interests of the Company from former    
employees of the Company or any Restricted Subsidiary thereof (or the estates,  
heirs or legatees of such former employees) for consideration which does not    
exceed $500,000 in the aggregate in any fiscal year; (v) any Restricted         
Investment made with the net cash proceeds from a substantially concurrent      
sale (other than to a Subsidiary of the Company) of Equity Interests of the     
Company (other than Disqualified Stock) and (vi) so long as no Default or       
Event of Default is continuing, any Restricted Investment which, together with  
all other Restricted Investments outstanding made pursuant to this clause (vi)  
does not exceed $5 million. Except to the extent specifically noted above,      
Restricted Payments made pursuant to this paragraph shall be included in        
calculating the amount of Restricted Payments made after the Issue Date.        

The amount of all Restricted Payments not made in cash shall be the Fair    
Market Value (which, if it exceeds $1 million, shall be determined by, and set  
forth in, a resolution of the Board of Directors of the Company and described   
in an Officers' Certificate delivered to the Trustee) on the date of the        
Restricted Payment of the asset(s) proposed to be transferred by the Company    
or any Restricted Subsidiary, as the case may be, pursuant to the Restricted    
Payment. Not later than the date of making any Restricted Payment, the Company  
shall deliver to the Trustee an Officers' Certificate stating that such         
Restricted Payments were permitted and setting forth the basis upon which the   
calculations required by the covenant described under the caption "--Certain    
Covenants-- Limitation on Restricted Payments" were computed, which             
calculations may be based upon the Company's latest available financial         
statements.                                                                     

LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED   
SUBSIDIARIES                                                                    

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, assume or       
otherwise cause or suffer to exist or become effective any consensual           
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)   
(a) pay dividends or make any other distributions to the Company or any of its  
Restricted Subsidiaries on its Capital Stock or with respect to any other       
interest or participation in, or measured by, its profits or (b) pay any        
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)    
make loans or advances to the Company or any of its Restricted Subsidiaries,    
(iii) transfer any of its properties to the Company or any of its Restricted    
Subsidiaries, (iv) grant any Liens in favor of the Holders of the Notes and     
the Trustee or (v) guarantee the Notes or any renewals or refinancings          
thereof, except for such encumbrances or restrictions existing under or by      
reason of (A) Existing Indebtedness, (B) the Senior Credit Facility, (C)        
applicable law, (D) any instrument governing Indebtedness or Capital Stock of   
a Person acquired by the Company or any of its Restricted Subsidiaries as in    
effect at the time of such acquisition (except to the extent such Indebtedness  
was Incurred in connection with or in contemplation of such acquisition),       
which encumbrance or restriction is not applicable to any Person, or the        
properties of any Person, other than the Person, or the property of the         
Person, so acquired, provided that in the case of Indebtedness, such            
Indebtedness was permitted by the terms of the Indenture to be Incurred, (E)    
customary non-assignment provisions in leases, licenses, sales agreements or    
other contracts (but excluding contracts related to the extension of credit)    
entered into in the ordinary course of business and consistent with past        
practices, (F) restrictions imposed pursuant to a binding agreement for the     
sale or disposition of all or substantially all of the Equity Interests or      
assets of any Restricted Subsidiary, provided such restrictions apply solely    
to the Equity Interests or assets being sold, (G) restrictions imposed by       
Permitted Liens on the transfer of the assets that are subject to such Liens,   
(H) Permitted Refinancing Indebtedness Incurred to refinance Existing           
Indebtedness or Indebtedness of the type described in clause (D) above,         
provided that the restrictions contained in the agreements governing such       
Permitted Refinancing Indebtedness are no more restrictive, as a whole, than    
those contained in the agreements governing the Indebtedness being refinanced,  
and (I) the terms of Purchase Money Indebtedness, but only to the extent such   
Purchase Money Indebtedness encumbers or restricts the property acquired with   
such Purchase Money Indebtedness.                                               

LIMITATIONS ON LAYERING INDEBTEDNESS                                          

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness  
(other than the Notes) that is subordinate in right of payment to               

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any other Indebtedness of the Company or a Restricted Subsidiary unless, by     
its terms, such Indebtedness is subordinate in right of payment to, or ranks    
pari passu with, the Notes or the Subsidiary Guarantees, as applicable.         

LIMITATION ON LIENS                                                           

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, affirm,  
assume or suffer to exist any Liens of any kind, other than Liens securing      
Senior Indebtedness and Permitted Liens, against or upon any assets or          
property now owned or hereafter acquired or any income or profits therefrom or  
assign or convey any right to receive income therefrom, unless (i) in the case  
of Liens securing Subordinated Indebtedness, the Notes are secured by a valid,  
perfected Lien on such assets, property or proceeds that is senior in priority  
to such Liens, (ii) in the case of Liens securing obligations subordinate to a  
Subsidiary Guarantee, such Subsidiary Guarantee is secured by a valid,          
perfected Lien on such assets, property or proceeds that is senior in priority  
to such Liens, and (iii) in all other cases, the Notes (and, if such Lien       
secures obligations of a Restricted Subsidiary, a Subsidiary Guarantee of such  
Restricted Subsidiary) are equally and ratably secured.                         

LIMITATION ON SALE OF ASSETS AND RESTRICTED SUBSIDIARY STOCK                  

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale, unless (i) the         
Company or such Restricted Subsidiary, as the case may be, receives             
consideration at the time of such Asset Sale at least equal to the Fair Market  
Value (which, if it exceeds $1 million, shall be determined by, and set forth   
in, a resolution of the Board of Directors of the Company and described in an   
Officers' Certificate of the Company delivered to the Trustee) of the assets    
(including, if appropriate, Equity Interests) disposed of or issued, as         
appropriate, and (ii) at least 75% of the consideration therefor received by    
the Company or such Restricted Subsidiary is in the form of cash or Cash        
Equivalents; provided, that the 75% limitation referred to above shall not      
apply to any Asset Sale in which the cash portion of the consideration          
received therefor, determined in accordance with the following sentence, is     
equal to or greater than what the after-tax net proceeds would have been had    
such transaction complied with the aforementioned 75% limitation. For purposes  
of this covenant (and not for purposes of any other provision of the            
Indenture), the term "cash" shall be deemed to include (a) any notes or other   
obligations received by the Company or such Restricted Subsidiary as            
consideration as part of such Asset Sale that are immediately converted by the  
Company or such Restricted Subsidiary into actual cash or Cash Equivalents (to  
the extent of the actual cash or Cash Equivalents so received), and (b) any     
liabilities of the Company or such Restricted Subsidiary (as shown on the most  
recent balance sheet of the Company or such Restricted Subsidiary) that (1)     
are assumed by the transferee of the assets which are the subject of such       
Asset Sale as consideration therefor in a transaction the result of which is    
that the Company and all of its Subsidiaries are released from all liability    
for such assumed liability, (2) are not by their terms subordinated in right    
of payment to the Notes, (3) are not owed to the Company or any Subsidiary of   
the Company, and (4) constitute short-term liabilities (as determined in        
accordance with GAAP).                                                          

Within 360 days after the receipt of any Net Proceeds from an Asset Sale,   
the Company may apply, directly or indirectly, such Net Proceeds (a) to repay   
permanently Senior Indebtedness of the Company or Senior Indebtedness of the    
Restricted Subsidiaries, or (b) to the making of a capital expenditure or the   
acquisition of other long-term assets, in each case, in a Related Business.     
Pending the final application of any such Net Proceeds, the Company or the      
Restricted Subsidiaries, as the case may be, may temporarily reduce             
Indebtedness under the Senior Credit Facility or otherwise invest such Net      
Proceeds in any manner that is not prohibited by the Indenture. Any Net         
Proceeds from Asset Sales that are not applied or invested as provided in the   
first sentence of this paragraph will be deemed to constitute "Excess           
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10 million,    
the Company shall make an offer to all Holders of Notes (an "Asset Sale         
Offer") to purchase the maximum principal amount of Notes that may be           
purchased out of the Excess Proceeds, at an offer price in cash in an amount    
equal to 100% of the principal amount thereof, plus accrued and unpaid          
interest and Liquidated Damages, if any, to the date of purchase, in            
accordance with the procedures set forth in the Indenture. If the aggregate     
principal amount of Notes tendered by Holders thereof is less than the amount   
of                                                                              

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Excess Proceeds, the Company may use any remaining Excess Proceeds for general  
corporate purposes. Upon completion of such offer to purchase, the amount of    
Excess Proceeds shall be reset at zero.                                         

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise      
dispose of any Capital Stock of any Restricted Subsidiary to any Person (other  
than the Company or a Wholly Owned Restricted Subsidiary of the Company),       
unless (i) such transfer, conveyance, sale, lease or other disposition is of    
all of the Capital Stock of such Restricted Subsidiary owned by the Company     
and its Restricted Subsidiaries or is otherwise permitted under the covenant    
described under the caption "--Certain Covenants--Limitations on Issuance,      
Sale and Ownership of Capital Stock of Restricted Subsidiaries" and (ii) such   
transaction is conducted in accordance with the covenant described in the       
preceding two paragraphs.                                                       

The Company will comply with the requirements of Rule 14e-1 under the       
Exchange Act and any other securities laws and regulations thereunder to the    
extent such laws and regulations are applicable in connection with the          
repurchase of Notes using Excess Proceeds.                                      

LIMITATION ON ISSUANCE, SALE AND OWNERSHIP OF CAPITAL STOCK OF RESTRICTED     
SUBSIDIARIES                                                                    

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to (i) sell, assign, transfer, convey or otherwise  
dispose of, any Equity Interests of any Restricted Subsidiary, other than to    
the Company or a Wholly Owned Restricted Subsidiary, (ii) permit any            
Restricted Subsidiary to issue any Equity Interests (including, without         
limitation, pursuant to any merger, consolidation, recapitalization or similar  
transaction) other than to the Company or a Wholly Owned Restricted Subsidiary  
or (iii) permit any Person other than the Company or a Wholly Owned Restricted  
Subsidiary to own any Equity Interests of any Restricted Subsidiary, except     
that (A) the Company or a Restricted Subsidiary may consummate a sale to a      
Person of all of the Equity Interests of a Restricted Subsidiary if such sale   
is made by the Company or a Restricted Subsidiary in compliance with the        
covenant described under the caption "--Certain Covenants--Limitation on Sale   
of Assets and Restricted Subsidiary Stock," (B) the Company may issue, and      
permit the subsequent ownership by directors of, directors' qualifying shares,  
(C) in the event that the Company acquires less than 100% (on a fully diluted   
basis) of the Shelter Shares, the remaining Shelter Shares may be owned by      
other Persons until such shares are acquired by the Company or a Wholly Owned   
Restricted Subsidiary of the Company or until the merger of Shelter with the    
Company or a Wholly Owned Restricted Subsidiary of the Company is consummated,  
and (D) the Company may permit the Persons (other than the Company and its      
Restricted Subsidiaries) who own Equity Interests in Encore Industries, Inc.    
to continue to own the number of shares of such Equity Interests owned by such  
other Persons as of the Issue Date.                                             

LIMITATION ON TRANSACTIONS WITH AFFILIATES                                    

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer   
or otherwise dispose of any of its properties or assets to, or purchase any     
property or assets from, or enter into or make or amend any contract,           
agreement, understanding, loan, advance or guarantee with, or for the benefit   
of, any Affiliate of the Company (other than the Company or a Restricted        
Subsidiary), in one transaction or a series of transactions (each of the        
foregoing an "Affiliate Transaction"), unless (i) such Affiliate Transaction    
is on terms that are no less favorable to the Company or the relevant           
Restricted Subsidiary than those that would have been obtained in a comparable  
transaction with an unrelated Person and (ii) the Company delivers to the       
Trustee (a) with respect to any Affiliate Transaction or series of related      
Affiliate Transactions after the Issue Date involving aggregate consideration   
in excess of $1 million, a resolution described in an Officers' Certificate,    
certifying that such Affiliate Transaction complies with clause (i) above and   
such Affiliate Transaction has been approved by a majority of the               
disinterested members of the Board of Directors of the Company and (b) with     
respect to any Affiliate Transaction or series of related Affiliate             
Transactions after the Issue Date involving aggregate consideration in excess   
of $5 million, an opinion as to the fairness to the Company of such Affiliate   
Transaction from a financial point of view issued by an independent nationally  
recognized investment banking firm or appraisal firm experienced in the         
appraisal or                                                                    

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similar review of similar types of transactions; provided that the following    
types of transactions shall not constitute Affiliate Transactions: (1) any      
transaction with an officer or director of the Company or any Restricted        
Subsidiary in connection with such individual's compensation (including         
directors' fees), employee benefits, severance arrangements or indemnification  
(to the extent consistent with applicable law and the charter and bylaws of     
the Company or such Restricted Subsidiary), in each case entered into by the    
Company or any of its Restricted Subsidiaries in the ordinary course of         
business, (2) transactions between or among the Company and Restricted          
Subsidiaries, (3) Restricted Payments that are permitted by the provisions of   
the covenant described under the caption "--Certain Covenants--Limitation on    
Restricted Payments"; (4) sales of Capital Stock of the Company made at         
prevailing market rates; (5) transactions or agreements existing as of the      
Issue Date, including those described under the caption "Management             
Compensation--Compensation Committee Interlocks and Insider Participation" and  
"Management Compensation--Certain Transactions"; and (6) loans to officers,     
directors and employees of the Company and Restricted Subsidiaries made in the  
ordinary course of business and in furtherance of the Company's business in an  
aggregate amount not to exceed $1 million at any one time outstanding.          

SALE AND LEASEBACK TRANSACTIONS                                               

The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;  
provided that the Company and any Restricted Subsidiary may enter into a sale   
and leaseback transaction if (a) the Company or such Restricted Subsidiary      
could have (i) Incurred Indebtedness in an amount equal to the Attributable     
Debt relating to such sale and leaseback transaction pursuant to the Debt       
Incurrence Ratio test set forth in the first paragraph of the covenant          
described under the caption "--Certain Covenants--Limitation on Incurrence of   
Indebtedness" and (ii) incurred a Lien to secure such Indebtedness pursuant to  
the covenant described under the caption "--Certain Covenants--Limitation on    
Liens," (b) the gross cash proceeds of such sale and leaseback transaction are  
at least equal to the Fair Market Value (as determined in good faith by the     
Board of Directors and set forth in an Officers' Certificate delivered to the   
Trustee) of the property that is the subject of such sale and leaseback         
transaction and (c) the transfer of assets in such sale and leaseback           
transaction is permitted by, and the proceeds of such sale and leaseback        
transaction are applied in compliance with, the covenant described under the    
caption "--Certain Covenants--Limitation on Sales of Assets and Restricted      
Subsidiary Stock."                                                              

LIMITATION ON MERGER, SALE OR CONSOLIDATION                                   

The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving entity), or sell, assign,     
transfer, lease, convey or otherwise dispose of all or substantially all of     
its properties or assets in one or more related transactions to, another        
Person, unless (i) the Company is the surviving entity, or the Person formed    
by or surviving any such consolidation or merger (if other than the Company)    
or to which such sale, assignment, transfer, lease, conveyance or other         
disposition shall have been made is a corporation organized or existing under   
the laws of the United States, any state thereof or the District of Columbia;   
(ii) the Person formed by or surviving any such consolidation or merger (if     
other than the Company) or the Person to which such sale, assignment,           
transfer, lease, conveyance or other disposition shall have been made assumes   
all the obligations of the Company under the Notes and the Indenture pursuant   
to a supplemental indenture in a form reasonably satisfactory to the Trustee;   
(iii) immediately after giving effect to such transaction, no Default or Event  
of Default exists or would exist; (iv) except in the case of a merger of the    
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the   
Company or the Person formed by or surviving any such consolidation or merger   
(if other than the Company) or to which such sale, assignment, transfer,        
lease, conveyance or other disposition shall have been made (A) will (treating  
any Indebtedness not previously an obligation of the Company or any of its      
Restricted Subsidiaries as a result of such transaction as having been          
Incurred at the time of such transaction) have Consolidated Net Worth           
immediately after the transaction equal to or greater than the Consolidated     
Net Worth of the Company immediately preceding the transaction and (B) will,    
at the time of such transaction and after giving pro forma effect thereto as    
if such transaction had occurred at the beginning of the applicable Reference   
Period, be                                                                      

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permitted to Incur at least $1.00 of additional Indebtedness pursuant to the    
Debt Incurrence Ratio test set forth in the first paragraph of the covenant     
described under the caption "--Certain Covenants--Limitation on Incurrence of   
Indebtedness"; and (v) the Company shall have delivered to the Trustee an       
Officers' Certificate and an Opinion of Counsel, each stating that such         
consolidation, merger or transfer and such supplemental indenture (if any)      
comply with the Indenture. For purposes of the foregoing, the transfer (by      
lease, assignment, sale or otherwise, in a single transaction or series of      
transactions) of all or substantially all of the properties or assets of one    
or more of the Restricted Subsidiaries of the Company, the Capital Stock of     
which constitutes all or substantially all of the properties and assets of the  
Company, shall be deemed to be the transfer of all or substantially all of the  
properties and assets of the Company. For restrictions on mergers,              
consolidations and disposition of assets involving Restricted Subsidiaries,     
see provisions under the caption "--Subsidiary Guarantees."                     

DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES                       

The Board of Directors of the Company may designate any Restricted          
Subsidiary to be an Unrestricted Subsidiary if (i) such designation would not   
cause a Default or Event of Default, (ii) at the time of and after giving       
effect to such designation, the Company could incur $1.00 of additional         
Indebtedness pursuant to the Debt Incurrence Ratio test set forth in the first  
paragraph of the covenant under the caption "--Certain Covenants-- Limitation   
on Incurrence of Indebtedness," and (iii) each of the other requirements of     
the definition of the term "Unrestricted Subsidiary" are satisfied. For         
purposes of making such determination, all outstanding Investments by the       
Company and its Restricted Subsidiaries (except to the extent repaid in cash)   
in the Subsidiary so designated will be deemed to be Restricted Payments at     
the time of such designation and will reduce the amount available for           
Restricted Payments under clause (c) of the first paragraph of the covenant     
under the caption "--Certain Covenants--Limitation on Restricted Payments."     
All such outstanding Investments will be deemed to constitute Restricted        
Payments in an amount equal to the greater of (i) the net book value of such    
Investments at the time of such designation and (ii) the Fair Market Value of   
such Investments at the time of such designation. Such designation will only    
be permitted if such Restricted Payment would be permitted at such time and if  
such Restricted Subsidiary otherwise meets the definition of an Unrestricted    
Subsidiary. Upon being so designated as an Unrestricted Subsidiary, any         
Subsidiary Guarantee that was previously executed by such Unrestricted          
Subsidiary shall be deemed terminated.                                          

LIMITATION ON LINES OF BUSINESS                                               

The Indenture provides that neither the Company nor any of its Restricted   
Subsidiaries shall directly or indirectly engage in any line or lines of        
business activity other than a Related Business.                                

PAYMENTS FOR CONSENT                                                          

The Indenture provides that the Company will not and will not permit any of 
its Restricted Subsidiaries to, directly or indirectly, pay or cause to be      
paid any consideration, whether by way of interest, fee or otherwise, to any    
Holder of any Notes for or as an inducement or any consent, waiver or           
amendment of any of the terms or provisions of the Indenture or the Notes or    
the Subsidiary Guarantees, unless such consideration is offered to be paid or   
agreed to be paid to all Holders of the Notes that consent, waive or agree to   
amend in the time frame set forth in the solicitation documents relating to     
such consent, waiver or agreement.                                              

FUTURE SUBSIDIARY GUARANTORS                                                  

The Indenture provides that all Subsidiaries (other than Unrestricted       
Subsidiaries) will, jointly and severally, Guarantee irrevocably and            
unconditionally the payment of all principal of, premium, if any, interest and  
Liquidated Damages on the Notes on a senior subordinated basis, and requires    
the Company to cause any Person that becomes a Subsidiary (other than an        
Unrestricted Subsidiary), including any Subsidiary that was previously an       
Unrestricted Subsidiary and which becomes a Restricted Subsidiary, after the    
Issue Date to execute and deliver to the Trustee a supplemental indenture       
pursuant to which such Restricted Subsidiary will Guarantee the payment of      
principal of, premium, if any, interest and Liquidated Damages on the Notes.    

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LIMITATION ON STATUS AS INVESTMENT COMPANY                                    

The Indenture prohibits the Company and its Restricted Subsidiaries from    
being required to register as an "investment company" (as that term is defined  
in the Investment Company Act of 1940, as amended), or from otherwise becoming  
subject to regulation under the Investment Company Act.                         

REPORTS                                                                         

The Indenture provides that whether or not the Company is subject to the    
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company  
shall deliver to the Trustee and, to each Holder and to prospective purchasers  
of Notes identified to the Company by an Initial Purchaser, within 15 days      
after it is or would have been (if it were subject to such reporting            
obligations) required to file such with the Commission, annual and quarterly    
financial statements substantially equivalent to financial statements that      
would have been included in reports filed with the Commission, if the Company   
were subject to the requirements of Section 13 or 15(d) of the Exchange Act,    
including, with respect to annual information only, a report thereon by the     
Company's certified independent public accountants as such would be required    
in such reports to the Commission, and, in each case, together with a           
management's discussion and analysis of financial condition and results of      
operations which would be so required and, unless the Commission will not       
accept such reports, file with the Commission the annual, quarterly and other   
reports which it is or (if it were subject to such reporting obligations),      
would have been required to file with the Commission.                           

EVENTS OF DEFAULT AND REMEDIES                                                  

The Indenture provides that each of the following constitutes an Event of   
Default: (i) default for 30 days in the payment when due of interest on, or     
Liquidated Damages with respect to, the Notes (whether or not prohibited by     
the subordination provisions of the Indenture), (ii) default in payment when    
due of the principal of or premium, if any, on the Notes (whether or not        
prohibited by the subordination provisions of the Indenture), (iii) failure by  
the Company to comply with the provisions described under the captions "--      
Certain Covenants--Repurchase of Notes at the Option of the Holder Upon a       
Change of Control," "--Certain Covenants--Limitation on Sales of Assets and     
Restricted Subsidiary Stock," or "--Certain Covenants--Limitation on Merger,    
Sale or Consolidation," (iv) failure by the Company for 30 days after written   
notice from the Trustee or Holders of 25% in principal amount of the then       
outstanding Notes to comply with any other covenant or agreement (except as     
provided in clause (i), (ii) and (iii) above) in the Indenture or the Notes,    
(v) except as permitted by the Indenture, any Subsidiary Guarantee shall be     
held in any judicial proceeding to be unenforceable or invalid or shall cease   
for any reason to be in full force and effect or any Subsidiary Guarantor, or   
any Person acting on behalf of any Subsidiary Guarantor, shall deny or          
disaffirm its obligations under its Subsidiary Guarantee, (vi) default under    
any mortgage, indenture or instrument under which there may be issued or by     
which there may be secured or evidenced any Indebtedness of the Company or any  
of its Restricted Subsidiaries (or the payment of which is Guaranteed by the    
Company or any of its Restricted Subsidiaries) whether such Indebtedness or     
Guarantee now exists, or is created after the Issue Date, which default (a) is  
caused by a failure to pay principal when due at final stated maturity (a       
"Payment Default"), or (b) results in the acceleration of such Indebtedness     
prior to its express maturity and, in each case, the principal amount of any    
such Indebtedness, together with the principal amount of any other such         
Indebtedness under which there has been a Payment Default or the maturity of    
which has been so accelerated, aggregates $10 million or more, (vii) failure    
by the Company or any of its Restricted Subsidiaries to pay final judgments     
aggregating in excess of $10 million, which judgments are not paid, discharged  
or stayed for a period of 60 days and are not covered by insurance and (viii)   
certain events of bankruptcy, insolvency or reorganization in respect of the    
Company or any of its Restricted Subsidiaries.                                  

If any Event of Default occurs and is continuing (other than an Event of    
Default specified in clause (viii) above), then either the Trustee or the       
Holders of at least 25% in principal amount of the then outstanding Notes by    
notice in writing to the Company (and to the Trustee if given by Holders) (an   
"Acceleration Notice") may declare all outstanding Notes to be due and          
payable, and the same (i) shall become immediately due and payable,             

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or (ii) if there are any amounts outstanding under the Senior Credit Facility,  
shall become immediately due and payable upon the first to occur of an          
acceleration under the Senior Credit Facility or five Business Days after       
receipt by the Company and the representative of the holders of the             
Indebtedness under the Senior Credit Facility of such Acceleration Notice, but  
only if such Event of Default is then continuing. Notwithstanding the           
foregoing, in the case of an Event of Default specified in clause (viii)        
above, all outstanding Notes will be immediately due and payable without        
declaration or other action or notice on the part of the Trustee or the         
Holders of the Notes. Holders of the Notes may not enforce the Indenture or     
the Notes, except as provided in the Indenture. Subject to certain              
limitations, Holders of a majority in principal amount of the then outstanding  
Notes may direct the Trustee in its exercise of any trust or power. In the      
event of a declaration of acceleration of the Notes because an Event of         
Default has occurred and is continuing as a result of the acceleration of any   
Indebtedness described in clause (vi) of the preceding paragraph, the           
declaration of acceleration of the Notes shall be automatically annulled if     
the holders of any Indebtedness described in clause (vi) have rescinded the     
declaration of acceleration in respect of such Indebtedness within 30 days of   
the date of such declaration and the Trustee has received written notice of     
such rescission and if (a) the annulment of the acceleration of the Notes       
would not conflict with any judgment or decree of a court of competent          
jurisdiction, and (b) all existing Events of Default, except nonpayment of      
principal, premium, if any, or interest or Liquidated Damages on the Notes      
that became due solely because of the acceleration of the Notes, have been      
cured or waived. The Trustee may withhold from the Holders of the Notes notice  
of any continuing Default or Event of Default (except a Default or Event of     
Default relating to the payment of principal or interest) if it determines      
that withholding notice is in their interest.                                   

In the case of any Event of Default occurring by reason of any willful      
action (or inaction) taken (or not taken) by or on behalf of the Company with   
the intention of avoiding payment of the premium that the Company would have    
had to pay if the Company then had elected to redeem the Notes pursuant to the  
optional redemption provisions of the Indenture, an equivalent premium shall    
also become and be immediately due and payable to the extent permitted by law   
upon the acceleration of the Notes. If an Event of Default occurs prior to      
December 1, 2002, by reason of any willful action (or inaction) taken (or not   
taken) by or on behalf of the Company with the intention of avoiding the        
prohibition on redemption of the Notes prior to December 1, 2002, then the      
premium specified in the Indenture shall also become immediately due and        
payable to the extent permitted by law upon the acceleration of the Notes.      

The Holders of a majority in aggregate principal amount of the Notes then   
outstanding by notice to the Trustee may on behalf of the Holders of all of     
the Notes waive any existing Default or Event of Default and its consequences   
under the Indenture except a continuing Default or Event of Default in the      
payment of the principal of, premium, if any, interest or Liquidated Damages,   
if any, on such Notes which may only be waived with the consent of each Holder  
of the Notes affected.                                                          

Upon any payment or distribution of assets of the Company and its           
Subsidiaries in a total or partial liquidation, dissolution, reorganization or  
similar proceeding, including a Default under clause (viii) above, there may    
not be sufficient assets remaining to satisfy the claims of any Holders of      
Notes given the contractual subordination of the Notes and the Subsidiary       
Guarantees to Senior Indebtedness of the Company and the Restricted             
Subsidiaries, respectively. See "Risk Factors--Subordination."                  

The Company is required to deliver to the Trustee annually a statement      
regarding compliance with the Indenture, and the Company is required upon       
becoming aware of any Default or Event of Default, to deliver to the Trustee a  
statement specifying such Default or Event of Default.                          

LEGAL DEFEASANCE AND COVENANT DEFEASANCE                                        

The Indenture provides that the Company may, at its option and at any time, 
elect to have its obligations and the obligations of the Subsidiary Guarantors  
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such     
Legal Defeasance means that the Company shall be deemed to have paid and        
discharged the entire indebtedness represented, and the Indenture shall cease   
to be of further effect as to all outstanding Notes and Subsidiary Guarantees,  
except as to (i) rights of Holders to receive payments in respect of the        
principal                                                                       

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of, premium, if any, interest and Liquidated Damages on such Notes when such    
payments are due from the trust funds; (ii) the Company's obligations with      
respect to such Notes concerning issuing temporary Notes, registration of       
Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an    
office or agency for payment and money for security payments held in trust;     
(iii) the rights, powers, trust, duties, and immunities of the Trustee, and     
the Company's obligations in connection therewith; and (iv) the Legal           
Defeasance provisions of the Indenture. In addition, the Company may, at its    
option and at any time, elect to have the obligations of the Company and the    
Subsidiary Guarantors released with respect to certain covenants that are       
described in the Indenture ("Covenant Defeasance") and thereafter any omission  
to comply with such obligations shall not constitute a Default or Event of      
Default with respect to the Notes. In the event Covenant Defeasance occurs,     
certain events (not including non-payment, guarantees, bankruptcy,              
receivership, rehabilitation and insolvency events) described under "Events of  
Default" will no longer constitute an Event of Default with respect to the      
Notes.                                                                          

In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit    
of the Holders of the Notes, U.S. legal tender, Government Securities or a      
combination thereof, in such amounts as will be sufficient, in the opinion of   
a nationally recognized firm of independent public accountants, to pay the      
principal of, premium, if any, and interest on such Notes on the stated date    
for payment thereof or on the redemption date of such principal or installment  
of principal of, premium, if any, or interest on such Notes, and the Holders    
of Notes must have a valid, perfected, exclusive security interest in such      
trust; (ii) in the case of Legal Defeasance, the Company shall have delivered   
to the Trustee an opinion of counsel in the United States reasonably            
acceptable to the Trustee confirming that (A) the Company has received from,    
or there has been published by the Internal Revenue Service, a ruling or (B)    
since the date of the Indenture, there has been a change in the applicable      
federal income tax law, in either case to the effect that, and based thereon    
such opinion of counsel shall confirm that, the Holders of such Notes will not  
recognize income, gain or loss for federal income tax purposes as a result of   
such Legal Defeasance and will be subject to federal income tax on the same     
amounts, in the same manner and at the same times as would have been the case   
if such Legal Defeasance had not occurred; (iii) in the case of Covenant        
Defeasance, the Company shall have delivered to the Trustee an opinion of       
counsel in the United States reasonably acceptable to such Trustee confirming   
that the Holders of such Notes will not recognize income, gain or loss for      
federal income tax purposes as a result of such Covenant Defeasance and will    
be subject to federal income tax on the same amounts, in the same manner and    
at the same times as would have been the case if such Covenant Defeasance had   
not occurred; (iv) no Default or Event of Default shall have occurred and be    
continuing on the date of such deposit or insofar as Events of Default from     
bankruptcy or insolvency events are concerned, at any time in the period        
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or  
Covenant Defeasance shall not result in a breach or violation of, or            
constitute a default under the Indenture or any other material agreement or     
instrument to which the Company or any of its Subsidiaries is a party or by     
which the Company or any of its Subsidiaries is bound; (vi) the Company shall   
have delivered to the Trustee an Officers' Certificate stating that the         
deposit was not made by the Company with the intent of preferring the Holders   
of such Notes over any other creditors of the Company or with the intent of     
defeating, hindering, delaying or defrauding any other creditors of the         
Company or others; and (vii) the Company shall have delivered to the Trustee    
an Officers' Certificate and an opinion of counsel, each stating that the       
conditions precedent provided for in, in the case of the officers'              
certificate, (i) through (vi) and, in the case of the opinion of counsel,       
clauses (i) (with respect to the validity and perfection of the security        
interest), (ii), (iii) and (v) of this paragraph have been complied with.       

If the funds deposited with the Trustee to effect Legal Defeasance or       
Covenant Defeasance are insufficient to pay the principal of, premium, if any,  
interest and Liquidated Damages on the Notes when due, then the obligations of  
the Company and the Subsidiary Guarantors under the Indenture will be revived   
and no such defeasance will be deemed to have occurred.                         

TRANSFER AND EXCHANGE                                                           

Holders of Notes may transfer or exchange their Notes in accordance with the
Indenture, but the Registrar may require a Holder, among other things, to       
furnish appropriate endorsements and transfer documents, and to                 

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pay any taxes and fees required by law or permitted by the Indenture, in        
connection with any such transfer or exchange. Neither the Company nor the      
Registrar is required to issue, register the transfer of, or exchange (i) any   
Note selected for redemption or tendered pursuant to an Offer, or (ii) any      
Note during the period between (a) the date the Trustee receives notice of a    
redemption from the Company and the date the Notes to be redeemed are selected  
by the Trustee or (b) a record date and the next succeeding interest payment    
date. The registered Holder of a Note will be treated as its owner for all      
purposes.                                                                       

AMENDMENT, SUPPLEMENT AND WAIVER                                                

Subject to certain exceptions, the Indenture may be amended or supplemented 
with the consent of the Holders of at least a majority in principal amount of   
the Notes then outstanding under such Indenture, and any existing Default or    
Event of Default (other than a payment default) or compliance with any          
provision may be waived with the consent of the Holders of a majority in        
principal amount of the Notes then outstanding under the Indenture. Without     
the consent of any Holder of Notes, the Company, the Subsidiary Guarantors and  
the Trustee may amend or supplement the Indenture or the Notes to, among other  
things, cure any ambiguity, defect or inconsistency, to provide for             
uncertificated Notes in addition to or in place of certificated Notes, to       
provide for the assumption by a successor corporation of the Company's          
obligations to the Holders of Notes in accordance with the covenant described   
under the caption "--Certain Covenants--Limitation on Merger, Sale or           
Consolidation," to add further Subsidiary Guarantees with respect to the        
Notes, to release Subsidiary Guarantors when permitted by the Indenture, to     
secure the Notes, to add to the covenants of the Company and any Restricted     
Subsidiary of the Company for the benefit of the Holders of the Notes or to     
surrender any right or power conferred upon the Company or any Restricted       
Subsidiary of the Company, to comply with the Trust Indenture Act, or to make   
any change that does not materially adversely affect the legal rights of any    
Holder of Notes.                                                                

Without the consent of each Holder of Notes affected, the Company may not   
(i) reduce the principal amount of Notes whose Holders must consent to an       
amendment to the Indenture or a waiver under the Indenture; (ii) reduce the     
rate of or change the interest payment time of the Notes, or alter the          
provisions with respect to the redemption of the Notes (other than the          
provisions relating to the covenants described above under the captions "--     
Certain Covenants--Repurchase of Notes at the Option of the Holder Upon a       
Change of Control" and "--Certain Covenants--Limitation on Sales of Assets and  
Restricted Subsidiary Stock"); (iii) reduce the principal of or change the      
fixed maturity of the Notes; (iv) make the Notes payable in money other than    
as stated in the Notes; (v) make any change in the provisions concerning        
waiver of Defaults or Events of Default by Holders of the Notes, or rights of   
Holders of the Notes to receive payment of principal or interest; (vi) waive    
any Default or Event of Default in the payment of principal of, premium, if     
any, or unpaid interest on, and Liquidated Damages, if any, with respect to     
the Notes (except a rescission of acceleration of the Notes by the Holders of   
at least a majority in aggregate principal amount of the Notes and waiver of    
the payment default that resulted from such acceleration); (vii) make any       
change to the subordination provisions of the Indenture and the Notes in a      
manner that materially adversely affects the legal rights of any Holder of the  
Notes; (viii) waive a redemption or repurchase payment with respect to any      
Note (other than a payment required by one of the covenants described above     
under the captions "--Certain Covenants--Repurchase of Notes at the Option of   
the Holder Upon a Change of Control" and "--Certain Covenants--Limitations on   
Sales of Assets and Restricted Subsidiary Stock"); (ix) make any change in the  
foregoing amendment and waiver provisions; or (x) except as provided under the  
caption "--Legal Defeasance and Covenant Defeasance" or in accordance with the  
terms of any Subsidiary Guarantee, release a Subsidiary Guarantor from its      
obligations under its Subsidiary Guarantee or make any change in a Subsidiary   
Guarantee that would adversely affect the Holders of the Notes.                 
Notwithstanding the foregoing, any amendment or waiver to the covenants         
described above under the captions "--Certain Covenants--Repurchase of Notes    
at the Option of the Holder Upon a Change of Control" and "--Certain            
Covenants--Limitation on Sales of Assets and Restricted Subsidiary Stock,"      
will require the consent of the Holders of at least two-thirds in aggregate     
principal amount of the Notes then outstanding if such amendment would          
adversely affect the rights of Holders of Notes.                                

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The subordination provisions contained in the Indenture are for the benefit 
of the holders from time to time of Senior Indebtedness and may not be          
rescinded, canceled, amended or modified in any way other than any amendment    
or modification that would not adversely affect the rights of any holder of     
Senior Indebtedness or any amendment or modification that is consented to by    
each holder of Senior Indebtedness that would be adversely affected thereby.    

NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS            

The Indenture provides that no direct or indirect stockholder, employee,    
officer or director, as such, past, present or future of the Company, the       
Subsidiary Guarantors or any successor entity shall have any personal           
liability in respect of the obligations of the Company or the Subsidiary        
Guarantors under the Indenture or the Notes by reason of his or its status as   
such stockholder, employee, officer or director, except to the extent such      
Person is the Company or a Subsidiary Guarantor.                                

CERTAIN DEFINITIONS                                                             

"Acquired Indebtedness" means, with respect to any specified Person, (i)    
Indebtedness of any other Person existing at the time such other Person is      
merged with or into or becomes a Restricted Subsidiary of such specified        
Person, including, without limitation, Indebtedness Incurred in connection      
with, or in contemplation of, such other Person merging with or into or         
becoming a Restricted Subsidiary of such specified Person and (ii)              
Indebtedness secured by a Lien encumbering any asset acquired by such           
specified Person.                                                               

"Affiliate" of any specified Person means any other Person directly or      
indirectly controlling or controlled by or under direct or indirect common      
control with such specified Person. For purposes of this definition, "control"  
(including, with correlative meanings, the terms "controlling," "controlled     
by" and "under common control with"), as used with respect to any Person,       
shall mean the possession, directly or indirectly, of the power to direct or    
cause the direction of the management or policies of such Person, whether       
through the ownership of voting securities, by agreement or otherwise;          
provided that Beneficial Ownership of 10% or more of the voting securities of   
a Person shall be deemed to be control.                                         

"Asset Sale" means (a) the direct or indirect sale, lease, license,         
conveyance, transfer or other disposition of any assets or rights (including,   
without limitation, by way of a sale and leaseback or similar arrangement, by   
merger or consolidation) by the Company or a Restricted Subsidiary (a           
"disposition"), in one transaction or a series of transactions; provided that   
the disposition of all or substantially all of the assets of the Company and    
its Restricted Subsidiaries taken as a whole will be governed by the            
provisions of the Indenture described under the caption "--Repurchase of Notes  
at the Option of the Holder Upon a Change of Control" and/or the provisions     
described under the caption "--Certain Covenants--Limitation on Merger, Sale    
or Consolidation" and not by the provisions of the covenant described under     
the caption "--Certain Covenants--Limitation on Sales of Assets and Restricted  
Subsidiary Stock," and (b) the issuance or disposition by the Company or any    
of its Restricted Subsidiaries of Equity Interests of the Company's Restricted  
Subsidiaries. Notwithstanding the foregoing, none of the following will be      
deemed an Asset Sale: (i) a disposition of assets by the Company to a           
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a      
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Restricted     
Subsidiary to the Company or to a Restricted Subsidiary; (iii) a Restricted     
Payment that is permitted by the covenant described under the caption "--       
Certain Covenants--Limitation on Restricted Payments;" (iv) dispositions of     
$250,000 or less; (v) dispositions of assets or rights in the ordinary course   
of business consistent with past practices; (vi) a disposition of assets on or  
before the second anniversary of the Issue Date which meets the requirements    
of the first paragraph of the covenant described under the caption "--Certain   
Covenants--Limitation on Sale of Assets and Restricted Subsidiary Stock" the    
proceeds of which are used for Shelter Transition Expenditures on or before     
the second anniversary of the Issue Date; (vii) the grant in the ordinary       
course of business of any non-exclusive license of intellectual property        
rights; (viii) any liquidation of any Cash Equivalent; (ix) any disposition of  
defaulted receivables for collection; and (x) the grant of any Lien securing    
Indebtedness (or any foreclosure thereon) to the extent that such Lien is       
granted in compliance with the covenant set forth under the caption "--Certain  
Covenants--Limitation on Liens."                                                

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"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of         
interest implicit in such transaction, determined in accordance with GAAP) of   
the obligation of the lessee for net rental payments during the remaining term  
of the lease included in such sale and leaseback transaction (including any     
period for which such lease has been extended or may, at the option of the      
lessor, be extended).                                                           

"Average Life" means, as of the date of determination, with respect to any  
security or instrument, the quotient obtained by dividing (i) the sum of the    
products (a) of the number of years from the date of determination to the date  
or dates of each successive scheduled principal (or redemption) payment of      
such security or instrument and (b) the amount of each such respective          
principal (or redemption) payment by (ii) the sum of all such principal (or     
redemption) payments.                                                           

"Beneficial Owner" or "beneficial owner" (including, with correlative       
meanings, the terms "Beneficial Ownership" and "Beneficially Owns") for         
purposes of the definition of Change of Control has the meaning attributed to   
it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue   
Date), whether or not applicable, except that a "person" (as such term is used  
in Sections 13(d)(3) of the Exchange Act) shall be deemed to have "Beneficial   
Ownership" of all shares that any such person has the right to acquire,         
whether such right is exercisable immediately or only after the passage of      
time.                                                                           

"Board of Directors" means, with respect to any Person, the board of        
directors of such Person or any committee of the Board of Directors of such     
Person authorized, with respect to any particular matter, to exercise the       
power of the board of directors of such Person.                                 

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday   
which is not a day on which banking institutions in New York, New York are      
authorized or obligated by law or executive order to close.                     

"Capitalized Lease Obligation" means, as to any Person, the obligations of  
such Person under a lease that are required to be classified and accounted for  
as capital lease obligations under GAAP and, for purposes of this definition,   
the amount of such obligations at any date shall be the capitalized amount of   
such obligations at such date, determined in accordance with GAAP.              

"Capital Stock" means (i) in the case of a corporation, corporate stock,    
(ii) in the case of an association or business entity, any and all shares,      
interests, participations, rights or other equivalents (however designated) of  
corporate stock, (iii) in the case of a partnership, partnership interests      
(whether general or limited) and (iv) any other interest or participation that  
confers on a Person the right to receive a share of the profits and losses of,  
or distributions of assets of, the issuing Person.                              

"Cash Equivalents" means (i) Government Securities having maturities of not 
more than twelve months from the date of acquisition, (ii) certificates of      
deposit and eurodollar time deposits with maturities of twelve months or less   
from the date of acquisition, bankers' acceptances with maturities not          
exceeding six months and overnight bank deposits, in each case with any member  
bank of the U.S. Federal Reserve System having capital and surplus in excess    
of $500 million, (iii) repurchase obligations with a term of not more than      
seven days for underlying securities of the types described in clause (i)       
above entered into with any financial institution meeting the qualifications    
specified in clause (ii) above, and (iv) commercial paper having the rating of  
at least P-1 from Moody's Investors Service, Inc. ("Moody's"), or any           
successor to its rating business, or at least A-1 from Standard & Poor's        
Ratings Group ("S&P"), or any successor to its rating business, and in each     
case maturing within 180 days after the date of acquisition.                    

"Consolidated Coverage Ratio" of any Person on any date of determination    
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the      
aggregate amount of Consolidated EBITDA of such Person attributable to          
continuing operations and businesses (exclusive of amounts attributable to      
operations and businesses discontinued or disposed of) for the Reference        
Period to (b) the aggregate Consolidated Fixed Charges                          

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of such Person (exclusive of amounts attributable to operations and businesses  
discontinued or disposed of, but only to the extent that the obligations        
giving rise to such Consolidated Fixed Charges would no longer be obligations   
contributing to such Person's Consolidated Fixed Charges subsequent to the      
Transaction Date) during the Reference Period; provided, that for purposes of   
such calculation, (i) acquisitions which occurred during the Reference Period   
or subsequent to the Reference Period and on or prior to the Transaction Date   
shall be assumed to have occurred on the first day of the Reference Period,     
(ii) transactions giving rise to the need to calculate the Consolidated         
Coverage Ratio shall be assumed to have occurred on the first day of the        
Reference Period, (iii) the Incurrence of any Indebtedness or issuance of any   
Disqualified Stock during the Reference Period or subsequent to the Reference   
Period and on or prior to the Transaction Date (and the application of the      
proceeds therefrom to the extent used to refinance or retire other              
Indebtedness) shall be assumed to have occurred on the first day of such        
Reference Period, and (iv) the Consolidated Fixed Charges of such Person        
attributable to interest on any Indebtedness or dividends on any Disqualified   
Stock bearing a floating interest (or dividend) rate shall be computed on a     
pro forma basis as if the average rate in effect from the beginning of the      
Reference Period to the Transaction Date had been the applicable rate for the   
entire period, unless such Person or any of its Subsidiaries is a party to a    
Hedging Obligation (which by its terms will remain in effect for the 12-month   
period immediately following the Transaction Date) that has the effect of       
fixing the interest rate on the date of computation, in which case such rate    
(whether higher or lower) shall be used.                                        

"Consolidated EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person for such period adjusted to add thereto  
(to the extent deducted in determining Consolidated Net Income), without        
duplication, the sum of (i) consolidated income tax expense, (ii) consolidated  
depreciation and amortization expense, and other non-cash charges required to   
be reflected as expenses for such period on the books and records of such       
Person and (iii) Consolidated Fixed Charges, less the amount of all cash        
payments made by such Person or any of its Restricted Subsidiaries during such  
period to the extent such payments relate to non-cash charges that were added   
back in determining Consolidated EBITDA for such period or any prior period.    

"Consolidated Fixed Charges" means, with respect to any Person for any      
period, the sum of (i) the consolidated interest expense of such Person and     
its Restricted Subsidiaries for such period, whether paid or accrued            
(including, without limitation, amortization of debt issuance costs and         
original issue discount, non cash interest payments, the interest component of  
any deferred payment obligations, the interest component of all payments        
associated with Capital Lease Obligations, imputed interest with respect to     
Attributable Debt, interest payments in respect of Indebtedness of another      
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries  
or secured by a Lien on assets of such Person or one of its Restricted          
Subsidiaries, commissions, discounts and other fees and charges incurred in     
respect of letter of credit or bankers' acceptance financings, and net          
payments (if any) pursuant to Hedging Obligations), (ii) the consolidated       
interest expense of such Person and its Restricted Subsidiaries that was        
capitalized during such period, in each case, on a consolidated basis and in    
accordance with GAAP, and (iii) the product of (A) the aggregate amount of      
dividends paid (to the extent not accrued in a prior period) or accrued on      
Disqualified Stock of the Company and its Restricted Subsidiaries or preferred  
stock of the Company's Restricted Subsidiaries, to the extent such              
Disqualified Stock or preferred stock is owned by Persons other than the        
Company and its Restricted Subsidiaries and (B) a fraction, the numerator of    
which is one and the denominator of which is one minus the then current         
combined federal, state, local and foreign statutory tax rate of such Person,   
expressed as a decimal.                                                         

"Consolidated Net Income" means, with respect to any Person for any period, 
the aggregate of the Net Income of such Person and its Restricted Subsidiaries  
for such period, on a consolidated basis, determined in accordance with GAAP;   
provided that (i) the Net Income (but not loss) of any Person that is not a     
Restricted Subsidiary or that is accounted for by the equity method of          
accounting shall be included only to the extent of the amount of dividends or   
distributions paid in cash to the specified Person as to which Consolidated     
Net Income is being calculated, (ii) the Net Income of any Restricted           
Subsidiary shall be excluded to the extent that the declaration or payment of   
dividends or similar distributions by such Restricted Subsidiary of such Net    
Income would not be permitted at the date of determination directly or          
indirectly, pursuant to the terms of its charter and                            

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by-laws and all agreements, instruments, judgments, decrees, orders, statutes,  
rules or governmental regulations applicable to such Restricted Subsidiary or   
its stockholders, (iii) the Net Income of any Person acquired in a pooling of   
interests transaction for any period prior to the date of such acquisition      
shall be excluded, (iv) the cumulative effect of a change in accounting         
principles shall be excluded, (v) income or loss attributable to discounted     
operations shall be excluded, and (vi) any gain (but not loss) realized upon    
the sale or other disposition of any property, plant or equipment of the        
Company or its Restricted Subsidiaries (including pursuant to any sale and      
leaseback transaction) which is not sold or otherwise disposed of in the        
ordinary course of business and any gain (but not loss) realized upon the sale  
or other disposition of any Capital Stock of any Person shall be excluded.      

"Consolidated Net Worth" means, with respect to any Person as of any date,  
the sum of (i) the consolidated equity of the common equity holders of such     
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)   
the respective amounts reported on such Person's balance sheet as of such date  
with respect to any series of preferred equity (other than Disqualified Stock)  
that by its terms is not entitled to the payment of dividends or other          
distributions, unless such dividends or other distributions may be declared     
and paid only out of net earnings in respect of the year of such declaration    
and payment, but only to the extent of any cash received by such Person upon    
issuance of such preferred equity, less (x) all write-ups (other than write-    
ups resulting from foreign currency translations and write-ups of tangible      
assets of a going concern business made within 12 months after the acquisition  
of such business) subsequent to the date of the Indenture in the book value of  
any asset owned by such Person or a consolidated Restricted Subsidiary of such  
Person, (y) all investments as of such date in Persons that are not Restricted  
Subsidiaries (except, in each case, Permitted Investments), and (z) all         
unamortized debt discount and expense and unamortized deferred charges as of    
such date, all of the foregoing determined in accordance with GAAP.             

"Default" means any event or condition the occurrence of which is, or with  
the lapse of time or the giving of notice or both would be, an Event of         
Default.                                                                        

"Designated Senior Indebtedness" means, (i) any Indebtedness outstanding    
under the Senior Credit Facility and (ii) any other Senior Indebtedness         
permitted under the Indenture the principal amount of which is $25 million or   
more and that has been designated by the Company as "Designated Senior          
Indebtedness."                                                                  

"Disqualified Stock" means any Capital Stock that, by its terms (or by the  
terms of any security into which it is convertible or for which it is           
exchangeable), or upon the happening of any event, matures or is mandatorily    
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable   
at the option of the holder thereof, in whole or in part, on or prior to the    
date that is 91 days after the date on which the Notes mature.                  

"Eligible Receivables" means the trade receivables of the Company and its   
Restricted Subsidiaries less the allowance for doubtful accounts, each of the   
foregoing determined in accordance with GAAP.                                   

"Equity Interests" means Capital Stock and all warrants, options or other   
rights to acquire Capital Stock (but excluding any debt security that is        
convertible into, or exchangeable for, Capital Stock).                          

"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries in existence on the Issue Date after giving pro forma effect to    
the Transactions.                                                               

"Existing Majority Stockholder" means (i) Jerry E. Kimmel; (ii) his         
beneficiaries, estates, spouse and lineal descendants, legal representatives    
of any of the foregoing and the trustee of any bona fide trust of which any of  
the foregoing are the sole beneficiaries or grantors and (iii) all Affiliates   
controlled by Jerry E. Kimmel (provided that, for purposes of this clause       
(iii) only, the proviso set forth in the definition of the term "Affiliate"     
shall be deemed modified to provide that Beneficial Ownership of 50% or more    
of the voting securities of a Person shall constitute, and shall be necessary   
to constitute, control).                                                        

"Fair Market Value" means, with respect to any asset or property, the sale  
value that would be obtained in an arm's-length transaction between an          
informed and willing seller under no compulsion to sell and an informed         

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and willing buyer under no compulsion to buy; provided that if such value       
exceeds $1 million, such determination shall be made in good faith by the       
Board of Directors of the Company.                                              

"GAAP" means United States generally accepted accounting principles set     
forth in the opinions and pronouncements of the Accounting Principles Board of  
the American Institute of Certified Public Accountants and statements and       
pronouncements of the Financial Accounting Standards Board or in such other     
statements by such other entity as approved by a significant segment of the     
accounting profession in the United States as in effect on the Issue Date.      

"Government Securities" means direct obligations of, or obligations fully   
guaranteed by, or participations in pools consisting solely of obligations of   
or obligations guaranteed by, the United States of America for the payment of   
which guarantee or obligations the full faith and credit of the United States   
of America is pledged.                                                          

"Guarantee" means a guarantee (other than by endorsement of negotiable      
instruments for collection in the ordinary course of business), direct or       
indirect, in any manner (including, without limitation, letters of credit and   
reimbursement agreements in respect thereof), of all or any part of any         
Indebtedness.                                                                   

"Hedging Obligations" means, with respect to any Person, the obligations of 
such Person under (i) interest or currency exchange rate swap agreements,       
interest or currency exchange rate cap agreements and interest or currency      
exchange rate collar agreements and (ii) other agreements or arrangements, in   
any case, designed to protect such Person against fluctuations in interest or   
currency exchange rates (as appropriate, "Interest Rate Hedges" and "Currency   
Hedges").                                                                       

"Incur" means, with respect to any Indebtedness or other obligation of any  
Person, to create, issue, incur (by conversion, exchange or otherwise),         
assume, Guarantee or otherwise become liable in respect of such Indebtedness    
or other obligation or the recording, as required pursuant to GAAP or           
otherwise, of any such Indebtedness or other obligation on the balance sheet    
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"      
shall have meanings correlative to the foregoing); provided, however, that a    
change in GAAP that results in an obligation of such Person that exists at      
such time, and is not theretofore classified as Indebtedness, becoming          
Indebtedness shall not be deemed an Incurrence of such Indebtedness.            

"Indebtedness" means, with respect to any Person, (a) any liability of such 
Person, whether or not contingent (i) for borrowed money, or under any          
reimbursement obligation relating to a letter of credit, bankers' acceptance    
or note purchase facility; (ii) evidenced by a bond, note, debenture or         
similar instrument (including a purchase money obligation); (iii) for the       
payment of money relating to a Capital Lease Obligation; (iv) for or pursuant   
to Disqualified Stock; (v) for or pursuant to preferred stock of any            
Restricted Subsidiary of the Company (other than preferred stock held by the    
Company or any of its Restricted Subsidiaries); (vi) representing the balance   
deferred and unpaid of the purchase price of any property or services (except   
any such balance that constitutes a trade payable or accrued liability in the   
ordinary course of business that is not overdue by more than 90 days or is      
being contested in good faith by appropriate proceedings promptly instituted    
and diligently conducted); or (vii) under or in respect of Hedging              
Obligations; (b) any liability of others described in the preceding clause (a)  
that such Person has guaranteed, that is recourse to such Person or that is     
otherwise its legal liability, or the payment of which is secured by (or for    
which the holder of such liability has an existing right to be secured by) any  
Lien upon property owned by such Person, even though such Person has not        
assumed or become liable for the payment of such liability; and (c) any         
amendment, supplement, modification, deferral, renewal, extension or refunding  
of any liability of the types referred to in clauses (a) and (b) above. The     
amount of any non-interest bearing or other discount Indebtedness shall be      
deemed to be the principal amount thereof that would be shown on the balance    
sheet of the issuer dated such date prepared in accordance with GAAP, but such  
Indebtedness shall be deemed to have been Incurred only on the date of the      
original issuance thereof.                                                      

"Investments" means, with respect to any Person, all investments by such    
Person in other Persons (including Affiliates) in the forms of direct or        
indirect loans (including guarantees of Indebtedness or other obligations (but  
excluding endorsements of negotiable instruments for collection in the          
ordinary course of                                                              

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business)), advances or capital contributions (excluding commission, travel     
and similar advances to directors, officers and employees made in the ordinary  
course of business), purchases or other acquisitions (for consideration) of     
Indebtedness, Equity Interest or other securities, together with all items      
that are or would be classified as investments on a balance sheet prepared in   
accordance with GAAP.                                                           

"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities          
Corporation and NationsBanc Montgomery Securities, Inc.                         

"Issue Date" means the date of first issuance of the Notes under the        
Indenture.                                                                      

"Junior Securities" of any Person means securities (including Capital Stock 
but excluding Disqualified Stock) issued by such Person to a Holder on account  
of the Notes that (a) has an Average Life and maturity or mandatory redemption  
obligation, if any, longer than, or occurring after the final maturity date     
of, all Designated Senior Indebtedness of such Person, (b) by their terms or    
by law are subordinated to Senior Indebtedness of such Person outstanding on    
the date of issuance of such Junior Securities at least to the same extent as   
the Notes and (c) are not secured by any assets or property of the Company or   
any of its Subsidiaries. As used herein, "Designated Senior Indebtedness of     
such Person outstanding on the date of issuance of such Junior Securities"      
shall include securities issued in connection with a reorganization pursuant    
to the bankruptcy laws of any jurisdiction to Persons which held "Designated    
Senior Indebtedness" in such reorganization proceeding.                         

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether  
or not filed, recorded or otherwise perfected under applicable law (including   
any conditional sale or other title retention agreement, and any lease in the   
nature thereof).                                                                

"Net Income" means, with respect to any Person, the net income (loss) of    
such Person, determined in accordance with GAAP.                                

"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount  
of cash proceeds (including any cash received by way of deferred payment        
pursuant to a note receivable issued in connection with such Asset Sale, other  
than the portion of such deferred payment constituting interest, and including  
any amounts received as disbursements or withdrawals from any escrow or         
similar account established in connection with any such Asset Sale, but, in     
either case, only as and when so received) received by the Company or any of    
its Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the      
cash expenses of such Asset Sale (including, without limitation, the payment    
of principal of, and premium, if any, and interest on, Indebtedness required    
to be paid as a result of such Asset Sale (other than the Notes) and legal,     
accounting, management and advisory and investment banking fees and sales       
commissions), (ii) taxes paid or payable as a result thereof, (iii) any         
portion of cash proceeds that the Company determines in good faith should be    
reserved for post-closing adjustments, it being understood and agreed that on   
the day that all such post-closing adjustments have been determined, the        
amount (if any) by which the reserved amount in respect of such Asset Sale      
exceeds the actual post-closing adjustments payable by the Company or any of    
its Restricted Subsidiaries shall constitute Net Proceeds on such date, (iv)    
any relocation expenses and pension, severance and shutdown costs incurred as   
a result thereof and (v) any cash amounts actually set aside by the Company or  
any Restricted Subsidiary as a reserve in accordance with GAAP against any      
retained liabilities associated with the asset disposed of in such              
transaction, including, without limitation, pension and other post-employment   
benefit liabilities and liabilities related to environmental matters or         
against any indemnification obligations associated with such transaction.       

"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company  
nor any of its Restricted Subsidiaries (a) provides credit support of any kind  
(including any undertaking, agreement or instrument that would constitute       
Indebtedness), (b) is directly or indirectly liable (as a guarantor or          
otherwise), or (c) constitutes the lender, (ii) no default with respect to      
which (including any rights that the holders thereof may have to take           
enforcement action against an Unrestricted Subsidiary) would permit (upon       
notice, lapse of time or both) any holder of any other Indebtedness of the      
Company or any of its Restricted Subsidiaries to declare a default on           

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such other Indebtedness or cause the payment thereof to be accelerated or       
payable prior to its stated maturity and (iii) as to which the lenders have     
expressly waived any recourse which they may have, in law, equity or            
otherwise, whether based on misrepresentations, control, ownership or           
otherwise, to the Company or any of its Restricted Subsidiaries, including,     
without limitation, a waiver of the benefits of the provisions of Section       
1111(b) of the U.S. Bankruptcy Code (Title 11, United States Code), as          
amended.                                                                        

"Obligations" means any principal, interest, penalties, fees,               
indemnifications, reimbursements, damages and other liabilities payable under   
the documentation governing any Indebtedness.                                   

"Permitted Investments" means (i) any Investment in the Company or in a     
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;  
(iii) any Investment by the Company or any of its Restricted Subsidiaries in a  
Person engaged in a Related Business if, as a result of such Investment, (A)    
such Person becomes a Restricted Subsidiary of the Company or (B) such Person   
is merged, consolidated or amalgamated with or into, or transfers or conveys    
substantially all of its assets to, or is liquidated into, the Company or a     
Restricted Subsidiary of the Company; (iv) Investments the payment for which    
consists exclusively of Equity Interests (excluding Disqualified Stock) of the  
Company; (v) Investments in shares of money market mutual or similar funds      
having assets in excess of $500 million; and (vi) Investments in negotiable     
instruments held for collection in the ordinary course of business and lease,   
utility and similar deposits.                                                   

"Permitted Lien" means (i) Liens securing Permitted Indebtedness Incurred   
pursuant to clause (i) of the definition of such term; (ii) Liens in favor of   
the Company and/or its Restricted Subsidiaries; (iii) Liens on property of a    
Person existing at the time such Person is merged into or consolidated with     
the Company or any of its Restricted Subsidiaries, provided that such Liens     
were in existence prior to the contemplation of such merger or consolidation    
and do not extend to any assets other than those of the Person merged into or   
consolidated with the Company or any such Restricted Subsidiary; (iv) Liens     
securing any Acquired Indebtedness and which exist at the time of acquisition   
thereof by the Company or any of its Restricted Subsidiaries, provided that     
such Liens were in existence prior to the contemplation of such acquisition;    
(v) Liens arising under the Indenture in favor of the Trustee; (vi) Liens       
existing on the date of the Indenture; (vii) Liens arising by reason of (1)     
any judgment, decree or order of any court not constituting an Event of         
Default; (2) taxes not yet delinquent or which are being contested in good      
faith by appropriate proceedings which suspend the collection thereof,          
promptly instituted and diligently conducted, and for which adequate reserves   
have been established to the extent required by GAAP; (3) security for payment  
of workers' compensation or other insurance; (4) good faith deposits in         
connection with tenders, leases and contracts (other than contracts for the     
payment of money), bids, licenses, performance or similar bonds and other       
obligations of a like nature, in the ordinary course of business; (5) zoning    
restrictions, easements, licenses, reservations, provisions, covenants,         
conditions, waivers, restrictions on the use of property or minor               
irregularities of title (and with respect to leasehold interests, mortgages,    
obligations, Liens and other encumbrances incurred, created, assumed or         
permitted to exist and arising by, through or under a landlord or owner of the  
leased property, with or without consent of the lessees), none of which         
materially impairs the use of any parcel of property material to the operation  
of the business of the Company or any Restricted Subsidiary or the value of     
such property for the purpose of such business; (6) deposits to secure public   
or statutory obligations or in lieu of surety or appeal bonds; (7) surveys,     
exceptions, title defects, encumbrances, easements, reservations of, or rights  
of others for, rights of way, sewers, electric lines, telegraph or telephone    
lines and other similar purposes or zoning or other restrictions as to the use  
of real property not interfering with the ordinary conduct of the business of   
the Company or any of its Restricted Subsidiaries; or (8) operation of law or   
statute and incurred in the ordinary course of business, including without      
limitation, those in favor of mechanics, materialmen, suppliers, laborers or    
employees, and, if securing sums of money, for sums which are not yet           
delinquent or are being contested in good faith by appropriate proceedings      
which suspend the collection thereof, promptly instituted and diligently        
conducted, and for which adequate reserves have been established to the extent  
required by GAAP; (viii) Liens resulting from the deposit of funds in trust     
for the purpose of decreasing or defeasing Indebtedness of the Company and its  
Restricted Subsidiaries so long as such deposit of funds and such decreasing    
or defeasing of Indebtedness are permitted under the caption "--Limitation on   
Restricted Payments" covenant; and (ix) any extension, renewal or replacement   
(or successive extensions, renewals or replacements),                           

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in whole or in part, of any Lien referred to in the foregoing clauses (iii),    
(iv) and (vi) above; provided that the principal amount of the Indebtedness     
secured thereby shall not exceed the principal amount of Indebtedness secured   
thereby immediately prior to the time of such extension, renewal or             
replacement, and that such extension, renewal or replacement Lien shall be      
limited to all or a part of the property that secured the Lien so extended,     
renewed or replaced (plus improvements on such property).                       

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company  
or any of its Restricted Subsidiaries issued in exchange for, or the net        
proceeds of which are used by such Person to extend, refinance, renew,          
replace, defease or refund other Indebtedness of such Person ("Old              
Indebtedness"); provided that: (i) the principal amount (or accreted value, if  
applicable) of such Permitted Refinancing Indebtedness does not exceed the      
principal amount (or accreted value, if applicable) of the Old Indebtedness     
plus any premium or penalty payable thereon and any reasonable expenses         
incurred in connection therewith; (ii) such Permitted Refinancing Indebtedness  
has a final maturity date equal to or later than the final maturity date of,    
and has a Weighted Average Life to Maturity equal to or greater than the        
Weighted Average Life to Maturity of, the Old Indebtedness; (iii) if the Old    
Indebtedness is subordinated in right of payment to the Notes, such Permitted   
Refinancing Indebtedness is subordinated in right of payment to the Notes on    
terms at least as favorable to the Holders as those contained in the            
documentation governing the Old Indebtedness; (iv) such Permitted Refinancing   
Indebtedness is on terms that are no more restrictive, as a whole, than those   
governing such Old Indebtedness; and (v) such Permitted Refinancing             
Indebtedness is Incurred only by the Company or the Restricted Subsidiary that  
is the obligor on the Old Indebtedness.                                         

"Person" means any individual, corporation, limited liability company,      
partnership, joint venture, association, joint-stock company, trust,            
unincorporated organization or government or any agency or political            
subdivision thereof.                                                            

"Public Equity Offering" means an underwritten offering of Equity Interests 
(other than Disqualified Stock) of the Company for cash pursuant to an          
effective registration statement under the Securities Act.                      

"Purchase Money Indebtedness" of any Person means any Indebtedness of such  
Person to any seller or other Person incurred to finance the acquisition        
(including in the case of a Capitalized Lease Obligation, the lease) of any     
real or personal tangible property acquired after the Issue Date which, in the  
reasonable good faith judgment of the Board of Directors of the Company, is     
directly related to a Related Business of the Company and which is Incurred     
within 180 days of such acquisition and is secured only by the assets so        
financed.                                                                       

"Reference Period" with regard to any Person means the four full fiscal     
quarters for which financial statements are available at the time of            
determination (or such lesser period during which such Person has been in       
existence) ended immediately preceding any date upon which any such             
determination is to be made pursuant to the terms of the Notes or the           
Indenture.                                                                      

"Related Business" means the business conducted by the Company and its      
Restricted Subsidiaries as of the Issue Date and any and all businesses that    
in the good faith judgment of the Board of Directors of the Company are         
materially related businesses.                                                  

"Restricted Investment" means an Investment other than a Permitted          
Investment.                                                                     

"Restricted Subsidiary" means any direct or indirect Subsidiary of the      
Company that is not an Unrestricted Subsidiary.                                 

"Senior Credit Facility" means the credit agreement entered into on the     
Issue Date among the Company, the guarantors named therein, and NationsBank of  
Texas, N.A. as agent and lender, and the other lenders party thereto, or any    
refinancing or increases thereof made in accordance with the covenant           
described under the caption "--Certain Covenants -- Limitation on Incurrence    
of Indebtedness."                                                               

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"Senior Indebtedness" means, with respect to any Person, (i) all            
Indebtedness of such Person outstanding under the Senior Credit Facility and    
all Hedging Obligations with respect thereto, (ii) any other Indebtedness of    
such Person permitted to be issued under the Indenture, provided, however,      
that Senior Indebtedness shall not include any Indebtedness which by the terms  
of the instrument creating or evidencing the same is on parity with or is       
subordinated or junior in right of payment in any respect to any other          
Indebtedness of such Person or its Restricted Subsidiaries or Affiliates and    
(iii) all Obligations with respect to the foregoing. Notwithstanding anything   
to the contrary in the foregoing, Senior Indebtedness will not include (i) any  
liability for Federal, state, local, foreign or other taxes, (ii) any           
Indebtedness of any such Person to any of its Subsidiaries or other             
Affiliates, (iii) any accounts payable or trade liabilities arising in the      
ordinary course of business (including Guarantees thereof or instruments        
evidencing such liabilities), (iv) any Indebtedness that is incurred in         
violation of the Indenture, (v) Indebtedness of the Person to any shareholder   
of the Person, (vi) Indebtedness to, or guaranteed by the Person or any of its  
Subsidiaries for the benefit of, any director, officer or employee of the       
Person or any Subsidiary of the Person (including, without limitation, amounts  
owed for compensation), (vii) Capital Stock of such Person and Indebtedness     
represented by Disqualified Stock, (viii) Indebtedness which, when incurred     
and without respect to any election under Section 1111(b) of Title 11, United   
States Code, is without recourse to such Person and (ix) any Indebtedness or    
obligation which is subordinated in right of payment to any other Indebtedness  
or obligation of such Person. "Senior Indebtedness," when used with respect to  
a Subsidiary Guarantor, shall have a meaning substantially identical to that    
applied to the Indebtedness of the Person or its Subsidiaries.                  

"Shelter Transition Expenditures" means costs and expenses incurred by the  
Company and its Restricted Subsidiaries to facilitate the consolidation of the  
distribution and manufacturing businesses of the Company and the Restricted     
Subsidiaries with Shelter.                                                      

"Stated Maturity" means December 1, 2007.                                   

"Subordinated Indebtedness" means Indebtedness of the Company (or a         
Restricted Subsidiary) that is expressly subordinated in right of payment to    
the Notes (or a Subsidiary Guarantee, as appropriate).                          

"Subsidiary" means, with respect to any Person, (i) any corporation,        
association or other business entity of which more than 50% of the total        
voting power of shares of Capital Stock entitled (without regard to the         
occurrence of any contingency) to vote in the election of directors, managers   
or trustees thereof is at the time owned or controlled, directly or             
indirectly, by such Person or one or more of the other Subsidiaries of such     
Person (or a combination thereof) and (ii) any partnership (a) the sole         
general partner or the managing general partner of which is such Person or a    
Subsidiary of such Person or (b) the only general partner of which are such     
Person or of one or more Subsidiaries of such Person (or any combination        
thereof). Unless indicated to the contrary, "Subsidiary" refers to a direct or  
indirect Subsidiary of the Company.                                             

"Unrestricted Subsidiary" means any Subsidiary that is designated by the    
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a   
resolution of the Board of Directors of the Company, but only to the extent     
that such Subsidiary and each of the Subsidiaries of such Subsidiary (i) has    
no Indebtedness at the time of designation, and does not thereafter Incur any   
Indebtedness, other than Non-Recourse Debt, (ii) does not own any Equity        
Interests of, or own or hold any Lien on, any property of the Company or any    
Restricted Subsidiary of the Company (other than any Subsidiary of the          
Subsidiary to be so designated), (iii) is not party to any material agreement,  
contract, rearrangement or understanding with the Company or any of its         
Restricted Subsidiaries unless the terms of any such agreement, contract,       
arrangement or understanding are no less favorable to the Company or such       
Restricted Subsidiary than those that might be obtained at the time from        
Persons who are not Affiliates of the Company, (iv) is a Person with respect    
to which neither the Company nor any of its Restricted Subsidiaries has any     
direct or indirect obligation (a) to subscribe for additional Equity Interests  
or (b) to maintain or preserve such Person's financial condition or to cause    
such Person to achieve any specified levels of operating results, (v) has not   
guaranteed or otherwise directly or indirectly provided credit support for any  
Indebtedness of the Company or any of its Restricted Subsidiaries and (vi) has  
at least one director on its board                                              

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of directors that is not a director or executive officer of the Company or any  
of its Restricted Subsidiaries and has at least one executive officer that is   
not a director or executive officer of the Company or any of its Restricted     
Subsidiaries. Any such designation by the Board of Directors of the Company     
shall be evidenced to the Trustee by filing with the Trustee a certified copy   
of the resolution of the Board of Directors of the Company giving effect to     
such designation and an Officers' Certificate certifying that (i) such          
designation complied with the foregoing conditions, (ii) such designation was   
permitted by the covenant described under the caption "--Certain Covenants--    
Limitation on Restricted Payments," (iii) immediately after giving effect to    
such designation, the Company could Incur at least $1.00 of additional          
Indebtedness pursuant to the Debt Incurrence Ratio test set forth in the first  
paragraph of the covenant described under the caption "--Certain Covenants--    
Limitation on Incurrence of Indebtedness" and (iv) no Default or Event of       
Default would be in existence immediately following such designation. If, at    
any time, any Unrestricted Subsidiary would fail to meet the foregoing          
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an  
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness,     
Liens or agreements of such Subsidiary shall be deemed to be Incurred or        
created by a Restricted Subsidiary of the Company as of such date (and, if      
such Indebtedness, Liens or agreements are not permitted to be Incurred or      
created as of such date under the covenants of the Indenture, the Company       
shall be in default of such covenants). The Board of Directors of the Company   
may at any time designate any Unrestricted Subsidiary to be a Restricted        
Subsidiary, provided that such designation shall be deemed to be an Incurrence  
of Indebtedness and a creation of Liens and agreements by a Restricted          
Subsidiary of the Company of any outstanding Indebtedness, Liens or agreements  
of such Unrestricted Subsidiary and such designation shall only be permitted    
if (i) such Indebtedness, Liens and agreements are permitted under the          
covenants of the Indenture, and (ii) no Default or Event of Default would be    
in existence immediately following such designation.                            

"Voting Stock" means any class or classes of Capital Stock of any Person    
pursuant to which the holders thereof have the general voting power under       
ordinary circumstances to elect the board of directors (or Persons performing   
similar functions) of such Person.                                              

"Weighted Average Life to Maturity" means, when applied to any Indebtedness 
at any date, the number of years obtained by dividing (i) the sum of products   
obtained by multiplying (a) the amount of each then remaining installment,      
sinking fund, serial maturity or other required payments of principal,          
including payment at final maturity, in respect thereof, by (b) the number of   
years (calculated to the nearest one-twelfth) that will elapse between such     
date and the making of such payment, by (ii) the then outstanding principal     
amount of such Indebtedness.                                                    

"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of    
which are owned by the Company or one or more Wholly Owned Subsidiaries of the  
Company, other than directors' qualifying shares or an immaterial amount of     
shares to the extent required to be owned by other Persons pursuant to          
applicable law.                                                                 

BOOK-ENTRY; DELIVERY AND FORM                                                   

Except as set forth in the next paragraph, the Exchange Notes will initially
be issued in the form of one or more Global Notes (the "Global Notes"). The     
Global Notes will be deposited on the date of the closing of the Exchange       
Offer (the "Closing Date") with, or on behalf of, the Depositary and            
registered in the name of Cede & Co., as nominee for the Depositary (such       
nominee being referred to herein as the "Global Note Holder").                  

Exchange Notes that are issued as described below under "--Certificated     
Securities" will be issued in registered form (the "Certificated Securities").  
Upon the transfer of Certificated Securities, such Certificated Securities      
may, unless the Global Notes have previously been exchanged for Certificated    
Securities, be exchanged for an interest in a Global Note representing the      
principal amount of Exchange Notes being transferred.                           

The Depositary has advised the Company that the Depositary is a limited-    
purpose trust company which was created to hold securities for its              
participating organizations (collectively, the "Participants" or the            
"Depositary's                                                                   

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Participants") and to facilitate the clearance and settlement of transactions   
in such securities between Participants through electronic book-entry changes   
in accounts of its Participants. The Depositary's Participants include          
securities brokers and dealers (including the Initial Purchasers), banks and    
trust companies, clearing corporations and certain other organizations. Access  
to the Depositary's system is also available to other entities such as banks,   
brokers, dealers and trust companies (collectively, the "Indirect               
Participants" or the "Depositary's Indirect Participants") that clear through   
or maintain a custodial relationship with a Participant, either directly or     
indirectly. Persons who are not Participants may beneficially own securities    
held by or on behalf of the Depositary only through the Depositary's            
Participants or the Depositary's Indirect Participants.                         

The Company expects that pursuant to procedures established by the          
Depositary (i) upon deposit of the Global Notes, the Depositary will credit     
the accounts of Participants with portions of the principal amount of the       
Global Notes and (ii) ownership of the Notes evidenced by the Global Notes      
will be shown on, and the transfer of ownership thereof will be effected only   
through, records maintained by the Depositary (with respect to the interests    
of the Depositary's Participants), the Depositary's Participants and the        
Depositary's Indirect Participants. Prospective purchasers are advised that     
the laws of some states require that certain persons take physical delivery in  
definitive form of securities that they own. Consequently, the ability to       
transfer Exchange Notes evidenced by the Global Notes will be limited to such   
extent.                                                                         

So long as the Global Note Holder is the registered owner of any Exchange   
Notes, the Global Note Holder will be considered the sole owner or holder of    
such Exchange Notes outstanding under the Indenture. Beneficial owners of       
Exchange Notes evidenced by the Global Note will not be considered the owners   
or holders thereof under the Indenture for any purpose, including with respect  
to the giving of any directions, instructions or approvals to the Trustee       
thereunder. The ability of a person having a beneficial interest in Exchange    
Notes represented by a Global Note to pledge such interest to persons or        
entities that do not participate in the Depositary's system or to otherwise     
take actions in respect of such interest, may be affected by the lack of a      
physical certificate evidencing such interest.                                  

Neither the Company nor the Trustee will have any responsibility or         
liability for any aspect of the records relating to or payments made on         
account of Exchange Notes by the Depositary, or for maintaining, supervising    
or reviewing any records of the Depositary relating to such Exchange Notes.     

Payments in respect of the principal of, premium, if any, interest and      
Liquidated Damages, if any, on any Exchange Notes registered in the name of a   
Global Note Holder on the applicable record date will be payable by the         
Trustee to or at the direction of such Global Note Holder in its capacity as    
the registered holder under the Indenture. Under the terms of the Indenture,    
the Company and the Trustee may treat the persons in whose names the Exchange   
Notes, including the Global Notes, are registered as the owners thereof for     
the purpose of receiving such payments and for any and all other purposes       
whatsoever. Consequently, neither the Company nor the Trustee has or will have  
any responsibility or liability for the payment of such amounts to beneficial   
owners of Exchange Notes (including principal, premium, if any, interest and    
Liquidated Damages, if any).                                                    

The Company believes, however, that it is currently the policy of the       
Depositary to immediately credit the accounts of the relevant Participants      
with such payment, in amounts proportionate to their respective holdings in     
principal amount of beneficial interests in the relevant security as shown on   
the records of the Depositary. Payments by the Depositary's Participants and    
the Depositary's Indirect Participants to the beneficial owners of Exchange     
Notes will be governed by standing instructions and customary practice and      
will be the responsibility of the Depositary's Participants or the              
Depositary's Indirect Participants.                                             

CERTIFICATED SECURITIES                                                         

Subject to certain conditions, any person having a beneficial interest in a 
Global Note may, upon request to the Company or the Trustee, exchange such      
beneficial interest for Exchange Notes in the form of Definitive Notes (as      
defined in the Indenture). Upon any such issuance, the Trustee is required to   
register such Exchange Notes in the name of, and cause the same to be           
delivered to, such person or persons. In addition, if (i) the                   

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Company notifies the Trustee in writing that the Depositary is no longer        
willing or able to act as a depositary and the Company is unable to appoint a   
qualified successor within 90 days or (ii) the Company, at its option,          
notifies the Trustee in writing that it elects to cause the issuance of         
Exchange Notes in the form of Definitive Notes under the Indenture, then, upon  
surrender by the relevant Global Note Holder of its Global Note, Exchange       
Notes in such form will be issued to each person that the Depositary            
identifies as the beneficial owner of the related Exchange Notes.               

Neither the Company nor the Trustee shall be liable for any delay by the    
Depositary in identifying the beneficial owners of the related Exchange Notes   
and each such person may conclusively rely on, and shall be protected in        
relying on, instructions from the Depositary for all purposes (including with   
respect to the registration and delivery, and the respective principal          
amounts, of the Exchange Notes to be issued).                                   

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 

The following summary describes certain United States federal income tax    
considerations to holders of the Exchange Notes who are subject to U.S. net     
income tax with respect to the Exchange Notes ("U.S. persons") and who will     
hold the Exchange Notes as capital assets. There can be no assurance that the   
U.S. Internal Revenue Service (the "IRS") will take a similar view of the       
purchase, ownership or disposition of the Exchange Notes. This summary is       
based upon the Internal Revenue Code of 1986, as amended, and regulations,      
rulings and judicial decisions now in effect, all of which are subject to       
change. It does not include any discussion of the tax laws of any state, local  
or foreign governments or any estate or gift tax considerations that may be     
applicable to the Exchange Notes or holders thereof; nor does it discuss all    
aspects of U.S. federal income taxation that may be relevant to a particular    
investor under his particular circumstances or to investors subject to special  
treatment under the U.S. federal income tax laws (for example, dealers in       
securities or currencies, S corporations, life insurance companies, tax-exempt  
organizations, taxpayers subject to the alternative minimum tax and non-U.S.    
persons) and also does not discuss Exchange Notes held as a hedge against       
currency risks or as part of a straddle with other investments or as part of a  
"synthetic security" or other integrated investment (including a "conversion    
transaction") comprising an Exchange Note and one or more other investments,    
or situations in which the functional currency of the holders is not the U.S.   
dollar.                                                                         

Holders of Old Notes contemplating acceptance of the Exchange Offer should  
consult their tax advisors with respect to their particular circumstances and   
with respect to the effects of state, local or foreign tax laws to which they   
may be subject.                                                                 

EXCHANGE OF NOTES                                                               

The exchange of Old Notes for Exchange Notes should not be a taxable event  
to holders for United States federal income tax purposes. The exchange of Old   
Notes for the Exchange Notes pursuant to the Exchange Offer should not be       
treated as an "exchange" for United States federal income tax purposes,         
because the Exchange Notes should not be considered to differ materially in     
kind or extent from the Old Notes. Accordingly, the Exchange Notes should have  
the same issue price as the Old Notes, and a holder should have the same        
adjusted basis and holding period in the Exchange Notes as it had in the Old    
Notes immediately before the exchange.                                          

INTEREST ON EXCHANGE NOTES                                                      

A holder of an Exchange Note will be required to report as ordinary interest
income for U.S. federal income tax purposes interest earned on an Exchange      
Note in accordance with the holder's method of tax accounting.                  

DISPOSITION OF EXCHANGE NOTES                                                   

A holder's tax basis for an Exchange Note generally will be the holder's    
purchase price for the Old Note. Upon the sale, exchange, redemption,           
retirement or other disposition of an Exchange Note, a holder will recognize    
gain or loss equal to the difference (if any) between the amount realized and   
the holder's tax basis in the Exchange Note. Such gain or loss should be long-  
term capital gain or loss if the Exchange Note has been held for more than      
eighteen months, mid-term capital gain or loss if the Exchange Note has been    
held for more than one year but not more than eighteen months and otherwise     
should be short-term capital gain or loss (with certain exceptions to the       
characterization as capital gain if the Exchange Note was acquired at a market  
discount).                                                                      

BACKUP WITHHOLDING                                                              

A holder of an Exchange Note may be subject to backup withholding at the    
rate of 31% with respect to interest paid on the Exchange Note and proceeds     
from the sale, exchange, redemption or retirement of the Exchange Note, unless  
such holder (a) is a corporation or comes within certain other exempt           
categories and, when required, demonstrates that fact or (b) provides a         
correct taxpayer identification number, certifies as to no loss of exemption    
from backup withholding and otherwise complies with applicable requirements of  
the backup withholding rules. A holder of an Exchange Note who does not         
provide the Company with his correct taxpayer identification number may be      
subject to penalties imposed by the IRS.                                        

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A holder of an Exchange Note who is not a U.S. person will generally be     
exempt from backup withholding and information reporting requirements, but may  
be required to comply with certification and identification procedures in       
order to obtain an exemption from backup withholding and information            
reporting.                                                                      

Any amount paid as backup withholding will be creditable against the        
holder's U.S. federal income tax liability.                                     

PLAN OF DISTRIBUTION  

Each Participating Broker-Dealer that receives Exchange Notes for its own   
account in connection with the Exchange Offer must acknowledge that it will     
deliver a prospectus in connection with any resale of such Exchange Notes.      
This Prospectus, as it may be amended or supplemented from time to time, may    
be used by Participating Broker-Dealers during the period referred to below in  
connection with resales of Exchange Notes received in exchange for Old Notes    
where such Old Notes were acquired by such Participating Broker-Dealers for     
their own accounts as a result of market-making activities or other trading     
activities (other than a resale of an unsold allotment from the original sale   
of Old Notes). The Company has agreed that this Prospectus, as it may be        
amended or supplemented from time to time, may be used by a Participating       
Broker-Dealer in connection with resales of such Exchange Notes for a period    
ending one year after the Expiration Date (or such shorter period during which  
all such resales have occurred). However, a Participating Broker-Dealer who     
intends to use this Prospectus in connection with the resale of Exchange Notes  
received in exchange for Old Notes pursuant to the Exchange Offer must notify   
the Company, or cause the Company to be notified, on or prior to the            
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be   
given in the space provided for that purpose in the Letter of Transmittal or    
may be delivered to the Exchange Agent at one of the addresses set forth in     
the Letter of Transmittal. See "The Exchange Offer--Resales of Exchange         
Notes."                                                                         

The Company will not receive any proceeds from the issuance of the Exchange 
Notes offered hereby. Exchange Notes received by Participating Broker-Dealers   
for their own accounts in connection with the Exchange Offer may be sold from   
time to time in one or more transactions in the over-the-counter market, in     
negotiated transactions, through the writing of options on the Exchange Notes   
or a combination of such methods of resale, at market prices prevailing at the  
time of resale, at prices related to such prevailing market prices or at        
negotiated prices. Any such resale may be made directly to purchasers or to or  
through brokers or dealers who may receive compensation in the form of          
commissions or concessions from any such broker-dealer and/or the purchasers    
of any such Exchange Notes. Any Participating Broker-Dealer that resells        
Exchange Notes that were received by it for its own account in connection with  
the Exchange Offer and any broker or dealer that participates in a              
distribution of such Exchange Notes may be deemed to be an "underwriter"        
within the meaning of the Securities Act, and any profit on any such resale of  
Exchange Notes and any commissions or concessions received by any such persons  
may be deemed to be underwriting compensation under the Securities Act. The     
Letter of Transmittal states that by acknowledging that it will deliver and by  
delivering a prospectus, a Participating Broker-Dealer will not be deemed to    
admit that it is an "underwriter" within the meaning of the Securities Act.     

For a period ending 180 days from the date on which the Exchange Offer      
Registration Statement is declared effective, the Company will promptly send    
additional copies of this Prospectus and any amendment or supplement to this    
Prospectus to any Participating Broker-Dealer that requests such documents in   
the Letter of Transmittal.                                                      

LEGAL MATTERS 

The validity of the Notes and the Subsidiary Guarantees will be passed upon 
for the Company by Jackson Walker, L.L.P., Dallas, Texas. Richard S. Tucker, a  
partner in Jackson Walker L.L.P., is Secretary and a director of the Company.   

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EXPERTS 

The consolidated balance sheets as of December 31, 1996 and 1995, of Kevco, 
Inc. and the related consolidated statements of income, stockholders' equity    
and cash flows for each of the two years in the period ended December 31,       
1996, included in this Prospectus have been included herein in reliance on the  
report, which includes an explanatory paragraph regarding a change in           
accounting method, of Coopers & Lybrand L.L.P., independent accountants, given  
on the authority of that firm as experts in accounting and auditing.            

The statements of income, stockholders' equity and cash flows of Kevco, Inc.
for the year ended December 31, 1994, included in this Prospectus have been     
included herein in reliance on the report of Rylander, Clay & Opitz, L.L.P.,    
independent auditors, given on the authority of that firm as experts in         
accounting and auditing.                                                        

The consolidated financial statements of Shelter Components Corporation as  
of December 31, 1996 and 1995 and for the two years then ended included in      
this Prospectus have been so included in reliance on the report of Price        
Waterhouse LLP, independent accountants, given on the authority of said firm    
as experts in auditing and accounting.                                          

The consolidated statements of income, shareholders' equity and cash flows  
of Shelter Components Corporation and Subsidiaries for the year ended December  
31, 1994, included in this Prospectus have been included herein in reliance on  
the report of Coopers & Lybrand L.L.P., independent accountants, given on the   
authority of that firm as experts in accounting and auditing.                   

The consolidated balance sheets as of December 31, 1996 and 1995 of Bowen   
Supply, Inc. and Subsidiary and the related consolidated statements of income,  
stockholders' equity and cash flows for the years then ended, included in this  
Prospectus have been included herein in reliance on the report of Dougherty,    
McKinnon & Luby, independent auditors, given on the authority of that firm as   
experts in accounting and auditing.                                             

The balance sheets as of September 29, 1996 and October 1, 1995 of          
Consolidated Forest Products, L.L.C. and the related statements of income and   
retained earnings and cash flows for the year ended September 29, 1996 and the  
period December 1, 1994 to October 1, 1995, included in this Prospectus have    
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,     
independent accountants, given on the authority of that firm as experts in      
accounting and auditing.                                                        

The consolidated statements of income and cash flows of Service Supply      
Systems, Inc. and Subsidiary for the year ended December 31, 1994, included in  
this Prospectus have been included herein in reliance on the report of Rumsey   
& Huckaby, P.C., independent auditors, given on the authority of that firm as   
experts in accounting and auditing.                                             

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                          PAGE
                                                                          ----
                                                                              
KEVCO, INC.                                                                   
Report of Independent Accountants........................................  F-3
Independent Auditor's Report.............................................  F-4
Consolidated Financial Statements as of December 31, 1996 and 1995 and        
 for the three years in the period ended December 31, 1996                    
  Consolidated Balance Sheets............................................  F-5
  Consolidated Statements of Income......................................  F-6
  Consolidated Statements of Stockholders' Equity........................  F-7
  Consolidated Statements of Cash Flows..................................  F-8
  Notes to Consolidated Financial Statements............................. F-10
Consolidated Financial Statements as of September 30, 1997 and December       
 31, 1996 and for the nine month periods ended September 30, 1997 and         
 1996                                                                         
  Consolidated Balance Sheets (unaudited)................................ F-20
  Consolidated Statements of Income (unaudited).......................... F-21
  Consolidated Statements of Cash Flows (unaudited)...................... F-22
  Notes to Consolidated Financial Statements (unaudited)................. F-23
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES                               
Report of Independent Accountants........................................ F-28
Report of Independent Accountants........................................ F-29
Consolidated Financial Statements as of December 31, 1996 and 1995 and        
 for the three years in the period ended December 31, 1996                    
  Consolidated Balance Sheets............................................ F-30
  Consolidated Statements of Income...................................... F-31
  Consolidated Statements of Shareholders' Equity........................ F-32
  Consolidated Statements of Cash Flows.................................. F-33
  Notes to Consolidated Financial Statements............................. F-34
Consolidated Financial Statements as of September 30, 1997 and December       
 31, 1996 and for the nine month periods ended September 30, 1997 and         
 1996                                                                         
  Consolidated Balance Sheets (unaudited)................................ F-42
  Consolidated Statements of Income (Unaudited).......................... F-43
  Consolidated Statements of Cash Flows (Unaudited)...................... F-44
  Notes to Consolidated Financial Statements (Unaudited)................. F-45
BOWEN SUPPLY, INC., AND SUBSIDIARY                                            
Independent Auditor's Report............................................. F-47
Consolidated Financial Statements as of December 31, 1996 and 1995 and        
 for the two years in the period ended December 31, 1996                      
  Consolidated Balance Sheets............................................ F-48
  Consolidated Statements of Stockholders' Equity........................ F-49
  Consolidated Statements of Income...................................... F-50
  Consolidated Statements of Cash Flows.................................. F-51
  Notes to Consolidated Financial Statements............................. F-52

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                                                                [Download Table]
                                                                               
CONSOLIDATED FOREST PRODUCTS, L.L.C.                                           
Report of Independent Accountants........................................  F-58
Consolidated Financial Statements as of September 29, 1996 and October 1,      
 1995 and for the year ended September 29, 1996 and the period December        
 2, 1994 to October 1, 1995                                                    
  Balance Sheets.........................................................  F-59
  Statements of Income and Retained Earnings.............................  F-60
  Statements of Cash Flows...............................................  F-61
  Notes to Financial Statements..........................................  F-62
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY                                    
Independent Auditor's Report.............................................  F-68
Consolidated Financial Statements for the year ended December 31, 1994         
  Consolidated Statement of Income.......................................  F-69
  Consolidated Statement of Cash Flows...................................  F-70
  Notes to Consolidated Financial Statements.............................  F-71

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Stockholders and Board of Directors                                      
Kevco, Inc.                                                                     
Fort Worth, Texas                                                               

We have audited the accompanying consolidated balance sheets of Kevco, Inc. 
as of December 31, 1996 and 1995, and the related consolidated statements of    
income, stockholders' equity, and cash flows for each of the two years in the   
period ended December 31, 1996. 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 in accordance with generally accepted auditing      
standards. 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. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the consolidated financial position of Kevco, Inc.    
as of December 31, 1996 and 1995, and the consolidated results of their         
operations and their cash flows for each of the two years in the period ended   
December 31, 1996, in conformity with generally accepted accounting             
principles.                                                                     

As discussed in Note 13 to the consolidated financial statements, Kevco,    
Inc. retroactively changed its method of accounting for inventory from the      
last-in, first-out method to the first-in, first-out method and the             
consolidated financial statements for all years presented have been restated    
accordingly.                                                                    

We also audited the adjustments described in Note 13 that were applied to   
restate the 1994 financial statements. In our opinion, such adjustments are     
appropriate and have been properly applied.                                     

/s/ Coopers & Lybrand L.L.P.                                                    

Fort Worth, Texas                                                               
February 21, 1997, except for                                                   
Note 13 as to which the date                                                    
is June 30, 1997                                                                

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INDEPENDENT AUDITOR'S REPORT  

To the Stockholders and Board of Directors                                      
Kevco, Inc.                                                                     
Fort Worth, Texas                                                               

We have audited the accompanying statements of income, stockholders' equity 
and cash flows of Kevco, Inc. (an S-Corporation) for the year ended December    
31, 1994. 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 audit.                                                  

We conducted our audit in accordance with generally accepted auditing       
standards. 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. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audit provides a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the results of operations and cash flows of Kevco,    
Inc. for the year ended December 31, 1994, in conformity with generally         
accepted accounting principles.                                                 

/s/ Rylander, Clay & Opitz, L.L.P.                                              

Fort Worth, Texas                                                               
March 24, 1995                                                                  

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KEVCO, INC. 

CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                                DECEMBER 31,   
                                                               --------------- 
                                                                1996    1995   
                                                                               
                            ASSETS                                             
Current assets:                                                                
  Cash and cash equivalents................................... $ 2,078 $   977 
  Trade receivables (less allowance for doubtful accounts of                   
   $100 and $160 in 1996 and 1995, respectively)..............   9,458  14,769 
  Inventories.................................................  23,722  19,201 
  Prepaid expenses and other..................................     338     343 
                                                               ------- ------- 
    Total current assets......................................  35,596  35,290 
Property and equipment, net...................................  10,208   9,758 
Intangible assets, net........................................   9,495  10,162 
Other assets..................................................     440     459 
                                                               ------- ------- 
    Total assets.............................................. $55,739 $55,669 
                                                               ======= ======= 
             LIABILITIES AND STOCKHOLDERS' EQUITY                              
Current liabilities:                                                           
  Trade accounts payable...................................... $ 6,666 $11,258 
  Accrued liabilities.........................................   3,107   3,231 
  Income taxes payable........................................     762     --  
  Current portion of long-term debt...........................     367   1,057 
  Current deferred income taxes...............................     168     --  
                                                               ------- ------- 
    Total current liabilities.................................  11,070  15,546 
Long-term debt, less current portion..........................   9,464  30,206 
Deferred compensation obligation..............................     383     361 
Deferred income taxes.........................................     629     --  
                                                               ------- ------- 
    Total liabilities......................................... $21,546 $46,113 
                                                               ------- ------- 
Commitments and contingencies (Note 8)                                         
Stockholders' equity:                                                          
  Common stock, $.01 par value; 100,000 shares authorized;                     
   6,809 and 4,700 shares issued in 1996 and 1995,                             
   respectively...............................................      68      47 
  Additional paid-in capital..................................  32,854   3,034 
  Loan to stockholder.........................................     --   (3,437)
  Retained earnings...........................................   1,271  10,660 
  Treasury stock, 306 shares at cost..........................     --     (748)
                                                               ------- ------- 
    Total stockholders' equity................................ $34,193 $ 9,556 
                                                               ------- ------- 
    Total liabilities and stockholders' equity................ $55,739 $55,669 
                                                               ======= ======= 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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KEVCO, INC. 

CONSOLIDATED STATEMENTS OF INCOME 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                     YEAR ENDED DECEMBER 31,    
                                                    --------------------------- 
                                                      1996      1995     1994   
                                                                                
Net sales.......................................... $267,344  $182,519  $99,279 
Cost of sales......................................  226,653   155,641   83,356 
                                                    --------  --------  ------- 
  Gross profit.....................................   40,691    26,878   15,923 
Commission income..................................    5,497     2,610    1,066 
                                                    --------  --------  ------- 
                                                      46,188    29,488   16,989 
Selling, general and administrative expenses.......   29,723    20,889   11,941 
                                                    --------  --------  ------- 
  Operating income.................................   16,465     8,599    5,048 
Interest income....................................      151       355      346 
Interest expense...................................   (2,209)   (1,692)    (627)
Other income.......................................      --        --       800 
                                                    --------  --------  ------- 
  Income before income tax provision...............   14,407     7,262    5,567 
Income tax provision...............................    1,695        45       51 
                                                    --------  --------  ------- 
  Net income....................................... $ 12,712  $  7,217  $ 5,516 
                                                    ========  ========  ======= 
Pro forma information (unaudited) (Note 1):                                     
  Historical income before income taxes............ $ 14,407  $  7,262  $ 5,567 
  Income tax expense adjustments...................    5,475     2,832    2,171 
                                                    --------  --------  ------- 
  Pro forma net income............................. $  8,932  $  4,430  $ 3,396 
                                                    ========  ========  ======= 
  Pro forma earnings per share..................... $   1.61  $   0.90  $  0.69 
                                                    ========  ========  ======= 
  Weighted average shares outstanding..............    5,531     4,946    4,946 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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KEVCO, INC. 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                          TREASURY                                               
                         COMMON STOCK       STOCK      ADDITIONAL                                
                         -------------- -------------   PAID-IN     LOAN TO   RETAINED           
                         SHARES  AMOUNT SHARES AMOUNT   CAPITAL   STOCKHOLDER EARNINGS   TOTAL   
                                                                                                 
Balance at December 31,                                                                          
 1993................... 4,700    $47     306  $(748)   $ 2,837     $(4,937)  $  6,651  $  3,850 
  Net income............   --     --      --     --         --          --       5,516     5,516 
  Distribution to                                                                                
   stockholders.........   --     --      --     --         --          --      (4,022)   (4,022)
  Collections from                                                                               
   stockholder..........   --     --      --     --         --          750        --        750 
                         -----    ---    ----  -----    -------     -------   --------  -------- 
Balance at December 31,                                                                          
 1994................... 4,700     47     306   (748)     2,837      (4,187)     8,145     6,094 
  Net income............   --     --      --     --         --          --       7,217     7,217 
  Distribution to                                                                                
   stockholders.........   --     --      --     --         --          --      (4,702)   (4,702)
  Collections from                                                                               
   stockholder..........   --     --      --     --         --          750        --        750 
  Contributed capital...   --     --      --     --         197         --         --        197 
                         -----    ---    ----  -----    -------     -------   --------  -------- 
Balance at December 31,                                                                          
 1995................... 4,700     47     306   (748)     3,034      (3,437)    10,660     9,556 
  Net income............   --     --      --     --         --          --      12,712    12,712 
  Distribution to                                                                                
   stockholders.........   --     --      --     --         --          --     (14,407)  (14,407)
  Collections from                                                                               
   stockholder..........   --     --      --     --         --          375        --        375 
  Distribution of loan                                                                           
   to stockholders......   --     --      --     --         --        3,062     (3,062)      --  
  Contributed capital...   --     --      --     --          86         --         --         86 
  Retirement of treasury                                                                         
   stock................  (306)    (3)   (306)   748       (745)        --         --        --  
  Contribution of S                                                                              
   corporation retained                                                                          
   earnings with change                                                                          
   to C corporation                                                                              
   status...............   --     --      --     --       4,632         --      (4,632)      --  
  Issuance of stock..... 2,415     24     --     --      25,847         --         --     25,871 
                         -----    ---    ----  -----    -------     -------   --------  -------- 
Balance at December 31,                                                                          
 1996................... 6,809    $68     --   $ --     $32,854     $   --    $  1,271  $ 34,193 
                         =====    ===    ====  =====    =======     =======   ========  ======== 

The accompanying notes are an integral part of the consolidated financial 
statements. 

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KEVCO, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS)

                                                                [Download Table]

                                                    YEAR ENDED DECEMBER 31,    
                                                   --------------------------- 
                                                     1996      1995     1994   
                                                                               
Cash flows from operating activities:                                          
  Net income.....................................  $ 12,712  $  7,217  $ 5,516 
  Adjustments to reconcile net income to net cash                              
   provided by operating activities:                                           
    Depreciation and amortization................     1,792     1,041      399 
    Gain on sale of assets.......................       (10)      (16)     (11)
    Deferred compensation obligation.............        22        28       (7)
    Deferred income taxes........................       797       --       --  
Changes in assets and liabilities, net of effects                              
 from purchase of Service Supply Systems, Inc.:                                
  Trade receivables, net.........................     5,311    (2,014)    (835)
  Inventories....................................    (4,521)   (1,363)  (1,604)
  Prepaid expenses and other.....................         5        71       (9)
  Trade accounts payable.........................    (4,592)    3,650     (591)
  Accrued liabilties.............................      (124)     (166)     218 
  Income taxes payable...........................       762       --       --  
                                                   --------  --------  ------- 
    Net cash provided by operating activities....    12,154     8,448    3,076 
                                                   --------  --------  ------- 
Cash flows from investing activities:                                          
  Purchase of equipment..........................    (1,586)   (2,844)    (432)
  Proceeds from sale of assets...................        21       594       11 
  Decrease in other assets.......................        19       180      (47)
  Purchase of Service Supply Systems, Inc., net                                
   of cash acquired..............................       --    (17,449)     --  
  Loan origination fees..........................       --       (913)     --  
                                                   --------  --------  ------- 
    Net cash used by investing activities........    (1,546)  (20,432)    (468)
                                                   --------  --------  ------- 
Cash flows from financing activities:                                          
  Net proceeds from initial public offering......    25,871       --       --  
  (Payment) proceeds from line of credit.........    (6,500)   (4,587)   2,400 
  Payments of long-term debt.....................   (14,932)   (1,900)  (1,578)
  Proceeds from long-term debt...................       --     30,700      --  
  Payment of acquired debt.......................       --     (8,124)     --  
  Distributions paid.............................   (14,407)   (4,702)  (4,022)
  Capital contributions..........................        86       197      --  
  Collections on loan to stockholder.............       375       750      750 
                                                   --------  --------  ------- 
    Net cash (used) provided by financing                                      
     activities..................................    (9,507)   12,334   (2,450)
                                                   --------  --------  ------- 
Net increase in cash and cash equivalents........     1,101       350      158 
Beginning cash and cash equivalents..............       977       627      469 
                                                   --------  --------  ------- 
Ending cash and cash equivalents.................  $  2,078  $    977  $   627 
                                                   ========  ========  ======= 
Supplemental cash flow information:                                            
  Cash paid during the period for:                                             
    Interest.....................................  $  2,162  $  1,471  $   604 
                                                   ========  ========  ======= 
    Income taxes.................................  $    456  $     45  $    51 
                                                   ========  ========  ======= 

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KEVCO, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)  
(IN THOUSANDS)  

Supplemental schedule of noncash investing and financing activities:        

The Company distributed the loan to stockholder of $3,062 to the Company's  
stockholders effective June 30, 1996.                                           

During 1995, the Company purchased all of the capital stock of Service      
Supply Systems, Inc. for $17,700. In conjunction with the acquisition,          
liabilities were assumed as follows:                                            

                                                                [Download Table]
                                                                             
Fair value of assets acquired........................................ $32,400
Cash paid for the capital stock......................................  17,700
                                                                      -------
  Liabilities assumed................................................ $14,700
                                                                      =======

Of the $14,700 in liabilities assumed, $8,100 was immediately paid off with 
the proceeds from long-term debt.                                               

Noncompete obligations of $544 were incurred when the Company purchased     
Service Supply Systems, Inc. and entered into two noncompete agreements which   
are being amortized over the life of the agreements.                            

The accompanying notes are an integral part of the consolidated financial 
statements. 

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                  

DESCRIPTION OF OPERATIONS                                                     

Kevco, Inc. manufactures and distributes products and materials for use by  
the manufactured housing and recreational vehicle industries.                   

BASIS OF CONSOLIDATION                                                        

The accompanying consolidated financial statements include the accounts of  
Kevco, Inc. and its wholly-owned subsidiaries (the "Company"). All significant  
intercompany transactions and accounts have been eliminated.                    

CASH AND CASH EQUIVALENTS                                                     

For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, deposits with banks and all highly liquid investments with original    
maturities of three months or less. The carrying value of cash and cash         
equivalents approximates fair value as of December 31, 1996 and 1995.           

INVENTORIES                                                                   

Inventories are stated at the lower of cost or market. Inventories purchased
for resale and manufacturing inventories are valued using the first-in, first-  
out (FIFO) method.                                                              

PROPERTY AND EQUIPMENT                                                        

Property and equipment are carried at cost less accumulated depreciation.   
Additions to and major improvements of property and equipment are capitalized.  
Maintenance and repair costs are expensed as incurred. When assets are retired  
or otherwise disposed of, their costs and related accumulated depreciation are  
removed from the accounts and any resulting gains or losses are included in     
the operations for the period.                                                  

Depreciation is computed using the straight-line method over the estimated  
useful lives of the assets as follows:                                          

                                                                [Download Table]
                                                                         
Buildings..................................................      40 years
Furniture and equipment.................................... 5 to 10 years
Transportation equipment................................... 4 to 10 years
Leasehold improvements.....................................      10 years

INTANGIBLE ASSETS                                                             

Intangible assets are comprised of noncompete agreements, loan origination  
fees and goodwill. Noncompete agreements are amortized on a straight-line       
basis over the terms of the related agreements (24 to 30 months). Loan          
origination fees associated with the acquisition of the Company's term debt     
and revolving credit facility have been capitalized and are being amortized on  
a straight-line basis over five years. The excess of acquisition cost of        
acquired businesses over the fair value of net assets acquired ("goodwill") is  
amortized, using the straight-line method, over 40 years. The Company reviews   
goodwill to assess recoverability periodically. At each balance sheet date,     
management assesses whether there has been a permanent impairment in the value  
of goodwill by considering factors such as expected future operating income,    
current operating results, and other economic factors. Management believes no   
impairment has occurred.                                                        

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DEFERRED COMPENSATION OBLIGATION                                              

The Company has entered into deferred compensation agreements with certain  
employees, whereby payments will be made upon death or retirement for a ten     
year period and such liability has been recorded at the present value of the    
anticipated future payments.                                                    

REVENUE RECOGNITION                                                           

Revenue from product sales is recognized at the time of shipment or the time
of receipt in the case of direct shipments from vendors to customers.           
Commissions are recognized as earned.                                           

INCOME TAXES                                                                  

Income taxes are provided based on earnings reported for tax return purposes
in addition to a provision for deferred income taxes in accordance with SFAS    
No. 109, Accounting for Income Taxes. The provision for income taxes includes   
deferred taxes determined by the change in the deferred tax liability (or       
asset) which is computed based on the differences between the financial         
statement and income tax bases of assets and liabilities, all of which are      
measured by applying enacted tax laws and rates. Deferred tax expense is the    
result of changes in the deferred tax liability or asset.                       

INTEREST RATE HEDGE                                                           

The Company entered into an interest rate hedge agreement in conjunction    
with its primary credit facility to alter interest rate exposure on both the    
revolver and the term debt. Amounts expected to be paid or received on the      
interest rate hedge are recognized as adjustments to interest expense. Any      
gain or loss from the termination of this hedge agreement will be recognized    
at that time.                                                                   

CONCENTRATION OF CREDIT RISK                                                  

The Company's sales are primarily to the manufactured housing and           
recreational vehicle industries across a wide geographical area and generally   
require no advance payment from customers. The Company had sales to two         
customers representing approximately 16% and 14% of net sales in 1996.          

The Company estimates future credit losses based on continual evaluation of 
customers' financial condition, historical loss experience and current          
economic conditions. The estimated future credit losses are expensed through    
an allowance for doubtful accounts and actual credit losses are charged to the  
allowance when incurred.                                                        

USE OF ESTIMATES                                                              

The preparation of financial statements in conformity with generally        
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the dates of the financial   
statements and the reported amounts of revenues and expenses in the reporting   
periods. Actual results could differ from those estimates.                      

STOCK SPLIT                                                                   

On August 29, 1996, the Company effected a .47-for-1 reverse stock split of 
its common stock. All share and per share amounts included in the accompanying  
financial statements and notes have been restated to reflect the stock split.   

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

UNAUDITED PRO FORMA NET INCOME                                                

Pro forma net income represents the results of operations adjusted to       
reflect a provision for income tax on historical income before income taxes,    
which gives effect to the change in the Company's income tax status to a C      
corporation prior to the consummation of the Company's initial public           
offering. The difference between the pro forma income tax rates utilized and    
the federal statutory rate of 35% relates primarily to state income taxes (5%,  
less effect of federal tax benefit).                                            

UNAUDITED PRO FORMA EARNINGS PER SHARE                                        

Historical net income per common share is not presented because it is not   
indicative of the ongoing entity. Pro forma earnings per share have been        
computed by dividing pro forma net income by the weighted average number of     
shares of common stock outstanding during the period. Pro forma earnings per    
share data has been presented to reflect the effect of the assumed issuance of  
that number of shares of common stock that would generate sufficient cash to    
pay an S corporation distribution in an amount equal to previously taxed but    
undistributed earnings.                                                         

2. ACQUISITION:                                                                 

The Company purchased all of the capital stock of Service Supply Systems,   
Inc. ("Service Supply") on June 30, 1995 for approximately $17,700,000 and at   
that date merged Service Supply with and into the Company. The acquisition was  
accounted for as a purchase and, accordingly, the operating results of Service  
Supply have been included in the operating results of the Company since June    
30, 1995. The acquisition cost in excess of the fair value of net assets of     
Service Supply of $7,087,000 has been accounted for as goodwill and will be     
amortized over its useful life of 40 years.                                     

3. INVENTORIES:                                                                 

Inventories are comprised of the following (in thousands):                  

                                                                [Download Table]

                                                                 YEAR ENDED     
                                                                DECEMBER 31,    
                                                               ---------------- 
                                                                1996     1995   
                                                                                
   Raw materials.............................................. $ 4,385  $ 2,314 
   Work-in-process............................................     332      303 
   Finished goods.............................................   1,324      828 
   Goods held for resale......................................  17,681   15,756 
                                                               -------  ------- 
                                                               $23,722  $19,201 
                                                               =======  ======= 

4. PROPERTY AND EQUIPMENT:                                                      

  Property and equipment consists of the following (in thousands):              


                                                                 YEAR ENDED     
                                                                DECEMBER 31,    
                                                               ---------------- 
                                                                1996     1995   
                                                                                
   Land....................................................... $   242  $   242 
   Buildings..................................................   5,195    4,774 
   Furniture and equipment....................................   6,181    5,213 
   Transportation equipment...................................   3,277    3,232 
   Leasehold improvements.....................................     564      503 
                                                               -------  ------- 
                                                                15,459   13,964 
   Less accumulated depreciation..............................  (5,251)  (4,206)
                                                               -------  ------- 
     Property and equipment, net.............................. $10,208  $ 9,758 
                                                               =======  ======= 

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Property and equipment under capital leases consists of buildings of        
$2,231,000 and furniture and equipment of $640,000 for the years ended          
December 31, 1996 and 1995, and accumulated depreciation of $1,982,000 and      
$1,846,000 for the years ended December 31, 1996 and 1995, respectively.        

5. INTANGIBLE ASSETS:                                                           

Intangible assets consist of the following (in thousands):                  

                                                                [Download Table]

                                                              YEAR ENDED     
                                                             DECEMBER 31,    
                                                            ---------------- 
                                                             1996     1995   
                                                                             
Goodwill................................................... $ 9,113  $ 9,113 
Loan origination fees......................................     913      913 
Noncompete agreements......................................     544      544 
                                                            -------  ------- 
                                                             10,570   10,570 
Less accumulated amortization..............................  (1,075)    (408)
                                                            -------  ------- 
  Intangible assets, net................................... $ 9,495  $10,162 
                                                            =======  ======= 

6. LONG-TERM DEBT:                                                              

Long-term debt consists or the following (in thousands):                    

                                                                [Download Table]

                                                             YEAR ENDED    
                                                            DECEMBER 31,   
                                                           --------------- 
                                                            1996    1995   
                                                           (IN THOUSANDS)  
                                                                           
Revolving credit facility payable to a bank, due June 30,                  
 1998, with interest payable monthly. Interest is paid at                  
 the bank's prime rate or LIBOR rates based on pricing                     
 options elected by the Company plus a margin determined                   
 by operating statistics of the Company (8.25% and 7.93%                   
 at December 31, 1996 and 1995, respectively),                             
 $11,611 net of an outstanding letter of credit in the                     
 amount of $389, was available under the credit facility                   
 at December 31, 1996....................................  $8,000  $14,500 
Term debt payable to a bank with interest payable monthly                  
 and quarterly principal payments of $625 commencing on                    
 October 1, 1996 until maturity at June 30, 2001.                          
 Interest is paid at LIBOR rates based on pricing options                  
 selected by the Company plus a margin determined by                       
 operating statistics of the Company (7.54% at                             
 December 31, 1995)......................................     --    14,500 
Capital lease obligations to a related party,                              
 collateralized by equipment, maturing through 2007, with                  
 interest rates from 13.9% to 26.8%......................   1,548    1,681 
Obligations payable under noncompete and consulting                        
 agreements, due in 24 to 48 months with payments ranging                  
 from $3,000 to $10,833 per month, maturing through 1999,                  
 interest imputed at 8.50%...............................     283      582 
                                                           ------  ------- 
Totals...................................................   9,831   31,263 
Less current portion.....................................    (367)  (1,057)
                                                           ------  ------- 
                                                           $9,464  $30,206 
                                                           ======  ======= 

The term debt and revolving credit facility are collateralized by           
substantially all of the assets of the Company and its subsidiaries, including  
a pledge of all outstanding capital stock of such subsidiaries. The related     
credit agreement contains certain restrictions and conditions which include     
cash flow requirements, limitations on acquisitions of property and equipment,  
and restrictions on distributions to stockholders.                              

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The following are scheduled maturities of debt (in thousands):              

                                                                [Download Table]

YEAR ENDING                                                              
DECEMBER 31,                                                             
                                                                         
 1997............................................................. $  367
 1998.............................................................  8,131
 1999.............................................................    127
 2000.............................................................    114
 2001.............................................................    111
Thereafter........................................................    981
                                                                   ------
                                                                   $9,831
                                                                   ======

In addition, in order to reduce interest rate risk on the credit facility,  
the Company has entered into an interest rate hedge agreement in the notional   
amount of $15.0 million, whereby the Company will receive interest payments     
should LIBOR increase above 9.00% and, conversely, will make interest payments  
should LIBOR decrease below 5.25%, the effect of which limits the Company's     
interest expense within the range of 9.00% to 5.25% LIBOR on $15.0 million of   
debt. Management intends to hold the interest rate hedge until maturity on      
August 28, 1998. The Company has incurred no gain or loss related to this       
interest rate hedge for the year ended December 31, 1996. The fair value of     
the interest rate hedge agreement is not considered to be material.             

The fair value of long-term debt was $10.6 and $32.0 million as of December 
31, 1996 and 1995, respectively. The fair value of the Company's long-term      
debt was calculated by discounting future cash flows using an estimated fair    
market value interest rate.                                                     

In February 1997, the Company and its lender amended the credit agreement in
order to fund the acquisitions discussed in Note 13. The term debt was          
increased to $30.0 million and the revolving credit facility increased to       
$35.0 million, each maturing in 2001. The term debt will be payable $0 in       
1997; $2 million in 1998; $8 million in 1999; $10 million in 2000; and $10      
million in 2001. The interest rate structure, restrictions and conditions are   
similar to the credit agreement prior to amendment.                             

7. INCOME TAXES:                                                                

Prior to November 6, 1996, the Company was treated for federal and state    
income tax purposes as an S corporation under Subchapter S of the Internal      
Revenue Code. As a result, the Company's earnings for such period were taxed    
at the stockholder level. Effective November 6, 1996, the Company terminated    
its S corporation status and restructured to create an operating company with   
a subsidiary. From November 6, 1996, the Company's earnings have been taxed as  
a C corporation and provisions for income taxes have been reflected in the      
consolidated financial statements. The Company recorded a nonrecurring net      
deferred tax provision of approximately $353,000 associated with the            
recognition of a related deferred tax liability due to the termination of the   
Company's S corporation status.                                                 

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The provision for income taxes for the years ended December 31, 1996, 1995  
and 1994 consists of the following (in thousands):                              

                                                                [Download Table]

                                                                YEAR ENDED   
                                                               DECEMBER 31,  
                                                             ----------------
                                                              1996  1995 1994
                                                                             
Federal:                                                                     
  Current................................................... $  559 $--  $-- 
  Deferred..................................................    692  --   -- 
State:                                                                       
  Current...................................................    339   45   51
  Deferred..................................................    105  --   -- 
                                                             ------ ---- ----
                                                             $1,695 $ 45 $ 51
                                                             ====== ==== ====

Income taxes are provided for the tax effects of transactions reported in   
the financial statements and consist of taxes currently due plus deferred       
taxes related primarily to differences between the treatment of certain items   
for financial statement purposes and the treatment of those items for           
corporation tax purposes. The deferred tax assets and liabilities represent     
the future tax return consequences of those differences, which will either be   
taxable or deductible when the assets and liabilities are recovered or          
settled.                                                                        

Significant components of the Company's deferred tax assets and liabilities 
at December 31, 1996 were as follows (in thousands):                            

                                                                [Download Table]
                                                                            
Deferred tax assets:                                                        
  Accrued liabilities.............................................. $   214 
  Allowance for doubtful accounts..................................      40 
  Inventory capitalization.........................................     196 
  Deferred compensation............................................     153 
  Capital leases...................................................     264 
  Noncompete agreements............................................     127 
  Inventory reserve................................................     217 
                                                                    ------- 
    Total gross deferred tax assets................................   1,211 
                                                                    ------- 
Deferred tax liabilities:                                                   
  Depreciation.....................................................  (1,173)
  IRC Section 481 inventory adjustment.............................    (835)
                                                                    ------- 
    Total gross deferred tax liabilities...........................  (2,008)
                                                                    ------- 
      Net deferred tax liabilities................................. $  (797)
                                                                    ======= 
Current deferred income tax liability.............................. $  (168)
Noncurrent deferred income tax liability...........................    (629)
                                                                    ------- 
      Net deferred tax liabilities................................. $  (797)
                                                                    ======= 

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The differences between the consolidated provision for income taxes and     
income taxes computed using income before income taxes and the U.S. federal     
income tax rate for the years ended December 31, 1996, 1995 and 1994 are as     
follows (in thousands):                                                         

                                                                [Download Table]

                                                 YEAR ENDED DECEMBER 31,   
                                                 ------------------------- 
                                                  1996     1995     1994   
                                                                           
Amount computed using statutory rate (35%)...... $ 5,042  $ 2,542  $ 1,948 
Increase (decrease) in taxes resulting from:                               
  Recognition of deferred tax liability in                                 
   connection with S corporation termination....     353      --       --  
  Tax effect of change in method of valuing                                
   inventory....................................     388                   
  State income taxes............................     225       45       51 
  Tax effect of income not subject to federal                              
   tax due to corporation S status..............  (4,329)  (2,542)  (1,948)
  Other, net....................................      16      --       --  
                                                 -------  -------  ------- 
                                                 $ 1,695  $    45  $    51 
                                                 =======  =======  ======= 

8. COMMITMENTS AND CONTINGENCIES:                                               

LEASES                                                                        

The Company leases various equipment and buildings under capital and        
noncancelable operating leases with an initial term in excess of one year. As   
of December 31, 1996, future minimum rental payments required under these       
capital and operating leases are summarized as follows (in thousands):          

                                                                [Download Table]

                                                         CAPITAL  OPERATING
                                                         LEASES    LEASES  
                                                                           
1997.................................................... $   432   $2,175  
1998....................................................     363    1,926  
1999....................................................     340    1,375  
2000....................................................     340      995  
2001....................................................     304      759  
Thereafter..............................................   1,573      690  
                                                         -------   ------  
Total...................................................   3,352   $7,920  
                                                                   ======  
Less amount representing interest.......................  (1,804)          
                                                         -------           
Present value of minimum lease payments................. $ 1,548           
                                                         =======           

Rental expense for operating leases was $3,839,000, $2,640,000 and          
$1,574,000 for the years ended December 31, 1996, 1995 and 1994, respectively.  

EMPLOYMENT AGREEMENTS                                                         

The Company has entered into an employment agreement with its majority      
stockholder for a five-year term renewable annually and has entered into a      
consulting agreement with a former stockholder through October 1998.            

LITIGATION                                                                    

There are claims and pending actions incident to the business operations of 
the Company. Management does not expect resolution of these matters to have a   
material adverse effect on the Company's financial position or future results   
of operations or cash flows.                                                    

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

9. RETIREMENT PLAN:                                                             

The Company has a defined contribution retirement plan which covers         
substantially all full-time employees and is qualified under Section 401(k) of  
the Internal Revenue Code. Under the plan, employees may voluntarily            
contribute a percentage of their compensation to the plan and the Company may   
make discretionary contributions. The Company's contributions to the plan for   
the years ended December 31, 1996, 1995 and 1994 were $100,000, $225,000 and    
$150,000, respectively.                                                         

10. RELATED PARTY TRANSACTIONS:                                                 

The Company leases certain buildings and data processing equipment under    
capital leases from partnerships partially owned by the majority stockholder    
of the Company. Two of the leased warehouses were financed through economic     
development and industrial revenue bonds; one series of which was issued by     
Newton, Kansas in the original principal amount of $575,000, and with respect   
to which, the Company is the sub-lessee of the premises and a co-guarantor,     
and one series of which was issued by Elkhart, Indiana in the original          
principal amount of $400,000, and with respect to which, the Company is the     
lessee of the premises and has agreed to perform the obligations of the lessor  
contained in the mortgage. Lease payments for the facilities and equipment      
were approximately $672,000 in each of the years ended 1996, 1995 and 1994.     

The Company loaned its majority stockholder $5.0 million in 1993, payable in
monthly principal installments of $62,500 plus interest at 9% at December 31,   
1995, due November 1997. The Company distributed the loan to stockholder to     
the Company's stockholders effective June 30, 1996.                             

11. OTHER INCOME:                                                               

The Company received $800,000 in 1994 from a disability insurance policy on 
a former stockholder who was determined disabled and used the proceeds to       
retire a note payable to the former stockholder.                                

12. STOCK-BASED COMPENSATION PLANS:                                             

The Company sponsors the Kevco, Inc. 1995 Stock Option Plan and the Kevco,  
Inc. 1996 Stock Option Plan (the "Plans"), which are stock-based incentive      
compensation plans. The Company applies APB Opinion 25 and related standards    
in accounting for the Plans. In 1995, the FASB issued FASB Statement No. 123,   
Accounting for Stock-Based Compensation ("SFAS 123"). Adoption of the cost      
recognition provisions of SFAS 123 is optional and the Company has decided not  
to elect these provisions of SFAS 123. However, disclosures as if the Company   
adopted the cost recognition provisions of SFAS 123 in 1995 are required by     
SFAS 123 and are presented below.                                               

Under the Plans, the Company is authorized to issue up to 702,735 shares of 
common stock pursuant to "Awards" granted in the form of incentive stock        
options (intended to qualify under Section 422 of the Internal Revenue Code of  
1986, as amended) and nonqualified stock options. Awards may be granted to      
selected employees and directors of the Company. During 1995 and 1996, the      
Company granted only nonqualified stock options under the Plans.                

NONQUALIFIED STOCK OPTIONS                                                    

The Plans provide that the exercise price of any stock option will be       
determined by the Board of Directors on the date of grant. The stock options    
granted in 1995 or 1996 vest over periods of 10 years and 7 years,              
respectively. All options vested in November 1996, at the time of the initial   
public offering. In accordance with APB 25, the Company has not recognized any  
compensation cost for these stock options granted during 1995 and 1996.         

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

A summary of the status of the Company's stock options as of December 31,   
1995 and 1996, and the changes during the year ended on those dates is          
presented below:                                                                

                                                                [Download Table]

                                              NONQUALIFIED STOCK OPTIONS       
                                        ---------------------------------------
                                               1996                1995        
                                        ------------------- -------------------
                                        NUMBER OF  WEIGHTED NUMBER OF  WEIGHTED
                                        SHARES OF  AVERAGE  SHARES OF  AVERAGE 
                                        UNDERLYING EXERCISE UNDERLYING EXERCISE
                                         OPTIONS    PRICES   OPTIONS    PRICES 
                                                                               
Outstanding at beginning of year......    47,854    $ 5.64       --       N/A  
Granted...............................   393,450    $11.17    47,854    $5.64  
Exercised.............................       --        N/A       --       N/A  
Forfeited.............................    26,108    $10.42       --       N/A  
Expired...............................       --        N/A       --       N/A  
Outstanding at end of year............   415,196    $10.58    47,854    $5.64  
Exercisable at end of year............   415,196    $10.58       --       N/A  
Weighted-average fair value of options                                         
 granted during the year..............   $  1.84       --     $ 1.39      --   

The fair value of each stock option granted is estimated on the date of     
grant using the minimum value method of option pricing with the following       
weighted-average assumptions for grants in 1995 and 1996, respectively:         
dividend yield of zero percent for both years; risk-free interest rates are     
different for each grant and range from 5.77% to 6.19%; and the expected lives  
of 5 and 3.5 years, respectively, for the 1995 and 1996 options. In             
determining the "minimum value," SFAS 123 does not require the volatility of    
the Company's common stock underlying the options to be calculated or           
considered because the Company was not publicly-traded when the options were    
granted.                                                                        

The following table summarizes information about stock options outstanding  
at December 31, 1996:                                                           

                                                                [Download Table]

            OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE    
------------------------------------------------  ------------------------
               NUMBER                                NUMBER               
            OUTSTANDING    WEIGHTED    WEIGHTED   EXERCISABLE    WEIGHTED 
                 AT         AVERAGE    AVERAGE         AT        AVERAGE  
EXERCISE    DECEMBER 31,   REMAINING   EXERCISE   DECEMBER 31,   EXERCISE 
 PRICES         1996         LIFE       PRICE         1996        PRICE   
--------    ------------   ---------   --------   ------------   -------- 
                                                                          
$ 5.64         44,306        7.85       $ 5.64       44,306       $ 5.64  
 11.17        370,890        5.66        11.17      370,890        11.17  
              -------        ----       ------      -------       ------  
              415,196        5.90       $10.58      415,196       $10.58  
              =======        ====       ======      =======       ======  

NET INCOME AND NET INCOME PER COMMON SHARE                                    

Had the compensation cost for the Company's stock-based compensation plans  
been determined consistent with SFAS 123, the Company's net income and net      
income per common share for 1995 and 1996 would approximate the pro forma       
amounts below (in thousands):                                                   

                                                                [Download Table]

                                        SFAS 123 PRO              SFAS 123 PRO
                           AS REPORTED     FORMA     AS REPORTED     FORMA    
                           DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
                               1996         1996         1995         1995    
                                                                              
SFAS 123 charge...........       --        $  711          --        $   34   
Pro forma net income......    $8,932       $8,491       $4,430       $4,409   
Pro forma net income per                                                      
 common share.............    $ 1.61       $ 1.54       $  .90       $ 0.89   

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The effects of applying SFAS 123 in this pro forma disclosure are not       
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,  
and the Company anticipates making awards in the future under its stock-based   
compensation plans.                                                             

13. CHANGE IN ACCOUNTING PRINCIPLE:                                             

During the second quarter of 1997, the Company adopted the FIFO method to   
value inventories for which the LIFO method has previously been utilized for    
determining cost. The FIFO method will better measure the current value of      
such inventories, provide a more appropriate matching of revenues and           
expenses, and conform all inventories of the Company to the same accounting     
method. Additionally, the change will enhance the comparability of the          
Company's financial statements by changing to the predominant method utilized   
in its industry.                                                                

As required by generally accepted accounting principles, the Company applied
this change retroactively, which resulted in a decrease in net income of        
approximately $276,000 for the year ended December 31, 1996 and an increase in  
net income of approximately $236,000 and $269,000 for the years ended December  
31, 1995 and 1994, respectively. The cumulative effect of this restatement on   
retained earnings at January 1, 1994 was an increase of $313,000. Pro forma     
net income (see Note 1) increased approximately $69,000, $144,000 and $164,000  
for the years ended December 31, 1996, 1995 and 1994, respectively and pro      
forma earnings per share (see Note 1) increased by $0.01, $0.03, and $0.04 for  
the years ended December 31, 1996, 1995, and 1994, respectively, as a result    
of applying the change retroactively.                                           

14. SUBSEQUENT EVENTS:                                                          

In February 1997, the Company acquired certain assets and liabilities of    
Consolidated Forest Products, L.L.C. for approximately $13,870,000.             
Consolidated Forest Products, L.L.C. is a privately held manufacturer of wood   
products based in Haleyville, Alabama.                                          

In February 1997, the Company acquired the common stock of Bowen Supply,    
Inc. for approximately $19,500,000. Bowen Supply, Inc. is a privately held      
distributor of building products to the manufactured housing and recreational   
vehicle industries based in Americus, Georgia.                                  

The Company will account for these transactions under the purchase method.  

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KEVCO, INC. 
CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                     SEPTEMBER 30, DECEMBER 31,
                                                         1997          1996    
                                                     ------------- ------------
                                                            (UNAUDITED)        
                                                                               
                       ASSETS                                                  
Current assets                                                                 
 Cash and cash equivalents..........................   $     77      $ 2,078   
 Trade accounts receivable, less allowance for                                 
  doubtful accounts of $132                                                    
  and $100 in 1997 and 1996, respectively...........     25,190        9,458   
 Inventories........................................     34,988       23,722   
 Prepaid expenses and other current assets..........      1,447          338   
                                                       --------      -------   
  Total current assets..............................     61,702       35,596   
Property and equipment, net.........................     18,563       10,208   
Intangible assets, net..............................     33,600        9,495   
Other assets........................................        713          440   
                                                       --------      -------   
  Total assets......................................   $114,578      $55,739   
                                                       ========      =======   
        LIABILITIES AND STOCKHOLDERS' EQUITY                                   
Current liabilities                                                            
 Trade accounts payable.............................   $ 22,245      $ 6,666   
 Accrued liabilities................................      4,050        3,107   
 Income taxes payable...............................        118          762   
 Current portion of long-term debt..................        112          367   
 Current deferred income taxes......................         50          168   
                                                       --------      -------   
  Total current liabilities.........................     26,575       11,070   
Long-term debt, less current portion................     45,737        9,464   
Deferred income taxes...............................        629          629   
Deferred compensation obligation....................      1,240          383   
                                                       --------      -------   
  Total liabilities.................................     74,181       21,546   
                                                       --------      -------   
Stockholders' equity:                                                          
 Common stock, $.01 par value; 100,000 shares autho-                           
  rized; 6,825 shares issued and outstanding........         68           68   
 Additional paid-in capital.........................     32,974       32,854   
 Retained earnings..................................      7,355        1,271   
                                                       --------      -------   
  Total stockholders' equity........................     40,397       34,193   
                                                       --------      -------   
  Total liabilities and stockholders' equity........   $114,578      $55,739   
                                                       ========      =======   

See accompanying notes to consolidated financial statements.

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KEVCO, INC. 
CONSOLIDATED STATEMENTS OF INCOME 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                       NINE MONTHS ENDED
                                                         SEPTEMBER 30,  
                                                       -----------------
                                                         1997     1996  
                                                       -------- --------
                                                          (UNAUDITED)   
                                                                        
Net sales............................................. $271,957 $205,048
Cost of sales.........................................  235,138  174,055
                                                       -------- --------
 Gross profit.........................................   36,819   30,993
Commission income.....................................    4,413    4,100
                                                       -------- --------
                                                         41,232   35,093
Selling, general and administrative expenses..........   28,738   22,590
                                                       -------- --------
 Operating income.....................................   12,494   12,503
Interest expense......................................    2,354    1,626
                                                       -------- --------
 Income before income taxes...........................   10,140   10,877
Income taxes..........................................    4,056       30
                                                       -------- --------
 Net income........................................... $  6,084 $ 10,847
                                                       ======== ========
Earnings per share.................................... $   0.88         
                                                       ========         
Weighted average shares outstanding...................    6,916         
                                                       ========         
Pro forma information (Note 5)                                          
 Historical income before income taxes................          $ 10,877
 Income tax expense adjustments.......................             4,133
                                                                --------
 Pro forma net income.................................          $  6,744
                                                                ========
 Pro forma earnings per share.........................          $   1.32
                                                                ========
 Weighted average shares outstanding..................             5,098
                                                                ========

See accompanying notes to consolidated financial statements.

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KEVCO, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS)

                                                                [Download Table]

                                                              NINE MONTHS ENDED
                                                                SEPTEMBER 30   
                                                              -----------------
                                                               1997      1996  
                                                              -------  --------
                                                                (UNAUDITED)    
                                                                               
Cash flows form operating activities:                                          
 Net income.................................................. $ 6,084  $10,847 
 Adjustments to reconcile net income to net cash provided by                   
  operating activities:                                                        
  Depreciation and amortization..............................   2,172    1,318 
  Gain on sale of assets.....................................      (3)      (4)
  Deferred compensation obligation...........................     375       24 
  Changes in assets and liabilities..........................  (2,390)    (474)
                                                              -------  ------- 
  Net cash provided by operating activities..................   6,238   11,711 
Cash flows from investing activities:                                          
 Purchase of Consolidated.................................... (13,420)     --  
 Purchase of Bowen........................................... (19,115)     --  
 Purchase of equipment.......................................  (2,000)  (1,086)
 Proceeds from sale of assets................................     806        4 
 Increase in other assets....................................    (509)    (314)
                                                              -------  ------- 
  Net cash used by investing activities...................... (34,238)  (1,396)
Cash flows from financing activities:                                          
 Proceeds (payments) on line of credit, net..................   4,600   (5,500)
 Proceeds from long-term debt................................  30,000      --  
 Distributions paid..........................................     --    (5,915)
 Payments of long-term debt..................................  (8,721)     (99)
 Capital contributions.......................................     --        86 
 Collections on loan to stockholder..........................     --       375 
 Stock options exercised.....................................     120      --  
                                                              -------  ------- 
  Net cash provided (used) by financing activities...........  25,999  (11,053)
                                                              -------  ------- 
Net decrease in cash and cash equivalents....................  (2,001)    (738)
Beginning cash and cash equivalents..........................   2,078      977 
                                                              -------  ------- 
Ending cash and cash equivalents............................. $    77  $   239 
                                                              =======  ======= 

See accompanying notes to consolidated financial statements.

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
(UNAUDITED) 

1.ACCOUNTING POLICIES AND BASIS OF PRESENTATION                                 

The Annual Report on Form 10-K for the year ended December 31, 1996, for    
Kevco, Inc. includes a summary of significant accounting policies and should    
be read in conjunction with this Form 10-Q. Prior to the effective date of the  
initial public offering (see Note 3), Kevco, Inc. restructured and created an   
operating company subsidiary with a subsidiary. As a result, the financial      
statements are referred to as consolidated financial statements. The            
accompanying consolidated financial statements of Kevco, Inc. and its wholly-   
owned subsidiaries (the "Company") have been prepared pursuant to the rules     
and regulations of the Securities and Exchange Commission ("SEC").              
Accordingly, they do not include all of the information and footnotes required  
by generally accepted accounting principles ("GAAP") for complete financial     
statements. All significant intercompany transactions and accounts have been    
eliminated.                                                                     

In the opinion of management, the consolidated financial statements contain 
all adjustments, consisting only of normal recurring adjustments, considered    
necessary for a fair statement of the balance sheets as of September 30, 1997   
and December 31, 1996, the statements of income for the nine-month period       
ended September 30, 1997 and 1996 and the statements of cash flows for the      
nine-month period ended September 30, 1997 and 1996. The results of operations  
for the nine-month period ended September 30, 1997 are not necessarily          
indicative of the results of operations for the entire fiscal year ending       
December 31, 1997.                                                              

On August 29, 1996, the Company effected a 0.47-for-1 reverse stock split of
its common stock and retired its treasury shares. All share and per share       
amounts included in the accompanying financial statements and footnotes have    
been restated to reflect the reverse stock split.                               

2.ACQUISITIONS                                                                  

On February 27, 1997, the Company acquired substantially all of the assets, 
and assumed certain liabilities, of Consolidated Forest Products, L.L.C.        
("Consolidated") (the "Consolidated Acquisition") for approximately $14.0       
million. The acquisition was accounted for as a purchase and, accordingly, the  
operating results of Consolidated have been included in the operating results   
of the Company since February 27, 1997. The acquisition cost in excess of the   
fair value of net assets of Consolidated of approximately $9.6 million has      
been accounted for as goodwill and will be amortized over its estimated useful  
life of 40 years.                                                               

On February 28, 1997, the Company purchased all of the capital stock of     
Bowen Supply, Inc. ("Bowen") (the "Bowen Acquisition") for approximately $19.5  
million. The acquisition was accounted for as a purchase and, accordingly, the  
operating results of Bowen have been included in the operating results of the   
Company since February 28, 1997. The acquisition cost in excess of the fair     
value of net assets of Bowen of approximately $14.9 million has been accounted  
for as goodwill and will be amortized over its estimated useful life of 40      
years.                                                                          

The following pro forma financial information combines the historical       
results of the Company as if the Consolidated Acquisition, the Bowen            
Acquisition and the initial public offering had occurred as of the beginning    
of each period presented:                                                       

                                                                [Download Table]


                                                            NINE MONTHS   
                                                               ENDED      
                                                           SEPTEMBER 30,  
                                                         -----------------
                                                           1997     1996  
                                                         -------- --------
                                                            (DOLLARS IN   
                                                            THOUSANDS)    
                                                                          
Net sales............................................... $294,253 $305,379
Net income.............................................. $  6,467 $ 10,001
Earnings per share...................................... $   0.93 $   1.45

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(UNAUDITED) 

3.INITIAL PUBLIC OFFERING                                                       

In November 1996, the Company completed an initial public offering of       
2,415,000 shares of the Company's common stock (including an over-allotment     
option of 315,000 shares exercised in December 1996) for $12.00 per share,      
netting proceeds to the Company after underwriting discounts and expenses of    
approximately $26.0 million. Proceeds to the Company were used to repay all of  
the outstanding balance of the Company's $20.0 million revolving credit         
facility of $9.0 million and a permanent reduction of all of the outstanding    
balance of the Company's term loan of $13.9 million. Proceeds were also used    
to make an S corporation distribution of approximately $3.7 million             
representing previously taxed but undistributed earnings through June 30, 1996  
(see Note 7 and 8).                                                             

4.INVENTORIES                                                                   

Inventories are comprised of the following (in thousands):                  

                                                                [Download Table]


                                                      SEPTEMBER 30, DECEMBER 31,
                                                          1997          1996    
                                                      ------------- ------------
                                                                                
Raw materials........................................    $ 7,922      $ 4,385   
Work-in process......................................        636          332   
Finished goods.......................................      1,938        1,324   
Goods held for resale................................     24,492       17,681   
                                                         -------      -------   
                                                         $34,988      $23,722   
                                                         =======      =======   

During the second quarter of 1997, the Company adopted the FIFO method to   
value inventories for which the LIFO method had previously been utilized for    
determining cost. The FIFO method will better measure the current value of      
such inventories, provide a more appropriate matching of revenues and           
expenses, and conform all inventories of the Company to the same accounting     
method. Additionally, the change will enhance the comparability of the          
Company's financial statements by changing to the predominant method utilized   
in its industry.                                                                

The Company applied this change retroactively, which resulted in an increase
in retained earnings of approximately $542,000 and $818,000 at January 1, 1997  
and 1996, respectively. There was no material impact on net income or earnings  
per share for the three and nine months ended September 30, 1996.               

5.PRO FORMA INFORMATION                                                         

Pro forma net income for 1996 represents the results of operations adjusted 
to reflect a provision for income taxes on historical income before income      
taxes, which gives effect to the change in the Company's income tax status to   
a C corporation concurrently with the consummation of the Company's initial     
public offering. The difference between the pro forma income tax rates          
utilized and the federal statutory rate of 34% relates primarily to state       
income taxes.                                                                   

Pro forma earnings per share for 1996 has been computed by dividing pro     
forma net income by the weighted average number of shares of common stock       
outstanding during the period.                                                  

In accordance with a regulation of the Securities and Exchange Commission,  
pro forma earnings per share data for 1996 have been presented to reflect the   
effect of the assumed issuance of that number of shares of common stock that    
would generate sufficient cash to pay an S corporation distribution in an       
amount equal to previously taxed but undistributed earnings.                    

Historical earnings per share for 1996 is not presented because it is not   
indicative of the ongoing entity.                                               

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(UNAUDITED) 

6.INCOME TAXES                                                                  

Prior to November 6, 1996, the Company's stockholders had elected to be     
taxed under the provisions of Subchapter S of the Internal Revenue Code. As a   
result, there was no provision for federal income taxes in the historical       
financial statements for the nine-month period ended September 30, 1996, as     
such taxes were the responsibility of the individual stockholders. Effective    
November 6, 1996, the Company converted to a C corporation and became subject   
to federal income taxes on an ongoing basis.                                    

7.STOCKHOLDERS' EQUITY                                                          

In conjunction with its initial public offering, the Company terminated its 
S corporation status and distributed to its stockholders approximately $3.7     
million, representing previously taxed but undistributed earnings at June 30,   
1996. On December 31, 1996, the Company repaid notes in the approximate         
aggregate amount of $5.2 million that were issued immediately prior to the      
consummation of the offering, which notes were the final S corporation          
distribution and represented earnings from July 1, 1996 to the consummation of  
the offering.                                                                   

8.CREDIT AGREEMENT                                                              

In February 1997, the Company and its lender amended the credit agreement in
order to fund the Consolidated Acquisition and the Bowen Acquisition (see Note  
2). The term debt was increased to $30.0 million and the revolving credit       
facility was increased to $35.0 million, each maturing in 2001. The Company's   
term debt and revolver are collateralized by inventory, accounts receivable     
and property and equipment and the common stock of the Company's subsidiaries   
(see Note 1). The related credit agreement contains certain restrictions and    
conditions that include cash flow and various financial ratio requirements,     
and limitations on incurrence on debt or liens, acquisitions of property and    
equipment, distributions to shareholders and certain events constituting a      
Change of Control (as defined in such agreement).                               

9.RECENT ACCOUNTING PRONOUNCEMENTS                                              

In February 1997, the Financial Accounting Standards Board ("FASB") issued  
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS  
128"). SFAS 128 simplifies the standards for computing earnings per share       
("EPS") previously found in APB Opinion No. 15, Earnings Per Share              
("Opinion 15"), and makes them comparable to international EPS standards. SFAS  
128 replaces the presentation of primary EPS with a presentation of basic EPS.  
Basic EPS excludes dilution and is computed by dividing income available to     
common stockholders by the weighted-average number of common shares             
outstanding for the period. Diluted EPS reflects the potential dilution that    
could occur if securities or other contracts to issue common stock were         
exercised or converted into common stock or resulted in the issuance of common  
stock that then shared in the earnings of the entity. Diluted EPS is computed   
similarly to fully diluted EPS pursuant to Opinion 15. SFAS 128 also requires   
dual presentation of basic and diluted EPS on the face of the income statement  
for entities with complex capital structures and a reconciliation of the        
numerator and denominator of the basic EPS computation to the numerator and     
denominator of the diluted EPS computation. SFAS 128 is effective for           
financial statements issued for periods ending after December 15, 1997,         
including interim periods; earlier application is not permitted. SFAS 128       
requires restatement of all prior-period EPS data presented. The Company is     
currently evaluating SFAS 128. However, management does not believe that it     
will have a material impact on the consolidated financial statements of the     
Company.                                                                        

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(UNAUDITED) 

In February 1997, The FASB issued Statement of Financial Accounting         
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS   
No. 129"). SFAS No. 129 establishes standards for disclosing information about  
an entity's capital structure and applies to all entities. This statement       
continues the previous requirements to disclose certain information about an    
entity's capital structure found in APB Opinions No. 10, Omnibus Opinion -      
1966, and No. 15, Earnings per Share, and FASB Statement No. 47, Disclosure of  
Long-Term Obligations, for entities that were subject to the requirements of    
those standards. This statement supersedes specific disclosure requirements of  
Opinions 10 and 15 and Statement 47 and consolidates them in this statement     
for ease of retrieval and for greater visibility to non-public entities. This   
statement is effective for financial statements for periods ending after        
December 15, 1997. It is not expected that the Company will experience any      
material revision in its disclosures when SFAS No. 129 is adopted.              

In June 1997, the FASB issued Statement of Financial Accounting Standards   
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130        
establishes standards for reporting and display of comprehensive income and     
its components (revenues, expenses, gains and losses) in a full set of general  
purpose financial statements. SFAS No. 130 requires that all items that are     
required to be recognized under accounting standards as components of           
comprehensive income be reported in a financial statement that is displayed     
with the same prominence as other financial statements. It does not require a   
specific format for that financial statement but requires that an enterprise    
display an amount representing total comprehensive income for the period in     
that financial statement. This statement is effective for fiscal years          
beginning after December 15, 1997. Reclassification of financial statements     
for earlier periods provided for comparative purposes is required. This         
statement has no impact on the financial condition or results of operations of  
the Company, but may require changes to the Company's disclosure requirements.  

In June 1997, the FASB issued Statement of Financial Accounting Standards   
No. 131, "Disclosures About Segments of an Enterprise and Related Information"  
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public    
business enterprises report information about operating segments in annual      
financial statements and requires that those enterprises report selected        
information about operating segments in interim financial reports issued to     
shareholders. SFAS No. 131 also establishes standards for related disclosures   
about products and services, geographic areas, and major customers. This        
statement supersedes FASB Statement No. 14, Financial Reporting for Segments    
of a Business Enterprise, but retains the requirement to report information     
about major customers. It amends FASB Statement No. 94, Consolidation of All    
Majority-Owned Subsidiaries, to remove the special disclosure requirements for  
previously unconsolidated subsidiaries. This statement is effective for fiscal  
years beginning after December 15, 1997. In the initial year of application,    
comparative information for earlier years is to be restated. This statement     
need not be applied to interim financial statements in the initial year of      
application, but comparative information for interim periods in the initial     
year of application is to be reported in financial statements for interim       
periods in the second year of application. This statement has no impact on the  
financial condition or results of operations of the Company, but may require    
changes in the Company's disclosure requirements.                               

10.SUBSEQUENT EVENT                                                             

On October 21, 1997, Kevco signed a definitive merger agreement with Shelter
Components Corporation ("Shelter") for Kevco to acquire all the outstanding     
shares of Shelter. Pursuant to the agreement, Kevco will pay $17.50 per share   
for each share of common stock of Shelter which currently has approximately     
7.8 million shares of common stock outstanding. The transaction will be a cash  
tender offer followed by a cash merger to acquire any shares not previously     
tendered. As a result of the transaction, Shelter will become a wholly-owned    
subsidiary of Kevco.                                                            

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KEVCO, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(UNAUDITED) 

In connection with the acquisition of Shelter, Kevco has entered into an    
arrangement to amend its credit agreement with a bank at closing of the         
acquisition to allow for aggregate senior borrowings of up to $125 million.     
The aggregate amount will be comprised of a revolving credit facility of $35    
million and a term loan facility of up to $90 million. The revolving credit     
facility will mature six years from date of closing and assuming a term loan    
facility of $90 million, the term loan scheduled repayments will be $0.5        
million in 1998, $5.5 million in 1999, $8.0 million in 2000, $8.0 million in    
2001, $10.5 million in 2002, $10.5 million in 2003 and $47.0 million in 2004.   
Borrowings under the revolving credit facility require monthly, bi-monthly or   
quarterly interest payments (depending on whether interest accrues based on     
the prime rate or LIBOR) calculated as a blend of the bank's prime rate and     
LIBOR based on pricing options selected by the Company plus a margin            
determined by operating statistics of the Company. Borrowings under the term    
loan facility require monthly, bi-monthly or quarterly interest payments        
(depending on whether interest accrues based on the prime rate or LIBOR) based  
on a blend of the bank's prime rate and LIBOR based on pricing options          
selected by the Company plus a margin determined by operating statistics of     
the Company. The term loan and revolving credit facility is collateralized by   
substantially all of the assets of the Company and its subsidiaries as well as  
the capital stock of such subsidiaries. The related credit agreement contains   
certain restrictions and conditions that include cash flow and various          
financial ratio requirements, and limitations on incurrence of debt or liens,   
acquisitions of property and equipment, distributions to stockholders and       
certain events constituting a Change of Control (as defined in the agreement).  

In addition to the funds available under the amended credit facility, the   
Company issued 10 3/8% senior subordinated notes in the aggregate principal     
amount of $105 million under the indenture dated as of December 1, 1997, as     
supplemented, (the "Indenture"), to complete the acquisition of the             
outstanding shares of Shelter. The Indenture contains certain covenants,        
including, but not limited to, covenants prohibiting or limiting: (i) the       
incurrence by the Company and its Restricted Subsidiaries (as defined in the    
Indenture) of additional Indebtedness (as defined in the Indenture); (ii) the   
payment of dividends or the making of other restricted payments by the          
Company; (iii) the creation of liens by the Company and its Restricted          
Subsidiaries; (iv) the creation or existence of restrictions on the ability of  
Restricted Subsidiaries to pay dividends or make other payments to the          
Company; (v) transactions by the Company and its Restricted Subsidiaries with   
affiliates; (vi) certain sales of assets by the Company and its Restricted      
Subsidiaries; (vii) the ability of the Company and the Restricted Subsidiaries  
to engage in certain lines of business; and (viii) the Company's ability to     
consolidate or merge with or into, or transfer all or substantially all of its  
assets to, another person.                                                      

Separate financial statements of the Company's subsidiaries are not included
because (a) all of the Company's direct and indirect subsidiaries have          
guaranteed the Company's obligations under the Indenture, among the Company,    
such subsidiaries (in such capacity, the "Guarantors"), and the United States   
Trust Company of New York, N.A., as trustee, (b) the Guarantors have fully and  
unconditionally guaranteed the 10 3/8% senior subordinated notes issued under   
the Indenture on a joint and several basis, (c) the Company is a holding        
company with no independent assets or operations other than its investments in  
the Guarantors and (d) the separate financial statements and other disclosures  
concerning the Guarantors are not presented because management has determined   
that they would not be material.                                                

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors and Shareholders of Shelter Components Corporation:   

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows    
present fairly, in all material respects, the financial position of Shelter     
Components Corporation and its subsidiaries at December 31, 1996 and 1995, and  
the results of their operations and their cash flows for the years then ended   
in conformity with generally accepted accounting principles. 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      
generally accepted auditing standards which 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 the     
opinion expressed above.                                                        

/s/ PRICE WATERHOUSE LLP                                                        

Indianapolis, Indiana                                                           
February 18, 1997                                                               

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Shareholders and Board of Directors of                                   
Shelter Components Corporation:                                                 

We have audited the accompanying consolidated statements of income,             
shareholders' equity and cash flows of Shelter Components Corporation and       
subsidiaries for the year ended December 31, 1994. These financial statements   
are the responsibility of the Corporation's management. Our responsibility is   
to express an opinion on these financial statements based on our audit.         

We conducted our audit in accordance with generally accepted auditing           
standards. 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. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audit provides a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly, in   
all material respects, and the consolidated results of operations and cash      
flows of Shelter Components Corporation and subsidiaries for the year ended     
December 31, 1994, in conformity with generally accepted accounting             
principles.                                                                     

/s/ Coopers & Lybrand L.L.P.                                                    

South Bend, Indiana                                                             
February 7, 1995                                                                

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

                                                                [Download Table]

                                                                 1996     1995  
                                                                                
                           ASSETS                                               
Current assets                                                                  
  Cash and cash equivalents..................................  $ 21,096 $     24
  Trade receivables, less allowance for doubtful receivables,                   
   1996 and 1995--$500.......................................    22,827   25,452
  Inventories................................................    41,475   50,049
  Deferred income taxes......................................     2,128    1,412
  Prepaid expenses and other.................................       595      457
  Real estate held for sale..................................     2,576      -- 
                                                               -------- --------
    Total current assets.....................................    90,697   77,394
Property, plant and equipment, net...........................    19,381   17,587
Cost in excess of net assets acquired, net of accumulated am-                   
 ortization, 1996--$1,482 and 1995--$1,125...................    10,312   11,554
Other assets.................................................       520      879
                                                               -------- --------
    Total assets.............................................  $120,910 $107,414
                                                               ======== ========
            LIABILITIES AND SHAREHOLDERS' EQUITY                                
Current liabilities                                                             
  Short-term debt............................................  $  6,000 $  4,723
  Current maturities of long-term debt.......................     1,904    2,009
  Accounts payable, trade....................................    23,067   23,159
  Income taxes payable.......................................     2,381       43
  Accrued liabilities:                                                          
   Salaries and wages........................................     2,142    2,015
   Accrued expenses related to sale of business..............     1,703      -- 
   Other.....................................................     3,416    3,716
                                                               -------- --------
    Total current liabilities................................    40,613   35,665
                                                               -------- --------
Long-term debt...............................................    16,639   19,596
                                                               -------- --------
Deferred income taxes........................................       745      944
                                                               -------- --------
Other deferred liabilities...................................       133       41
                                                               -------- --------
Commitments (Note 8)                                                            
Shareholders' equity                                                            
  Preferred stock, $.01 par value; authorized and unissued                      
   1,000,000 shares                                                             
  Common stock, $.01 par value; authorized 10,000,000 shares,                   
   issued 1996--7,680,623 shares and 1995--6,098,969 shares..        76       61
  Additional paid-in capital.................................    11,914   11,613
  Retained earnings..........................................    50,827   39,545
                                                               -------- --------
                                                                 62,817   51,219
    Less, Treasury stock, at cost, 1996--24,482 shares and                      
     1995--26,767 shares.....................................        37       51
                                                               -------- --------
      Total shareholders' equity.............................    62,780   51,168
                                                               -------- --------
      Total liabilities and shareholders' equity.............  $120,910 $107,414
                                                               ======== ========

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                   1996      1995      1994   
                                                                              
Net sales....................................... $521,022  $462,323  $333,104 
Cost of sales...................................  447,701   393,775   281,808 
                                                 --------  --------  -------- 
  Gross profit..................................   73,321    68,548    51,296 
Commission income...............................    2,459     3,005     3,111 
                                                 --------  --------  -------- 
                                                   75,780    71,553    54,407 
Selling, general and administrative expenses....   60,194    52,709    39,136 
                                                 --------  --------  -------- 
  Operating income..............................   15,586    18,844    15,271 
Gain on sale of carpet business.................   (5,919)      --        --  
Interest income.................................     (177)     (142)      (38)
Interest expense................................    1,831     2,472     1,035 
                                                 --------  --------  -------- 
  Income before income taxes....................   19,851    16,514    14,274 
Income taxes....................................    8,153     6,476     5,577 
                                                 --------  --------  -------- 
  Net income.................................... $ 11,698  $ 10,038  $  8,697 
                                                 ========  ========  ======== 
Net income per share............................ $   1.51  $   1.31  $   1.19 
                                                 ========  ========  ======== 
Weighted average common and common equivalent                                 
 shares outstanding.............................    7,738     7,680     7,300 
                                                 ========  ========  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                          ADDITIONAL                            
                                   COMMON  PAID-IN   RETAINED  TREASURY         
                                   STOCK   CAPITAL   EARNINGS   STOCK    TOTAL  
                                                                                
Balance at January 1, 1994........  $ 58   $ 8,395   $21,522    $(246)  $29,729 
  Exercise of stock options.......   --          4       --        38        42 
  Cash dividends ($.05 per                                                      
   share).........................   --        --       (346)     --       (346)
  Cash paid in lieu of fractional                                               
   shares.........................   --        --         (6)     --         (6)
  Net income......................   --        --      8,697      --      8,697 
                                    ----   -------   -------    -----   ------- 
Balance at December 31, 1994......    58     8,399    29,867     (208)   38,116 
  Exercise of stock options.......   --        171       --       157       328 
  Cash dividends ($.05 per                                                      
   share).........................   --        --       (360)     --       (360)
  Issuance of common shares in                                                  
   connection with a business                                                   
   acquisition (Note 9)...........     3     2,923       --       --      2,926 
  Tax benefit from early sale of                                                
   stock acquired with options....   --        120       --       --        120 
  Net income......................   --        --     10,038      --     10,038 
                                    ----   -------   -------    -----   ------- 
Balance at December 31, 1995......    61    11,613    39,545      (51)   51,168 
  Exercise of stock options.......   --        246       --        14       260 
  Cash dividends ($.05 per                                                      
   share).........................   --        --       (413)     --       (413)
  Cash paid in lieu of fractional                                               
   shares.........................   --        --         (3)     --         (3)
  Five-for-four stock split.......    15       (15)      --       --        --  
  Tax benefit from early sale of                                                
   stock acquired with options....   --         70       --       --         70 
  Net income......................   --        --     11,698      --     11,698 
                                    ----   -------   -------    -----   ------- 
Balance at December 31, 1996......  $ 76   $11,914   $50,827    $ (37)  $62,780 
                                    ====   =======   =======    =====   ======= 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS) 

                                                                [Download Table]

                                                   1996      1995       1994   
                                                                               
Cash flows from operating activities:                                          
  Net income.................................... $ 11,698  $  10,038  $  8,697 
  Adjustments to reconcile net income to net                                   
   cash provided by (used in) operating                                        
   activities:                                                                 
  Depreciation..................................    2,337      1,930     1,508 
  Amortization..................................    1,013        967       524 
  Loss (gain) on sales of property, plant and                                  
   equipment....................................       29         11       (53)
  Deferred income taxes.........................     (915)       (38)     (130)
  Gain on sale of carpet business...............   (5,919)       --        --  
Changes in certain assets and liabilities,                                     
 excluding effects from acquisitions and                                       
 dispositions:                                                                 
  Trade receivables.............................    2,760     (1,346)   (6,327)
  Inventories...................................     (738)     1,481   (17,484)
  Prepaid expenses and other....................     (138)      (154)      167 
  Accounts payable, trade.......................    2,687     (1,159)    6,479 
  Other current liabilities.....................    2,174        172      (183)
                                                 --------  ---------  -------- 
    Net cash provided by (used in) operating                                   
     activities.................................   14,988     11,902    (6,802)
                                                 --------  ---------  -------- 
Cash flows from investing activities:                                          
  Proceeds from sales of property, plant and                                   
   equipment....................................       61         51       120 
  Acquisitions of property, plant and                                          
   equipment....................................   (8,368)    (2,790)   (2,136)
  Acquisitions of businesses, net of cash                                      
   acquired.....................................     (145)      (732)     (732)
  Proceeds from sale of carpet business, net of                                
   $1,921 costs and expenses paid...............   16,367        --        --  
  Other, net....................................      110        180       132 
                                                 --------  ---------  -------- 
    Net cash provided by (used in) investing                                   
     activities.................................    8,025     (3,291)   (2,616)
                                                 --------  ---------  -------- 
Cash flows from financing activities:                                          
  Proceeds from issuance of debt................   83,837    171,697   100,382 
  Repayment of debt.............................  (85,622)  (180,271)  (90,652)
  Proceeds from exercise of stock options.......      260        328        42 
  Cash dividends paid...........................     (413)      (360)     (346)
  Other, net....................................       (3)       --         (6)
                                                 --------  ---------  -------- 
    Net cash (used in) provided by financing                                   
     activities.................................   (1,941)    (8,606)    9,420 
                                                 --------  ---------  -------- 
    Increase in cash............................   21,072          5         2 
Cash, beginning of year.........................       24         19        17 
                                                 --------  ---------  -------- 
Cash, end of year............................... $ 21,096  $      24  $     19 
                                                 ========  =========  ======== 
Supplemental disclosures of cash flow                                          
 information:                                                                  
  Cash paid during the year for:                                               
    Interest.................................... $  1,894  $   2,516  $    979 
    Income taxes................................    6,660      6,894     5,940 
Non-cash investing and financing activities:                                   
  Reclassification of short-term borrowings to                                 
   reflect debt refinancing.....................      --         --      8,000 
  Obligations assumed in business acquisitions..      --       9,438       897 
  Short-term debt issued in business                                           
   acquisition..................................      --       1,500       --  
  Long-term debt issued in business                                            
   acquisition..................................      --       5,522       --  
  Common stock issued in business acquisition...      --       2,926       --  

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES                  

Nature of Business--Shelter Components Corporation and subsidiaries         
(individually and collectively referred to as the "Corporation") manufacture    
and distribute products and materials primarily for use by the Manufactured     
Housing, Modular Housing and Recreational Vehicle industries.                   

SIGNIFICANT ACCOUNTING POLICIES:                                                

Principles of Consolidation--The consolidated financial statements include  
the accounts of the Corporation and its wholly-owned subsidiaries. All          
intercompany balances and transactions have been eliminated.                    

Inventories--Inventories are stated at the lower of cost or market, with    
cost determined by the first-in, first-out method.                              

Property, Plant and Equipment--Property, plant and equipment are carried at 
cost less accumulated depreciation. Depreciation is computed primarily by the   
straightline method over the estimated useful lives of the assets. Upon sale    
or retirement of property, plant and equipment, the asset cost and related      
accumulated depreciation are removed from the accounts and any resulting gain   
or loss is included in income.                                                  

Intangibles--Non-compete agreements are amortized on a straight-line basis  
over the terms of the related agreements (3 to 5 years). The excess of          
acquisition cost of acquired businesses over the fair value of net assets       
acquired ("goodwill") is amortized, using the straight-line method, over        
periods ranging from 10 to 40 years. The Corporation periodically reviews the   
carrying value of goodwill to assess that recoverability and impairments are    
recognized in operating results when a permanent diminution in value has        
occurred.                                                                       

Income Taxes--Deferred income taxes are determined using the liability      
method in accordance with Statement of Financial Accounting Standards (SFAS)    
No. 109 "Accounting for Income Taxes".                                          

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and reported amounts of revenue and expense during the reporting     
period. Actual results could differ from those estimates.                       

Fair Value of Financial Instruments--The fair value of all financial        
instruments where the face value differs from the fair value are estimated      
based upon quoted amounts or the use of current rates available for similar     
financial instruments. If fair value accounting had been used at December 31,   
1996 and 1995, instead of the historic basis of accounting used in the          
financial statements, long-term debt would exceed the reported level by         
approximately $1.5 million in each year.                                        

Product Warranty Expense--Provisions are made currently for the estimated   
future costs that will be incurred under product warranties presently in        
force.                                                                          

Revenue Recognition and Concentration of Credit Risk--Revenue from product  
sales is recognized at the time of shipment and commissions are recognized as   
earned on an accrual basis. Although the Corporation has a concentration of     
credit risk in the Manufactured Housing and Recreational Vehicle industries,    
there is no geographical concentration of credit risk. Sales to one customer    
were approximately 11%, 12% and 10% of the Corporation's consolidated net       
sales in 1996, 1995 and 1994, respectively. Two of the Corporation's customers  
merged during 1996 resulting in combined sales approximating 13% of the 1996    
consolidated net sales. The Corporation performs an ongoing credit evaluation   
of its customers' financial condition, and credit is extended to customers on   
an unsecured basis. Future credit losses are provided for currently through     
the allowance for doubtful receivables. Actual credit losses are charged to     
the allowance when incurred. The amounts provided for                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

such losses are determined based on the Corporation's historical loss           
experience considering current economic conditions.                             

Earnings Per Common Share--Primary and fully diluted earnings per common    
share computations are based on the weighted average number of shares of        
common stock and the dilutive effect of common stock equivalents (see Note 6)   
outstanding during each year, adjusted for all stock splits declared during     
the periods presented.                                                          

NOTE 2: INVENTORIES                                                             

Inventories consist of the following components:                            

                                                                [Download Table]

                                                               1996    1995  
                                                              (IN THOUSANDS) 
                                                                             
Raw materials................................................ $ 5,466 $ 8,272
Work-in-process..............................................     382   4,986
Finished goods...............................................     814   6,866
Goods held for resale........................................  34,813  29,925
                                                              ------- -------
  Total...................................................... $41,475 $50,049
                                                              ======= =======

NOTE 3: PROPERTY, PLANT AND EQUIPMENT                                           

The cost and accumulated depreciation are summarized as follows:            

                                                                [Download Table]

                                                              1996    1995  
                                                             (IN THOUSANDS) 
                                                                            
Land........................................................ $ 1,984 $ 1,435
Buildings...................................................  12,915  10,569
Leasehold improvements......................................     278   1,217
Machinery and equipment.....................................   6,276   9,739
Office equipment............................................   2,584   2,569
Transportation equipment....................................   2,206   2,184
                                                             ------- -------
                                                              26,243  27,713
Less, Accumulated depreciation..............................   6,862  10,126
                                                             ------- -------
Property, plant and equipment, net.......................... $19,381 $17,587
                                                             ======= =======

NOTE 4: DEBT                                                                    

The Corporation has a $25 million, unsecured, revolving bank line of credit 
(the "Revolver"). The Revolver requires monthly interest payments based on      
market interest rates (6.47% at December 31, 1996) and an annual commitment     
fee of 1/8% based on the unused portion of the Revolver. Outstanding            
borrowings under the Revolver at December 31, 1996 were $6 million which were   
repaid in January 1997. There were no outstanding borrowings under the          
revolving line of credit at December 31, 1995.                                  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Long-term debt consists of the following:                                   

                                                                [Download Table]

                                                              1996    1995  
                                                             (IN THOUSANDS) 
                                                                            
9.24% senior notes.......................................... $15,000 $15,000
6.4% senior notes...........................................   1,500   3,000
Term loan, payable in monthly installments including                        
 interest at 6.75% with a final maturity of February 1999,                  
 collateralized by a real estate mortgage...................   1,279   1,420
Unsecured note, payable in quarterly installments of $50                    
 including interest imputed at 9.24% with a final maturity                  
 of January 2000............................................     556     697
Other.......................................................     208   1,488
                                                             ------- -------
  Total long-term debt......................................  18,543  21,605
Less, Current maturities....................................   1,904   2,009
                                                             ------- -------
  Long-term debt, net of current maturities................. $16,639 $19,596
                                                             ======= =======

In February 1995, the Corporation issued $15 million, 9.24%, unsecured      
senior notes under a note agreement where interest is payable quarterly and     
principal is payable in eight annual installments of $1,875,000 commencing      
March 1998.                                                                     

The unsecured $1.5 million, 6.4% senior note outstanding at December 31,    
1996 was paid in full on February 15, 1997.                                     

Aggregate annual maturities of long-term debt for each of the next five     
years ending December 31 are as follows: 1997-$1,904,000; 1998-$2,285,000;      
1999-$3,055,000; 2000-$1,924,000 and 2001-$1,875,000.                           

The revolver and senior note agreements contain, among other provisions,    
certain covenants including: maintenance of minimum net worth and certain       
financial ratios; limitations on indebtedness, liens and leases; and            
limitations on the payment of cash dividends. Under the senior note agreements  
and revolver, retained earnings of $39.2 million at December 31, 1996 is        
restricted, as to cash dividends and purchases or redemptions of shares of      
common stock.                                                                   

NOTE 5: RETIREMENT PLAN                                                         

The Corporation has a defined contribution plan which covers substantially  
all fulltime employees of the Corporation and is qualified under Section        
401(k) of the Internal Revenue Code. Under the plan, employees may voluntarily  
contribute a percentage of their compensation and the plan allows the           
Corporation to make discretionary matching contributions. Retirement plan       
expense, including administrative expenses, aggregated $271,000; $259,000 and   
$198,000 for the years ended December 31, 1996, 1995 and 1994, respectively.    

NOTE 6: SHAREHOLDERS' EQUITY                                                    

The Corporation is authorized to issue 1,000,000 shares of special          
(preferred) shares (par value $.01), of which none have been issued. The        
special shares have no voting rights or powers, except the Corporation's Board  
of Directors is vested with authority to determine and state the designations   
and relative preferences, limitations, voting rights, if any, and other rights  
of the special shares.                                                          

On May 30, 1996, the Board of Directors declared a five-for-four stock split
of the Corporation's common stock, paid on July 8, 1996 to shareholders of      
record on June 24, 1996. On February 8, 1994, the Board of Directors declared   
a three-for-two stock split of the Corporation's common stock, paid on March    
8, 1994 to shareholders of record on February 22, 1994. All historical share    
and per share data has been restated for all periods presented herein to        
reflect these stock splits.                                                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

During 1996, the Board of Directors approved the Shelter Components Employee
Stock Purchase Plan which allows all full-time employees to purchase shares of  
the Corporation's common stock through payroll deduction at market prices. As   
of December 31, 1996, 4,422 shares of common stock had been purchased by        
employees participating in the plan. The Corporation pays the expenses of       
administering the plan.                                                         

The Corporation has a stock incentive plan authorizing the grant of         
incentive stock options and nonqualified stock options to purchase up to        
937,500 shares of the Corporation's common stock. Under the plan, the           
incentive stock option price may not be less than the fair market value of the  
Corporation's common stock at the date of grant. Generally, the options become  
exercisable over staggered periods and expire five years from the date of       
grant.                                                                          

The transactions for shares under options for each of the three years in the
period ended December 31, 1996 were as follows:                                 

                                                                [Download Table]

                                                        SHARES               
                                                        UNDER     PER SHARE  
                                                        OPTION   OPTION PRICE
                                                                             
Outstanding, January 1, 1994..........................  322,144  $1.54-$6.94 
  Exercised...........................................  (24,884)  1.54- 2.02 
                                                       --------              
Outstanding, December 31, 1994........................  297,260   1.54- 6.94 
  Exercised........................................... (104,235)  1.54- 6.94 
  Granted.............................................  241,250      9.20    
                                                       --------              
Outstanding, December 31, 1995........................  434,275   1.54- 9.20 
  Exercised...........................................  (65,823)  1.54- 9.20 
  Cancelled...........................................  (19,687)  6.94- 9.20 
                                                       --------              
Outstanding, December 31, 1996........................  348,765   6.94- 9.20 
                                                       ========              
Exercisable, December 31, 1996........................  136,401  $6.94-$9.20 
                                                       ========              

As of December 31, 1996, 331,095 shares were reserved for the granting of   
future stock options under this plan, compared with 106,330 shares at December  
31, 1995.                                                                       

In 1996, the Board of Directors implemented a non-qualified stock option    
plan for the purpose of granting stock options to the Corporation's non-        
employee directors. The plan provides for annual grants of 2,500 options to     
each non-employee director at the fair market value of the Corporation's        
common stock at the date of the grant. The options are immediately exercisable  
upon grant. In May 1996, a total of 20,000 options were granted to the non-     
employee directors of the Corporation at an exercise price of $10.90 per        
share, all of which were outstanding and exercisable at December 31, 1996. As   
of December 31, 1996, 180,000 shares were reserved for the granting of future   
stock options to non-employee directors under this plan.                        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The Corporation has adopted the disclosure-only provisions of Statement of  
Financial Accounting Standards No. 123, "Accounting for Stock-Based             
Compensation" (SFAS No. 123). The Corporation applies Accounting Principles     
Board Opinion No. 25 and related interpretations in accounting for its plan.    
Accordingly, no compensation cost has been recognized for its fixed stock       
option plan. Had compensation cost for the 1995 grant been determined based on  
the fair value method as defined in SFAS No. 123, the Corporation's net income  
and income per share would have been reduced to the proforma amounts indicated  
below.                                                                          

                                                                [Download Table]

                                                1996              1995       
                                          ----------------- -----------------
                                          REPORTED PROFORMA REPORTED PROFORMA
                                                                             
Net income............................... $11,698  $11,548  $10,038   $9,888 
Net income per share.....................    1.51     1.49     1.31     1.29 

The fair value of the option grant is estimated on the date of grant with   
the following assumptions: expected volatility 32%; risk-free interest rate of  
6.04%; and expected life of 3 years.                                            

NOTE 7: INCOME TAXES                                                            

Income taxes consist of the following:                                      

                                                                [Download Table]

                                                       1996    1995    1994  
                                                         (IN THOUSANDS)      
                                                                             
Federal:                                                                     
  Current............................................ $7,724  $5,414  $4,728 
  Deferred...........................................   (784)    (33)   (110)
                                                      ------  ------  ------ 
                                                       6,940   5,381   4,618 
                                                      ------  ------  ------ 
State:                                                                       
  Current............................................  1,344   1,100     979 
  Deferred...........................................   (131)     (5)    (20)
                                                      ------  ------  ------ 
                                                       1,213   1,095     959 
                                                      ------  ------  ------ 
  Total.............................................. $8,153  $6,476  $5,577 
                                                      ======  ======  ====== 

The components of the net deferred tax asset and the net deferred tax       
liability as of December 31, 1996 and 1995 were as follows:                     

                                                                [Download Table]

                                                            1996     1995   
                                                           (IN THOUSANDS)   
                                                                            
Current deferred tax asset:                                                 
  Allowance for doubtful receivables...................... $   196  $   196 
  Inventories.............................................     895      601 
  Accrued liabilities and other...........................   1,037      615 
                                                           -------  ------- 
    Deferred tax asset.................................... $ 2,128  $ 1,412 
                                                           =======  ======= 
Noncurrent deferred tax asset (liability):                                  
  Depreciation............................................ $  (643) $  (743)
  Acquired companies......................................    (210)    (214)
  Other...................................................     108       13 
                                                           -------  ------- 
    Deferred tax liability................................ $  (745) $  (944)
                                                           =======  ======= 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The following is a reconciliation of income taxes computed at the statutory 
federal income tax rate to the reported provision:                              

                                                                [Download Table]

                                                       1996   1995    1994  
                                                         (IN THOUSANDS)     
                                                                            
Computed income taxes at federal statutory rate...... $6,948 $5,782  $4,996 
State income taxes, net of federal benefit...........    789    711     630 
Writedown of non-deductible goodwill.................    280    --      --  
Other................................................    136    (17)    (49)
                                                      ------ ------  ------ 
  Total.............................................. $8,153 $6,476  $5,577 
                                                      ====== ======  ====== 

NOTE 8: COMMITMENTS, CONTINGENCIES AND RELATED PARTIES                          

LEASE COMMITMENTS                                                             

The Corporation leases certain facilities under noncancellable agreements   
which expire at various dates through September 2000. The lease agreements      
require the Corporation to pay property taxes, utilities, insurance, and        
repairs and maintenance on the properties. In addition, certain of the          
building leases are with entities which are principally owned by certain        
directors and officers of the Corporation. During 1996, the Corporation         
exercised its option to purchase certain real estate totalling $3.6 million     
from ELJO Investments, a partnership principally owned by certain directors     
and officers of the Corporation. The aggregate purchase price was below the     
fair market value of the properties at the date of purchase. During 1996, the   
Corporation also purchased a facility from Stults Realty, Inc. which is owned   
by Mr. Stults, the Corporation's President pursuant to a provision in the       
January 1995 agreement to purchase the assets of BABSCO, Inc. The purchase      
price was approximately $600,000, which reflected the fair market value of the  
property.                                                                       

The Corporation also leases certain transportation, manufacturing,          
distribution and office equipment under lease agreements with expiring terms    
through May 2004. The transportation leases require weekly rentals plus         
additional amounts based upon actual mileage.                                   

The above described leases are accounted for as operating leases. Total     
rental expense in the consolidated statements of income for the years ended     
December 31, 1996, 1995 and 1994 aggregated $3,759,000, $3,474,000 and          
$2,901,000 respectively, including payments to related parties of $266,000 in   
1996, $711,000 in 1995, and $531,000 in 1994. Future minimum annual lease       
payments under these operating leases, excluding mileage payments that may be   
required under transportation vehicle leases, are as follows:                   

                                                                [Download Table]

YEAR                       (IN THOUSANDS)
                                         
1997......................     $2,053    
1998......................      1,724    
1999......................      1,254    
2000......................        711    
2001......................        219    
Thereafter................        168    
                               ------    
                               $6,129    
                               ======    

SELF INSURANCE                                                                

The Corporation is self-insured for certain employee health benefits        
($100,000 per individual with an annual aggregate of approximately $1.4         
million) and workers' compensation ($500,000 per occurrence with an annual      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

aggregate of approximately $1.1 million). The Corporation accrues for the       
estimated losses occurring from both asserted and unasserted claims. The        
estimate of the liability for unasserted claims arising from incurred but not   
reported claims is based on an analysis of historical claims data.              

OTHER RELATED PARTY TRANSACTIONS                                              

The Corporation made purchases from an electrical wire products supplier in 
which the Corporation's President has a 16% ownership interest. Total           
purchases for 1996 and 1995 were approximately $3 million per year. The         
Corporation believes the purchases were at a price and terms which approximate  
general market prices and terms for similar products.                           

OTHER                                                                         

Certain claims are pending against the Corporation with respect to matters  
arising out of the ordinary conduct of the business. In the opinion of          
management, based upon presently available information, either adequate         
provision for anticipated costs has been made by insurance, accruals or         
otherwise, or the ultimate anticipated costs resulting will not materially      
affect the Corporation's consolidated financial position or results of          
operations.                                                                     

During 1996, the Corporation committed to the expansion of its corporate    
offices. At December 31, 1996, the outstanding contractual obligation amounted  
to $1.1 million.                                                                

NOTE 9: BUSINESS ACQUISITIONS                                                   

The following acquisitions have been accounted for using the purchase method
of accounting, with the operating results of the acquired businesses being      
included in the Corporation's consolidated financial statements from the date   
of acquisition.                                                                 

In January 1995, the Corporation acquired the business operations and       
operating assets of BABSCO, Inc. ("BABSCO"), located in Elkhart, Indiana, and   
having additional operations in Plymouth and Warsaw, Indiana and Mt. Joy,       
Pennsylvania. BABSCO is a wholesale distributor of a full line of electrical    
products to the Recreational Vehicle, Manufactured Housing and Modular Housing  
industries, and to electrical contractors in the Northern Indiana and Southern  
Michigan region. The total purchase price was $18.2 million, consisting of      
three promissory notes totalling $7.0 million, 336,323 restricted shares of     
common stock with a market value of $2.9 million, and $8.3 million of assumed   
liabilities as of the closing date. The promissory notes included a $1.5        
million demand note, an $800,000 note payable in quarterly installments over    
five years and a $4.7 million note paid in January 1996. The $7.5 million       
excess of the purchase price over the fair value of acquired assets             
("goodwill") is being amortized over a 20-year period.                          

The following represents unaudited proforma financial information as if the 
acquisition of BABSCO had occurred at the beginning of 1994 (in thousands,      
except per share amounts):                                                      

                                                                [Download Table]

                                   1994  
                                         
Net sales....................... $380,022
Net income......................    9,400
Net income per common share.....     1.23

On May 2, 1994 the Corporation acquired the business operations and         
operating assets of TATCO, Inc. ("TATCO") located in Lancaster, Pennsylvania.   
TATCO is a wholesale distributor of building and component products to the      
Manufactured and Modular Housing industries. The purchase price, including      
liabilities assumed                                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

and amounts due under non-compete, employment, and earnout agreements totalled  
$2.1 million. The $700,000 excess of the purchase price over the fair value of  
acquired assets ("goodwill") is being amortized over a ten-year period.         
Proforma financial information had TATCO been acquired as of the beginning of   
1994 has not been presented as it is not materially different from historical   
results of the Corporation.                                                     

NOTE 10: DISPOSAL OF CARPET BUSINESS                                            

On December 31, 1996, the Corporation sold the carpet manufacturing and yarn
processing operations and certain assets and transferred certain liabilities    
of its wholly-owned subsidiary, Danube Carpet Mills, Inc., for $18.3 million    
in cash. The transaction resulted in a pre-tax gain of $5.9 million which       
amounts to a net gain of $.41 per share after income taxes. The gain is net of  
$4.5 million of expenses incurred in connection with the sale of the business,  
including an $800,000 non-deductible charge for goodwill related to the carpet  
and yarn operations. Condensed income statement information and a listing of    
the assets and liabilities retained at December 31, 1996 relating to these      
operations after eliminating intercompany transactions and allocations are as   
follows:                                                                        

                                                                [Download Table]

                                                    YEAR ENDED DECEMBER 31, 
                                                    ------------------------
                                                     1996     1995    1994  
                                                                            
Sales.............................................. $74,851  $68,210 $64,573
Cost of sales......................................  63,403   55,385  52,228
                                                    -------  ------- -------
  Gross profit.....................................  11,448   12,825  12,345
Selling, general and administrative expenses.......  10,547    8,709   7,658
Interest expense...................................       4        3      15
Gain on sale of business...........................  (5,919)     --      -- 
                                                    -------  ------- -------
Income before income taxes......................... $ 6,816  $ 4,113 $ 4,672
                                                    =======  ======= =======

                                                                [Download Table]

                                                            DECEMBER 31, 1996
                                                                             
Accounts receivable........................................      $3,594      
Receivable due from buyer..................................         135      
Real estate held for sale to buyer.........................       1,648      
Accounts payable and accrued expenses......................      (2,444)     
Income taxes payable.......................................      (2,963)     
                                                                 ------      
  Net liabilities retained in excess of assets.............      $  (30)     
                                                                 ======      

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS (UNAUDITED) 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]


                                                                  SEPTEMBER 30, DECEMBER 31,
                                                                      1997          1996    
                                                                  ------------- ------------
                                                                                            
                          A S S E T S                                                       
CURRENT ASSETS                                                                              
  Cash..........................................................    $ 13,139      $ 21,096  
  Trade receivables, net........................................      33,010        22,827  
  Inventories...................................................      43,001        41,475  
  Deferred income taxes.........................................       2,128         2,128  
  Prepaid expenses and other....................................         440           595  
  Real estate held for sale.....................................         759         2,576  
                                                                    --------      --------  
    Total current assets........................................      92,477        90,697  
PROPERTY, PLANT AND EQUIPMENT, NET..............................      25,929        19,381  
COST IN EXCESS OF NET ASSETS ACQUIRED, net of accumulated                                   
 amortization...................................................      13,126        10,312  
OTHER ASSETS....................................................       1,322           520  
                                                                    --------      --------  
    Total assets................................................    $132,854      $120,910  
                                                                    ========      ========  
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y                            
CURRENT LIABILITIES                                                                         
  Short-term debt...............................................    $    --       $  6,000  
  Current maturities of long-term debt..........................       3,007         1,904  
  Accounts payable, trade.......................................      33,079        23,067  
  Accrued expenses and income taxes payable.....................       8,302         9,642  
                                                                    --------      --------  
    Total current liabilities...................................      44,388        40,613  
                                                                    --------      --------  
LONG-TERM DEBT..................................................      17,208        16,639  
                                                                    --------      --------  
DEFERRED INCOME TAXES...........................................         745           745  
                                                                    --------      --------  
OTHER DEFERRED LIABILITIES......................................         223           133  
                                                                    --------      --------  
SHAREHOLDERS' EQUITY                                                                        
  Preferred stock, $.01 par value...............................         --            --   
  Common stock, $.01 par value..................................          77            76  
  Additional paid-in capital....................................      12,759        11,914  
  Retained earnings.............................................      57,491        50,827  
                                                                    --------      --------  
                                                                      70,327        62,817  
  Less, Treasury stock..........................................          37            37  
                                                                    --------      --------  
    Total shareholders' equity..................................      70,290        62,780  
                                                                    --------      --------  
    Total liabilities and shareholders' equity..................    $132,854      $120,910  
                                                                    ========      ========  

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                           NINE MONTHS ENDED  
                                                             SEPTEMBER 30,    
                                                           ------------------ 
                                                             1997      1996   
                                                           --------  -------- 
                                                                              
Net sales................................................. $357,879  $397,065 
Cost of sales.............................................  307,906   339,549 
                                                           --------  -------- 
  Gross profit............................................   49,973    57,516 
Commission income.........................................    2,074     1,827 
                                                           --------  -------- 
                                                             52,047    59,343 
Operating expenses........................................   40,810    44,291 
                                                           --------  -------- 
  Operating income........................................   11,237    15,052 
Gains on sales of real estate.............................      447       --  
Interest income...........................................      755       102 
Interest expense..........................................   (1,219)   (1,398)
                                                           --------  -------- 
  Income before income taxes..............................   11,220    13,756 
Income taxes..............................................    4,320     5,365 
                                                           --------  -------- 
  Net income.............................................. $  6,900  $  8,391 
                                                           ========  ======== 
Earnings per common and common equivalent share........... $    .89  $   1.08 
                                                           ========  ======== 
Weighted average common and common equivalent shares                          
 outstanding..............................................    7,797     7,749 
                                                           ========  ======== 
Cash dividends per share.................................. $    .03  $    .02 
                                                           ========  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 
(IN THOUSANDS)

                                                                [Download Table]

                                                             NINE MONTHS ENDED  
                                                               SEPTEMBER 30,    
                                                             ------------------ 
                                                               1997      1996   
                                                             --------  -------- 
                                                                                
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $  7,419  $ 11,693 
                                                             --------  -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                           
  Acquisitions of property, plant and equipment.............   (6,210)   (6,057)
  Acquisition of business, net of cash acquired.............     (866)      --  
  Proceeds from sale of property, plant and equipment.......    1,822       --  
  Other, net................................................   (1,056)        8 
                                                             --------  -------- 
    Net cash used in investing activities...................   (6,310)   (6,049)
                                                             --------  -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                           
  Proceeds from issuance of debt............................    4,658    73,146 
  Repayment of debt.........................................  (14,412)  (78,823)
  Other, net................................................      688        34 
                                                             --------  -------- 
    Net cash used in financing activities...................   (9,066)   (5,643)
                                                             --------  -------- 
    Increase (decrease) in cash.............................   (7,957)        1 
Cash, beginning of period...................................   21,096        24 
                                                             --------  -------- 
Cash, end of period......................................... $ 13,139  $     25 
                                                             ========  ======== 
SUPPLEMENTAL INFORMATION:                                                       
  Non cash investing and financing activities:                                  
  Acquisition of a business:                                                    
    Obligations assumed..................................... $  2,372       --  
    Long-term debt issued...................................    3,500       --  
                                                             --------  -------- 
                                                             $  5,872  $    --  
                                                             ========  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  
SEPTEMBER 30, 1997  

NOTE A--BASIS OF PRESENTATION                                                   

The financial statements have been prepared from the unaudited financial    
records of the Corporation. In the opinion of management, the financial         
statements include all adjustments consisting only of normal recurring          
adjustments, necessary for a fair statement of the results of operations and    
financial position for the interim periods. The results of operations for the   
nine months ended September 30, 1997 are not necessarily indicative of the      
results to be expected for the full year ending December 31, 1997.              

The Consolidated Balance Sheet at December 31, 1996 has been derived from   
the Audited Consolidated Financial Statements at that date, but does not        
include all disclosures required by generally accepted accounting principles.   

The Consolidated Statements of Income and Cash Flows for the nine months    
ended September 30, 1996 include the results of operations and cash flows of    
Danube Carpet Mills, Inc. ("Danube"), the business operations and certain       
assets of which were sold on December 31, 1996. (See also Note E.)              

NOTE B--INVENTORIES                                                             

Inventories at September 30, 1997 and December 31, 1996 consisted of the    
following components (in thousands):                                            

                                                                [Download Table]

                                                           9/30/97 12/31/96
                                                           ------- --------
                                                                           
Raw materials............................................. $ 7,557 $ 5,466 
Work in process...........................................     566     382 
Finished goods............................................     797     814 
Goods held for resale.....................................  34,081  34,813 
                                                           ------- ------- 
                                                           $43,001 $41,475 
                                                           ======= ======= 

NOTE C--DEBT                                                                    

In January 1997, the Corporation repaid the $6 million revolving line of    
credit balance using funds available from the December 31, 1996 sale of         
Danube's operations. There were no outstanding borrowings under the $25         
million bank revolver at September 30, 1997.                                    

In February 1997, the Corporation paid the final $1.5 million principal     
installment on a 6.4% institutional investor note.                              

In June 1997, the Corporation issued convertible 7% notes payable totaling  
$3.5 million in connection with the acquisition of the operations and net       
assets of Plastic Solutions, Inc. ("PSI") (See Note D). Principal and interest  
payments are due annually with final installments due February 2001. The notes  
also provide an option for the noteholders to elect to receive payments in      
cash or in shares of the Corporation's common stock or a combination thereof    
at each payment date. The conversion price is $13.50 per share.                 

NOTE D--BUSINESS ACQUISITION                                                    

On June 27, 1997, the Corporation acquired the net assets and operations of 
Plastic Solutions, Inc. ("PSI"), a South Bend, Indiana manufacturer of          
injection molded plastic parts with annual sales of approximately $9 million.   
The total purchase price of $6.7 million consisted of cash of approximately     
$.9 million, $3.5 million in convertible long-term notes payable to the         
sellers, and $2.3 million of liabilities assumed. The purchase                  

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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) 
SEPTEMBER 30, 1997  
agreement also provides for additional consideration payable to the sellers     
contingent upon the future results of PSI through the year 2000. The excess of  
the purchase price over the fair value of the acquired assets ("goodwill") was  
approximately $3.2 million.                                                     

The results of operations for all periods presented would not have been     
materially different than reported if PSI had been acquired on January 1,       
1996.                                                                           

NOTE E--DISPOSAL OF CARPET BUSINESS                                             

On December 31, 1996, the Corporation sold the operations and certain assets
of its carpet and yarn manufacturing subsidiary, Danube Carpet Mills, Inc. The  
following reflects Danube's 1996 results of operations for the nine month       
period ended September 30, 1996:                                                

                                                                [Download Table]

                                                      (IN THOUSANDS EXCEPT
                                                         PER SHARE DATA)  
                                                                          
Net sales............................................ $     57,945        
                                                      ============        
Net income........................................... $      2,073        
                                                      ============        
Net income per share................................. $        .27        
                                                      ============        

NOTE F--SUBSEQUENT EVENTS--SALE OF REAL ESTATE                                  

On October 3, 1997, the Corporation sold the remaining real estate held in  
connection with the December 1996 sale of the operations and net assets of      
Danube Carpet Mills, Inc. The proceeds from the sale were $1.7 million and      
resulted in a net after-tax gain of approximately $.4 million or $.05 per       
share to be recorded in the fourth quarter of 1997.                             

NOTE G--SUBSEQUENT EVENTS--MERGER AGREEMENT                                     

On October 21, 1997, the Corporation signed a definitive merger agreement   
with Kevco, Inc. for Kevco to acquire all the outstanding shares of the         
Corporation at $17.50 per share through a cash tender offer. As a result of     
the transaction, and if the tender offer is successful, the Corporation will    
become a wholly-owned subsidiary of Kevco.                                      

The transaction has been recommended by the Board of Directors of each      
company. The cash tender offer is subject to Kevco receiving at least a         
majority of the outstanding shares of Shelter (on a fully-diluted basis) as     
well as the receipt of the required regulatory approvals and completion of      
anticipated financing, and is expected to be completed on or before December    
31, 1997. On October 28, 1997, the Corporation filed its                        
Solicitation/Recommendation Statement on Schedule 14D-9 relative to the cash    
tender offer by Kevco.                                                          

Kevco, headquartered in Fort Worth, Texas, is a leading wholesale           
distributor and manufacturer of building products to the manufactured housing   
and recreational vehicle industries and reported net sales of $267 million and  
pro forma net income of $8.9 million, or $1.60 per share for the year ended     
December 31, 1996.                                                              

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INDEPENDENT AUDITORS' REPORT  

Board of Directors                                                              
Bowen Supply, Inc.                                                              
Americus, Georgia                                                               

We have audited the consolidated balance sheets of Bowen Supply, Inc., and  
Subsidiary as of December 31, 1996 and 1995, and the related consolidated       
statements of income, stockholders' equity and cash flows for the years then    
ended. These consolidated financial statements are the responsibility of the    
Company's management. Our responsibility is to express an opinion on these      
consolidated financial statements based on our audits.                          

We conducted our audits in accordance with generally accepted auditing      
standards. Those standards require that we plan and perform the audit to        
obtain reasonable assurance about whether the consolidated financial            
statements are free of material misstatement. An audit includes examining, on   
a test basis, evidence supporting the amounts and disclosures in the            
consolidated financial statements. An audit also includes assessing the         
accounting principles used and significant estimates made by management, as     
well as evaluating the overall financial statement presentation. We believe     
that our audits provide a reasonable basis for our opinion.                     

In our opinion, the consolidated financial statements referred to above     
present fairly, in all material respects, the consolidated financial position   
of Bowen Supply, Inc., and Subsidiary as of December 31, 1996 and 1995, and     
the results of their operations and their cash flows for the years then ended   
in conformity with generally accepted accounting principles.                    

                                 /s/ DOUGHERTY MCKINNON & LUBY

Columbus, Georgia                                                               
February 14, 1997, except                                                       
for Note K which is                                                             
February 28, 1997                                                               

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BOWEN SUPPLY, INC., AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS 

                                                                [Download Table]

                                                               DECEMBER 31      
                                                          ----------------------
                                                             1996        1995   
                                                                                
                         ASSETS                                                 
CURRENT ASSETS                                                                  
 Cash and cash equivalents..............................  $    39,195 $  112,131
 Trade accounts receivable--Note D......................    2,283,195  1,783,262
 Other receivables......................................      151,840     97,835
 Inventories--Notes C and D.............................    4,040,910  3,699,942
 Deferred taxes--Note I.................................      142,537     65,649
 Other current assets...................................      616,479    274,891
                                                          ----------- ----------
 TOTAL CURRENT ASSETS...................................    7,274,156  6,033,710
OTHER ASSETS                                                                    
 Goodwill, net of accumulated amortization of $540,504                          
  and $518,081 for 1996 and 1995, respectively..........      356,442    378,865
 Cash surrender value of life insurance--Notes G and H..      352,210    356,793
 Rental property, net of allowances for depreciation of                         
  $291,294 and $265,144 for 1996 and 1995,                                      
  respectively..........................................      435,704    460,430
 Deferred taxes, net--Note I............................            0     20,231
 Other..................................................        5,450     13,029
                                                          ----------- ----------
                                                            1,149,806  1,229,348
PROPERTY AND EQUIPMENT--Notes D, E and F                                        
 Land and land improvements.............................      333,863     92,120
 Buildings and improvements.............................    1,732,608    580,154
 Leasehold improvements.................................       51,431     42,295
 Machinery and equipment................................    1,249,703    598,753
 Furniture and fixtures.................................      580,627    431,779
 Construction in progress...............................            0    155,345
                                                          ----------- ----------
                                                            3,948,232  1,900,446
 Less allowances for depreciation.......................    1,010,218    777,767
                                                          ----------- ----------
                                                            2,938,014  1,122,679
                                                          ----------- ----------
                                                          $11,361,976 $8,385,737
                                                          =========== ==========
          LIABILITIES AND STOCKHOLDERS' EQUITY                                  
CURRENT LIABILITIES                                                             
 Note payable to bank--Note D...........................  $   855,866 $1,857,090
 Note payable to stockholder............................      700,000          0
 Trade accounts payable.................................    1,565,624    974,882
 Other accrued expenses--Note H.........................      278,732     82,994
 Income taxes payable...................................      125,840    153,494
 Current portion of long-term debt and capitalized lease                        
  obligations...........................................      289,163     90,672
                                                          ----------- ----------
 TOTAL CURRENT LIABILITIES..............................    3,815,225  3,159,132
LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS, less                          
 portion classified as a current liability--                                    
 Notes D and E..........................................    1,802,421    516,733
NOTE PAYABLE TO STOCKHOLDER--Note F.....................            0    700,000
DEFERRED COMPENSATION--Note G...........................      196,039    212,272
MINORITY INTEREST.......................................        6,640     12,122
STOCKHOLDERS' EQUITY--Note J                                                    
 Common Stock, par value $.10 per share; authorized                             
  3,000,000 shares......................................       75,000     75,000
 Additional paid-in capital.............................    1,420,000  1,420,000
 Retained earnings......................................    4,806,881  3,050,708
                                                          ----------- ----------
                                                            6,301,881  4,545,708
 Less Treasury Stock, at cost...........................      760,230    760,230
                                                          ----------- ----------
                                                            5,541,651  3,785,478
                                                          ----------- ----------
COMMITMENTS--NOTE E                                                             
                                                          $11,361,976 $8,385,737
                                                          =========== ==========

See notes to consolidated financial statements

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BOWEN SUPPLY, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                          COMMON STOCK   ADDITIONAL             TREASURY STOCK              
                         ---------------  PAID-IN    RETAINED  -----------------            
                         SHARES  AMOUNT   CAPITAL    EARNINGS  SHARES   AMOUNT      TOTAL   
                                                                                            
Year ended December 31,                                                                     
 1995                                                                                       
 Balances at January 1,                                                                     
  1995.................. 750,000 $75,000 $1,420,000 $1,861,924 125,000 $(760,230) $2,596,694
 Net income for the                                                                         
  year..................       0       0          0  1,188,784       0         0   1,188,784
                         ------- ------- ---------- ---------- ------- ---------  ----------
  Balances at December                                                                      
   31, 1995............. 750,000  75,000  1,420,000  3,050,708 125,000  (760,230)  3,785,478
Year ended December 31,                                                                     
 1996                                                                                       
 Net income for the                                                                         
  year..................       0       0          0  1,756,173       0         0   1,756,173
                         ------- ------- ---------- ---------- ------- ---------  ----------
  Balances at December                                                                      
   31, 1996............. 750,000 $75,000 $1,420,000 $4,806,881 125,000 $(760,230) $5,541,651
                         ======= ======= ========== ========== ======= =========  ==========

---------------------                                                           
( ) denotes deduction                                                           

See notes to consolidated financial statements

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BOWEN SUPPLY, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME 

                                                                [Download Table]

                                                       YEAR ENDED DECEMBER 31   
                                                       ------------------------ 
                                                          1996         1995     
                                                                                
OPERATING REVENUES AND COSTS                                                    
  Net sales........................................... $41,301,322  $30,296,011 
  Less cost of goods sold--Note C.....................  33,269,930   24,026,234 
                                                       -----------  ----------- 
    GROSS PROFIT......................................   8,031,392    6,269,777 
OTHER OPERATING REVENUES..............................   1,403,328      918,595 
                                                       -----------  ----------- 
                                                         9,434,720    7,188,372 
OPERATING EXPENSES--Note H                                                      
  Selling, warehouse and delivery.....................   4,424,647    3,616,386 
  General and administrative..........................   1,755,821    1,406,924 
                                                       -----------  ----------- 
                                                         6,180,468    5,023,310 
                                                       -----------  ----------- 
    INCOME FROM OPERATIONS............................   3,254,252    2,165,062 
NONOPERATING REVENUES AND EXPENSES                                              
  Rental income, net--Note E..........................       1,475       14,801 
  Gain on sale of assets..............................      14,100       94,419 
  Interest income.....................................       5,069        6,218 
  Minority interest (deduction).......................        (518)       4,891 
  Interest expense (deduction)--Note H................    (369,143)    (333,386)
                                                       -----------  ----------- 
                                                          (349,017)    (213,057)
                                                       -----------  ----------- 
    INCOME BEFORE INCOME TAXES........................   2,905,235    1,952,005 
INCOME TAX EXPENSE--Note I............................   1,149,062      763,221 
                                                       -----------  ----------- 
    NET INCOME........................................ $ 1,756,173  $ 1,188,784 
                                                       ===========  =========== 

See notes to consolidated financial statements

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BOWEN SUPPLY, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                                [Download Table]

                                                           YEAR ENDED          
                                                           DECEMBER 31         
                                                    -------------------------- 
                                                        1996          1995     
                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES                                           
 Cash received from customers...................... $ 42,165,191  $ 30,933,192 
 Cash paid to suppliers and employees..............  (39,066,689)  (29,940,882)
 Income taxes paid.................................   (1,233,371)     (953,110)
 Interest received.................................        5,069         6,218 
 Interest paid.....................................     (362,618)     (347,754)
                                                    ------------  ------------ 
   NET CASH PROVIDED FROM (USED IN) OPERATING                                  
    ACTIVITIES.....................................    1,507,582      (302,336)
CASH FLOWS FROM INVESTING ACTIVITIES                                           
 Proceeds from sale of property and equipment and                              
  rental property..................................       27,801       144,110 
 Purchases of property and equipment...............   (1,429,218)     (130,644)
 Proceeds from cash surrender value of life                                    
  insurance........................................       67,532             0 
 Purchase of minority interest in subsidiary.......       (6,000)            0 
 Increase in cash surrender value of life                                      
  insurance........................................      (62,949)      (50,567)
                                                    ------------  ------------ 
   NET CASH USED IN INVESTING ACTIVITIES...........   (1,402,834)      (37,101)
CASH FLOWS FROM FINANCING ACTIVITIES                                           
 Net borrowings (payments) on revolving credit                                 
  agreement........................................   (1,001,224)      387,678 
 Additional borrowings under long-term debt and                                
  capitalized lease obligations....................    1,024,216             0 
 Principal payments on long-term debt and                                      
  capitalized lease obligations....................     (200,676)      (92,598)
                                                    ------------  ------------ 
   NET CASH PROVIDED FROM (USED IN) FINANCING                                  
    ACTIVITIES.....................................     (177,684)      295,080 
                                                    ------------  ------------ 
   NET DECREASE IN CASH AND CASH EQUIVALENTS.......       72,936        44,357 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.....      112,131       156,488 
                                                    ------------  ------------ 
   CASH AND CASH EQUIVALENTS AT END OF YEAR........ $     39,195  $    112,131 
                                                    ============  ============ 
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED                              
 FROM (USED IN) OPERATING ACTIVITIES                                           
 Net income........................................ $  1,756,173  $  1,188,784 
 Adjustments to reconcile net income to net cash                               
  provided from (used in) operating activities:                                
 Amortization......................................       22,448        22,536 
 Depreciation......................................      285,547       216,668 
 Deferred compensation.............................       29,807        32,133 
 Deferred income taxes.............................      (56,657)       (3,200)
 Gain on sale of assets............................      (14,100)      (94,419)
 Minority interest in net income (loss) of                                     
  consolidated subsidiary..........................          518        (4,891)
 Changes in account balances:                                                  
  Receivables......................................     (540,934)     (296,215)
  Inventories......................................     (340,968)     (789,616)
  Other current assets.............................     (341,588)     (170,243)
  Other assets.....................................       (5,450)            0 
  Trade accounts payable...........................      590,742      (174,638)
  Other accrued expenses...........................      189,213       (28,178)
  Income taxes payable.............................      (27,654)     (186,689)
  Accrued interest payable.........................        6,525       (14,368)
  Deferred compensation paid.......................      (46,040)            0 
                                                    ------------  ------------ 
   NET CASH PROVIDED FROM (USED IN) OPERATING                                  
    ACTIVITIES..................................... $  1,507,582  $   (302,336)
                                                    ============  ============ 

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES 

During 1996 and 1995 the Company acquired certain assets in exchange for    
directly related debt totaling $660,639 and $150,000, respectively.             
---------------------                                                           
( ) denotes deduction                                                           

See notes to consolidated financial statements

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE A--SIGNIFICANT ACCOUNTING POLICIES                                         

Principles of Consolidation: The consolidated financial statements include  
the accounts and transactions of the Company and its 90% owned (80% owned in    
1995) subsidiary, Encore Industries, Inc. All significant intercompany          
accounts and transactions have been eliminated in the consolidated financial    
statements.                                                                     

Description of Business: The Company is primarily engaged in the wholesale  
distribution of building products to the manufactured housing industry. The     
Company operates out of eleven warehouse locations located throughout the       
continental United States.                                                      

Concentration of Credit Risks: The Company extends unsecured credit to      
customers located throughout the continental United States.                     

The Company maintains its cash in bank deposit accounts at high credit      
quality financial institutions. The balances, at times, may exceed federally    
insured limits.                                                                 

The Company had net sales to two customers representing 20% and 12% of net  
sales in 1996.                                                                  

Inventories: Inventories are valued at the lower of cost or market value.   
The last-in, first-out (LIFO) method is used to determine the cost of the       
Company's inventory.                                                            

Property and Equipment and Rental Property: Property and equipment and      
rental property are recorded at cost. Major renewals and betterments are        
charged to the property accounts while replacements, maintenance and repairs    
which do not extend the life of the respective assets are expensed currently.   

The Company provides for depreciation of property and equipment and rental  
property by charging against operations amounts sufficient to amortize the      
cost of properties over their estimated useful lives: buildings 15-40 years;    
machinery and equipment 3-10 years; furniture and fixtures 3-8 years.           
Depreciation is computed using the straight-line method for financial           
reporting purposes and on accelerated methods for income tax purposes.          

When properties are disposed of, the related costs and accumulated          
depreciation are removed from the respective accounts and any profit or loss    
on disposition is credited or charged to operations.                            

Goodwill: Goodwill represents the excess of purchase price over net tangible
assets acquired. This amount is being amortized on the straight-line method     
over a period of 40 years. The Company reviews goodwill to assess               
recoverability periodically. At each balance sheet date, management assesses    
whether there has been a permanent impairment in the value of goodwill by       
considering factors such as expected future operating income, current           
operating results and other economic factors. Management believes no            
impairment has occurred.                                                        

Income Taxes: Income taxes are provided based on earnings reported for tax  
return purposes in addition to a provision for deferred income taxes in         
accordance with Statement of Financial Accounting Standards No. 109,            
Accounting for Income Taxes. The Company provides for deferred income taxes     
(see Note I) arising from the use of different methods of reporting             
depreciation expense for financial reporting purposes and income tax purposes   
and from differences in the timing of recording deferred compensation expense,  
bad debt expense, salary expense and certain inventory costs for financial      
reporting purposes and income tax purposes.                                     

Retirement Plan: The Company adopted a Defined Contribution 401(k) Plan     
effective January 1, 1996, in which substantially all full-time employees are   
eligible to participate. Participating employees can defer up to 15% of         
eligible compensation and the Company matches the employee contributions at     
the rate of 25% of the first 4% of employee deferral. The Company's matching    
contribution amounted to $20,452 for 1996.                                      

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Cash and Cash Equivalents: For purposes of the Consolidated Statements of   
Cash Flows, the Company considers all highly liquid debt instruments purchased  
with an original maturity of three months or less to be cash equivalents.       

Revenue Recognition: Revenue from product sales is recognized at the time of
shipment or the time of receipt in the case of direct shipments from vendors    
to customers. Commissions are recognized as earned.                             

Financial Instruments: The carrying amount reported in the consolidated     
balance sheets for cash and cash equivalents, accounts receivable, and          
accounts payable approximates fair value because of the immediate or short-     
term maturity of these financial instruments. The carrying amounts reported     
for the revolving line of credit and long-term debt approximate fair value      
because the underlying instruments are either at variable interest rates which  
reprice frequently or at stated rates of interest which approximate market.     

NOTE B--ESTIMATES                                                               

The preparation of financial statements in conformity with generally        
accepted accounting principles requires management to make estimates and        
assumptions that affect reported amounts of 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 differ from those estimates.  

NOTE C--INVENTORIES                                                             

Inventory cost is determined using the last-in, first-out (LIFO) method of  
inventory accounting. The Company utilizes this method because it believes      
this method results in a better matching of revenues and expenses. If the       
Company had used the first-in, first-out (FIFO) method of inventory             
accounting, inventories would have been $196,188 and $216,123 higher than       
reported at December 31, 1996 and 1995, respectively.                           

NOTE D--NOTE PAYABLE AND LONG-TERM DEBT                                         

The Company has a line of credit agreement under which the Company can      
borrow up to $3,500,000. Interest is payable at the LIBOR rate plus two         
percent and the line of credit is collateralized by inventories, accounts       
receivable, machinery and equipment and furniture and fixtures. This agreement  
contains certain covenants restricting the payment of dividends and the         
maintenance of minimum debt/worth ratios, debt service coverage ratios and      
tangible net worth. The amount borrowed under this agreement was $855,866 at    
December 31, 1996 (see Note K). The Company had a similar agreement with        
another lender in 1995. The amount borrowed under that agreement was            
$1,857,090 at December 31, 1995. The weighted average interest rate for         
borrowings under the line of credit was 8.3% and 9.9% during 1996 and 1995,     
respectively.                                                                   

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Long-term debt is summarized as follows:                                    

                                                                [Download Table]

                                                              DECEMBER 31    
                                                          -------------------
                                                             1996      1995  
                                                                             
Capitalized lease obligations (see Note E)..............  $1,164,115 $ 44,259
9.9% note payable to Small Business Administration, due                      
 in monthly installments of $2,279, including interest,                      
 in 1996 and decreasing to $2,229, including interest,                       
 in 2008; collateralized by a second mortgage on real                        
 estate with a cost of $507,591 (see Note K)............     179,812  187,715
7.0% notes payable to bank, due in monthly installments                      
 totaling $1,117, including interest, through November,                      
 1996; collateralized by trucks with a cost of $42,500..           0   10,885
8.0% note payable to bank, due in monthly installments                       
 of $1,594, including interest, through June, 1998, with                     
 balance then due; collateralized by real estate with a                      
 cost of $501,662 (see Note K)..........................      98,099  107,904
7.0% note payable to bank, due in monthly installments                       
 of $3,860, including interest, through June, 1998;                          
 collateralized by real estate with a cost of $507,591                       
 (see Note K)...........................................      67,040  106,642
Construction loan payable to bank; due on February 23,                       
 1996; refinanced with 9.0% note below..................           0  150,000
9.0% note payable to bank, due in monthly installments                       
 of $1,679, including interest, through March, 2001;                         
 with balance then due; collateralized by a second                           
 mortgage on real estate with a cost of $501,662 (see                        
 Note K)................................................     161,868        0
8.80% note payable to bank, due in monthly installments                      
 of $5,338, including interest, through September, 2006;                     
 collateralized by real estate with a cost of $531,345                       
 (see Note K)...........................................     420,650        0
                                                          ---------- --------
                                                           2,091,584  607,405
Less current portion....................................     289,163   90,672
                                                          ---------- --------
                                                          $1,802,421 $516,733
                                                          ========== ========

Annual maturities on long-term debt and capitalized lease obligations       
outlined above at December 31, 1996, are summarized as follows:                 

                                                                [Download Table]
                                                            
1997............................................. $  289,163
1998.............................................    367,217
1999.............................................    255,092
2000.............................................    211,078
2001.............................................    223,848
Thereafter.......................................    745,186
                                                  ----------
                                                  $2,091,584
                                                  ==========

NOTE E--LEASES                                                                  

The Company has acquired certain assets under capital leases at rates       
ranging from 4.90% to 12.46%. The cost and accumulated amortization of assets   
under capital leases was $1,456,985 and $102,703, respectively, at December     
31, 1996, and $147,095 and $56,528, respectively, at December 31, 1995.         
Amortization of these assets is included in depreciation expense in the         
accompanying consolidated financial statements.                                 

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The capitalized lease obligations are summarized as follows:                

                                                                [Download Table]

                                                            DECEMBER 31    
                                                         ------------------
                                                            1996     1995  
                                                                           
Construction loan to be refinanced by an Industrial                        
 Revenue bond on April 1, 1997; payable in 120 monthly                     
 installments beginning May 1, 1997, with interest                         
 fixed at the prime rate plus 3/8% as of April 1, 1997;                    
 collateralized by real estate and machinery and                           
 equipment costing $727,482 (see below)................  $  583,800 $     0
Capitalized lease obligations with interest rates                          
 ranging from 4.90% to 12.46%; monthly payments ranging                    
 from $16,935 in 1997 to $6,267 in 2001, year of final                     
 payment; collateralized by automobiles, trucks and                        
 equipment costing $729,503............................     580,315  44,259
                                                         ---------- -------
                                                         $1,164,115 $44,259
                                                         ========== =======

The construction loan is to be refinanced from the proceeds of an Industrial
Revenue Bond issued by the Douglas-Coffee County Industrial Authority. The      
Company will enter into a lease agreement with the Authority whereby the lease  
payments pursuant to the lease will equal the debt service requirements of the  
Bonds. The Bond issue will be for an amount not to exceed $616,250. Through     
December 31, 1996, the Company had incurred $727,482 in costs relating to this  
project.                                                                        

In addition, certain warehouses and automobiles are leased (see Note H)     
under noncancelable operating leases with original terms of three to ten years  
and renewal options of similar lengths of time. The warehouse leases generally  
provide for the payment of taxes and insurance by the lessor and utilities and  
minor repairs by the Company. The total rental expense for all operating        
leases amounted to $692,173 and $744,283 for 1996 and 1995, respectively.       

Future minimum payments, by year and in the aggregate, under the capital    
leases and operating leases with initial terms of one year or more consisted    
of the following at December 31, 1996:                                          

                                                                [Download Table]

                                                        CAPITAL   OPERATING 
                                                         LEASES     LEASES  
                                                                            
1997.................................................. $  274,152 $  415,335
1998..................................................    289,204    365,284
1999..................................................    260,062    330,130
2000..................................................    192,481    312,000
2001..................................................     98,058    312,000
Thereafter............................................    465,852          0
                                                       ---------- ----------
Total minimum lease payments..........................  1,579,809 $1,734,749
                                                                  ==========
Less amounts representing interest....................    415,694           
                                                       ----------           
Included in Note D.................................... $1,164,115           
                                                       ==========           

In computing the operating lease commitments shown above, it has been       
assumed that leases with related parties will be renewed at their expiration    
dates at annual rentals in effect at the end of the lease term.                 

The Company has rental property which it leases to unaffiliated companies   
under leases ranging in original terms of one to twelve months. These leases    
provide that the Company will pay real estate taxes and insurance on the        
leased property.                                                                

The Company received rental income totaling $7,987 and $20,635 from these   
and other short-term leases in 1996 and 1995, respectively.                     

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

NOTE F--NOTE PAYABLE TO STOCKHOLDER                                             

Note payable to stockholder consists of a note with interest payable monthly
at 10% through April 1, 1997, with the principal then due. The note is          
collateralized by substantially all machinery and equipment and furniture and   
fixtures. The note is subordinated to the line of credit described in Note D.   

NOTE G--DEFERRED COMPENSATION                                                   

The Company has employment contracts with various employees which provide   
for the payment of retirement benefits upon retirement at age 65. The           
agreements provide for payments to be made to the employees or their legal      
representatives over a ten year period commencing with the month following the  
employee's retirement.                                                          

The Company has recorded a liability which represents the net present value 
of benefits vested under these agreements using an interest rate of 8%. This    
liability amounted to $196,039 and $212,272 at December 31, 1996 and 1995,      
respectively.                                                                   

The agreements also provide for death benefits to be paid to the employee's 
legal representatives in the event of their death prior to retirement in lieu   
of the retirement benefits described above. These benefits and the payment      
terms thereof are equal to those described above and are funded by life         
insurance policies.                                                             

NOTE H--RELATED PARTY TRANSACTIONS                                              

Transactions with related parties not disclosed elsewhere are summarized as 
follows:                                                                        

                                                                [Download Table]

                                                     YEAR ENDED DECEMBER 31 
                                                     -----------------------
                                                        1996        1995    
                                                                            
Rental expense on automobiles and trucks...........  $     1,082 $    12,990
Rental expense on warehouses.......................      276,000     276,000
Interest expense on note payable to stockholder....       70,192      70,000
Equity in split-dollar life insurance policy on                             
 stockholder/officer...............................       86,878      66,979
Advances to majority stockholder (repaid prior to                           
 year end).........................................      907,613           0
Entertainment expenses paid to majority stockholder                         
 for use of certain assets.........................       11,900       5,100

The rental expense is paid under operating leases to the Company's majority 
stockholder or President (see Note E).                                          

Other accrued expenses in the accompanying consolidated balance sheets      
include interest payable on the note payable to stockholder of $5,945 at        
December 31, 1996 and 1995.                                                     

NOTE I--INCOME TAXES                                                            

The net deferred taxes recorded in the accompanying consolidated balance    
sheets include the following components:                                        

                                                                [Download Table]

                                             YEAR ENDED DECEMBER 31        
                                       ----------------------------------- 
                                             1996               1995       
                                       -----------------  ---------------- 
                                                  NON-              NON-   
                                       CURRENT  CURRENT   CURRENT CURRENT  
                                                                           
Deferred tax liabilities.............. $      0 $(77,392) $     0 $(63,570)
Deferred tax assets...................  142,537   77,392   65,649   83,801 
                                       -------- --------  ------- -------- 
  NET DEFERRED TAXES.................. $142,537 $      0  $65,649 $ 20,231 
                                       ======== ========  ======= ======== 

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BOWEN SUPPLY, INC., AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Income tax expense in the accompanying Consolidated Statements of Income is 
summarized as follows:                                                          

                                                                [Download Table]

                                                     YEAR ENDED DECEMBER 31  
                                                     ------------------------
                                                        1996         1995    
                                                                             
Federal                                                                      
  Current income tax expense........................ $   999,017  $  604,087 
  Deferred income tax benefit (deduction)...........     (44,746)     (2,883)
                                                     -----------  ---------- 
                                                         954,271     601,204 
                                                     -----------  ---------- 
State                                                                        
  Current income tax expense........................     206,702     162,334 
  Deferred income tax benefit (deduction)...........     (11,911)       (317)
                                                     -----------  ---------- 
                                                         194,791     162,017 
    INCOME TAX EXPENSE.............................. $ 1,149,062  $  763,221 
                                                     ===========  ========== 

A reconciliation of income tax expense in the accompanying Consolidated     
Statements of Income to the statutory rate is summarized as follows:            

                                                                [Download Table]

                                                     YEAR ENDED DECEMBER 31  
                                                     ------------------------
                                                        1996         1995    
                                                                             
Income tax expense at 34% statutory rate............ $   987,780  $  663,681 
Add (deduct):                                                                
  State income taxes, net of federal benefit........     128,562     106,931 
  Income tax effect of nondeductible expenses.......      33,124      19,275 
Other...............................................        (404)    (26,666)
                                                     -----------  ---------- 
                                                         161,282      99,540 
                                                     -----------  ---------- 
    INCOME TAX EXPENSE.............................. $ 1,149,062  $  763,221 
                                                     ===========  ========== 

NOTE J--STOCK OPTIONS                                                           

The Company has a Qualified Stock Option Plan which reserves 50,000 shares  
of the Company's $.10 par value Common Stock for granting to key personnel.     
The options allow these personnel to purchase the Company's stock at no less    
than $5 per share or 100% of the fair market value, whichever is higher, on     
the dates the options are granted. At December 31, 1996, no options had been    
granted under this plan.                                                        

NOTE K--SUBSEQUENT EVENT                                                        

The stockholders of the Company executed an agreement on February 28, 1997, 
with Kevco, Inc., whereby Kevco, Inc. will acquire all of the outstanding       
stock of the Company. All of the Company's long-term debt (including the        
revolver described in Note D) is anticipated to be paid in full in conjunction  
with this transaction.                                                          

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors                                                       
Consolidated Forest Products, L.L.C.                                            

We have audited the accompanying balance sheets of Consolidated Forest      
Products, L.L.C. (the Company) as of September 29, 1996 and October 1, 1995,    
and the related statements of income and retained earnings and cash flows for   
the year ended September 29, 1996 and the period December 2, 1994 to October    
1, 1995. 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 in accordance with generally accepted auditing      
standards. Those standards require that we plan and perform the audits 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. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the financial position of Consolidated Forest         
Products, L.L.C. as of September 29, 1996 and October 1, 1995, and the results  
of its operations and its cash flows for the year ended September 29, 1996 and  
the period December 2, 1994 to October 1, 1995, in conformity with generally    
accepted accounting principles.                                                 

                                /s/ Coopers & Lybrand L.L.P.

Fort Worth, Texas                                                               
November 8, 1996, except for Note 9 as                                          
to which the date is February 27, 1997                                          

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CONSOLIDATED FOREST PRODUCTS, L.L.C.

BALANCE SHEETS

SEPTEMBER 29, 1996 AND OCTOBER 1, 1995

                                                                [Download Table]

                                                      SEPTEMBER 29, OCTOBER 1, 
                                                          1996         1995    
                                                                               
                       ASSETS                                                  
Current assets:                                                                
  Cash and cash equivalents..........................  $     6,254  $     6,053
  Trade accounts receivable, net of allowance of                               
   doubtful accounts of $73,800 and $150,486 in 1996                           
   and 1995, respectively............................    3,928,686    3,786,127
  Advances to owner and employees....................       17,546       12,757
  Inventory..........................................    4,496,745    4,022,491
  Prepaid expenses and other.........................      287,313      252,259
                                                       -----------  -----------
    Total current assets.............................    8,736,544    8,079,687
  Property, plant, and equipment, net................    4,099,814    4,086,385
  Organization and financing cost, net of accumulated                          
   amortization of $353,175 and $152,115 in 1996 and                           
   1995, respectively................................      282,825      483,885
  Goodwill, net of accumulated amortization of                                 
   $470,130 and $213,690 in 1996 and 1995,                                     
   respectively......................................    3,376,279    3,632,719
  Noncompete agreement, net of accumulated                                     
   amortization of $27,500 in 1996...................      122,500            0
                                                       -----------  -----------
                                                       $16,617,962  $16,282,676
                                                       ===========  ===========
           LIABILITIES AND MEMBERS' EQUITY                                     
Current liabilities:                                                           
  Current maturities of long-term debt...............  $ 1,798,077  $ 1,586,967
  Cash overdraft.....................................    2,552,927    1,718,697
  Accounts payable...................................    2,059,859    1,465,965
  Accrued liabilities................................      724,408      652,059
                                                       -----------  -----------
    Total current liabilities........................    7,135,271    5,423,688
                                                       -----------  -----------
Long-term debt, less current portion above...........    4,178,829    5,851,307
Borrowings under line of credit......................    2,956,194    4,253,853
                                                       -----------  -----------
    Total liabilities................................   14,270,294   15,528,848
                                                       -----------  -----------
Commitments and contingencies (Note 7)                                         
Members' equity:                                                               
  Capital contributions..............................      700,000      700,000
  Retained earnings..................................    1,647,668       53,828
                                                       -----------  -----------
    Total members' equity............................    2,347,668      753,828
                                                       -----------  -----------
                                                       $16,617,962  $16,282,676
                                                       ===========  ===========

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED FOREST PRODUCTS, L.L.C.

STATEMENTS OF INCOME AND RETAINED EARNINGS

FOR THE YEAR ENDED SEPTEMBER 29, 1996 AND THE PERIOD
DECEMBER 2, 1994 TO OCTOBER 1, 1995 

                                                                [Download Table]

                                                                    DECEMBER 2, 
                                                                      1994 TO   
                                                      SEPTEMBER 29, OCTOBER 1,  
                                                          1996         1995     
                                                                                
Net sales............................................  $92,474,171  $62,872,613 
Cost of sales........................................   81,745,729   56,642,646 
                                                       -----------  ----------- 
    Gross profit.....................................   10,728,442    6,229,967 
Selling, general, and administrative expenses........    7,597,871    4,978,089 
                                                       -----------  ----------- 
Income from operations...............................    3,130,571    1,251,878 
                                                       -----------  ----------- 
Other income and expense:                                                       
  Other income.......................................       46,213        2,545 
  Interest expense...................................   (1,229,984)  (1,053,477)
                                                       -----------  ----------- 
    Total other expense, net.........................   (1,183,771)  (1,050,932)
                                                       -----------  ----------- 
    Net income.......................................    1,946,800      200,946 
Retained earnings, beginning of period...............       53,828            0 
Tax dividends paid to members........................     (352,960)    (147,118)
                                                       -----------  ----------- 
Retained earnings, end of period.....................  $ 1,647,668  $    53,828 
                                                       ===========  =========== 

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED FOREST PRODUCTS, L.L.C.

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED SEPTEMBER 29, 1996 AND THE PERIOD
DECEMBER 2, 1994 TO OCTOBER 1, 1995 

                                                                [Download Table]

                                                                  DECEMBER 2,  
                                                                    1994 TO    
                                                    SEPTEMBER 29,  OCTOBER 1,  
                                                        1996          1995     
                                                                               
Cash flows from operating activities:                                          
  Net income.......................................  $ 1,946,800  $    200,946 
  Adjustments to reconcile net income to net cash                              
   provided by operating activities:                                           
    Depreciation...................................      576,154       392,999 
    Amortization...................................      485,000       365,805 
    Loss (gain) on sale of equipment...............        1,487        (1,548)
    Other, net.....................................            0      (235,503)
    Changes in:                                                                
      Accounts receivable, net.....................     (142,559)     (360,511)
      Advances to owner and employees..............       (4,789)      (21,052)
      Inventory....................................     (474,254)     (178,918)
      Prepaid expenses and other...................      (35,054)     (111,770)
      Accounts payable.............................      593,894       330,574 
      Accrued liabilities..........................       72,349       278,509 
                                                     -----------  ------------ 
        Net cash provided by operating activities..    3,019,028       659,531 
                                                     -----------  ------------ 
Cash flows from investing activities:                                          
  Cash paid in connection with acquisition of net                              
   assets of business..............................            0   (11,940,730)
  Cash paid for organization costs.................            0       (82,624)
  Cash paid for noncompete agreement...............     (150,000)            0 
  Capital expenditures.............................     (646,070)   (1,395,651)
  Proceeds from sale of equipment..................       55,000        62,814 
                                                     -----------  ------------ 
        Net cash used in investing activities......     (741,070)  (13,356,191)
                                                     ===========  ============ 
Cash flows from financing activities:                                          
  Cash paid for financing costs....................            0      (153,376)
  Net (payments) proceeds on line of credit........   (1,297,659)    4,253,853 
  Proceeds from long-term debt.....................      150,000     6,780,156 
  Payments on long-term debt.......................   (1,611,368)   (1,018,379)
  Proceeds from capital contributions..............            0     2,200,000 
  Change in cash overdraft.........................      834,230       787,577 
  Tax dividends paid to members....................     (352,960)     (147,118)
                                                     -----------  ------------ 
        Net cash (used in) provided by financing                               
         activities................................   (2,277,757)   12,702,713 
                                                     -----------  ------------ 
        Net increase in cash and cash equivalents..          201         6,053 
Cash and cash equivalents, beginning of period.....        6,053             0 
                                                     -----------  ------------ 
Cash and cash equivalents, end of period...........  $     6,254  $      6,053 
                                                     ===========  ============ 
Supplemental cash flow information:                                            
  Cash paid for interest during the period.........  $ 1,256,911  $    944,070 
                                                     ===========  ============ 

As described in Note 1, the note payable to member at October 1, 1995 of    
$1,264,497 represented a noncash financing activity.                            

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED FOREST PRODUCTS, L.L.C.  

NOTES TO FINANCIAL STATEMENTS 

1. GENERAL                                                                      

On December 2, 1994, Consolidated Forest Products, L.L.C. (the Company)     
purchased the net assets of Consolidated Forest Products, Inc. (Predecessor)    
for $7,260,104. The financial information of the Company reflects purchase      
accounting in which the purchase price of $7,260,104 is allocated to the        
underlying assets and liabilities of the Predecessor based on their respective  
estimated fair values. In connection with the acquisition, payments in the      
amount of $5,995,607 were made to shareholders of the Predecessor who are also  
members of the Company. Amounts paid to these members in excess of Predecessor  
basis have been recorded as a reduction of members' equity of $1,500,000. A     
note payable to the principal member of the Predecessor was recorded for the    
unpaid portion of the purchase price. Goodwill, the excess of the purchase      
price over the fair value of the net assets acquired, amounted to               
approximately $3,846,000 and is being amortized on a straight-line basis over   
15 years.                                                                       

The acquisition of the net assets of the Predecessor was financed with      
contributed capital of $2,200,000 and the following borrowings from Barclays    
Business Credit, Inc. (which was subsequently acquired by Fleet Capital         
Corporation): a term note payable of $5,500,000 and advances under a            
$6,500,000 revolving line of credit facility. Following the acquisition,        
certain existing indebtedness of the Predecessor was repaid using financing     
proceeds.                                                                       

The Company is engaged in the business of fabricating and distributing      
lumber and plywood, at wholesale, as well as manufacturing wood rafters for     
mobile home manufacturers. The Company operates and sells to customers          
primarily in the Southeastern United States. During the year ended September    
29, 1996 and the period December 2, 1994 to October 1, 1995, sales to seven     
customers represented approximately 69% and 62% of total sales, respectively,   
and outstanding balances related to these customers represented approximately   
59% and 63% of accounts receivable as of September 29, 1996 and October 1,      
1995, respectively.                                                             

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

A summary of the significant accounting policies used by the Company is set 
forth below.                                                                    

CASH AND CASH EQUIVALENTS--The Company considers all highly liquid debt     
instruments with an original maturity of three months or less at the time of    
purchase to be cash equivalents. Primarily all of the Company's cash and cash   
equivalents are held in one major banking institution.                          

FINANCIAL INSTRUMENTS--The carrying amount reported in the balance sheet for
cash and cash equivalents, accounts receivable, and accounts payable            
approximates fair value because of the immediate or short-term maturity of      
these financial instruments. The carrying amounts reported for the revolving    
line of credit and long-term debt approximate fair value because the            
underlying instruments are either at variable interest rates which reprice      
frequently or at stated rates of interest which approximate market.             

INVENTORY--Inventory is valued at the lower of cost or market. The first-in,
first-out (FIFO) method is used to determine the cost of the Company's          
inventory.                                                                      

INTANGIBLE ASSETS--Intangible assets are stated at cost and are being       
amortized on a straight-line basis over lives as follows:                       

                                                                [Download Table]

                                                     LIFE   
                                                            
Goodwill..........................................  15 years
Organization and financing costs.................. 5-7 years
Noncompete agreement..............................   5 years

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CONSOLIDATED FOREST PRODUCTS, L.L.C.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

The Company reviews goodwill to assess recoverability periodically. At each 
balance sheet date, management assesses whether there has been a permanent      
impairment in the value of goodwill by considering factors such as expected     
future operating income, current operating results and other economic factors.  
Management believes no impairment has occurred.                                 

PROPERTY, PLANT, AND EQUIPMENT--Property, plant, and equipment is stated at 
cost and depreciated using the straight-line method over the estimated useful   
lives of the assets. Expenditures for repairs and maintenance are charged to    
expense as incurred; betterments which materially prolong the lives of the      
assets are capitalized. The cost of assets retired or otherwise disposed of     
and the related accumulated depreciation are removed from the accounts and the  
gain or loss on such disposition is included in income.                         

LONG-LIVED ASSETS--During the year ended September 29, 1996, the Company    
implemented Financial Accounting Standards Board (FASB) Statement No. 121,      
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets    
to be Disposed Of. In accordance with FASB 121, the Company will recognize      
impairment losses on long-lived assets used in operations when indicators of    
impairment are present and the undiscounted cash flows estimated to be          
generated by those assets are less than the asset's carrying amount. If         
undiscounted future cash flows are less than the asset's carrying amount, an    
impairment loss would be recorded using discounted future cash flows. There     
were no such losses recognized at September 29, 1996.                           

INCOME TAXES--As a limited liability company, the Company is not subject to 
income taxes. The liability or benefit is passed on to the members of the       
Company. Thus, no provision for income taxes has been provided for in the       
accompanying financial statements.                                              

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure 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 differ from those estimates.             

3. INVENTORY                                                                    

Inventory consists of the following at September 29, 1996 and October 1,    
1995:                                                                           

                                                                [Download Table]

                                           SEPTEMBER 29, 1996 OCTOBER 1, 1995
                                                                             
Raw materials.............................     $3,498,929       $3,299,664   
Work-in-process...........................        304,978          187,595   
Finished goods............................        692,838          535,232   
                                               ----------       ----------   
                                               $4,496,745       $4,022,491   
                                               ==========       ==========   

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CONSOLIDATED FOREST PRODUCTS, L.L.C.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

4. PROPERTY, PLANT, AND EQUIPMENT                                               

Balances of property, plant, and equipment consist of the following at      
September 29, 1996 and October 1, 1995:                                         

                                                                [Download Table]

                                           SEPTEMBER 29, 1996 OCTOBER 1, 1995
                                                                             
Land......................................     $  393,822       $  380,792   
Buildings.................................      1,091,329          961,767   
Machinery and equipment...................      2,159,840        1,784,971   
Furniture and office equipment............         93,099           80,874   
Automotive equipment......................      1,293,355        1,263,902   
                                               ----------       ----------   
                                                5,031,445        4,472,306   
Less accumulated depreciation.............        931,631          385,921   
                                               ----------       ----------   
                                               $4,099,814       $4,086,385   
                                               ==========       ==========   

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CONSOLIDATED FOREST PRODUCTS, L.L.C.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. LONG-TERM DEBT                                                               

At September 29, 1996 and October 1, 1995, long-term debt consists of the   
following:                                                                      

                                                                [Download Table]

                                                    SEPTEMBER 29, OCTOBER 1,
                                                        1996         1995   
                                                                            
Senior note payable to Fleet Capital Corporation,                           
 variable interest (9.75% and 10.25% at September                           
 29, 1996 and October 1, 1995, respectively)                                
 payable monthly along with $114,583 in principal                           
 until January 6, 1998, at which time remaining                             
 principal balance becomes due....................   $3,145,520   $4,520,520
Senior note payable to Fleet Capital Corporation,                           
 variable interest (9.75% and 10.25% at Sepember                            
 29, 1996 and October 1, 1995, respectively)                                
 payable monthly along with $10,833 in principal                            
 until January 6, 1998, at which time remaining                             
 principal balance becomes due....................      487,505      617,501
Note payable to member, subordinate to the debt                             
 payable to Fleet Capital Corporation, with                                 
 interest payable annually at 8%..................    1,190,681    1,264,497
Subordinated note payable to member, variable                               
 interest (9.25% and 10% at September 29, 1996 and                          
 October 1, 1995, respectively) payable monthly,                            
 principal due January 6, 1999....................      450,000      300,000
Subordinated note payable to member, variable                               
 interest (9.25% and 10% at September 29, 1996 and                          
 October 1, 1995, respectively) payable monthly,                            
 principal due January 6, 1999....................      300,000      300,000
Deferred loan origination fee payable to Fleet                              
 Capital Corporation, due January 6, 1998.........      400,000      400,000
Note payable to AmSouth Bank, payable monthly                               
 including interest at 7 3/4%.....................            0       30,156
Note payable to City of Haleyville Water & Sewer                            
 Department, no interest, principal payable $200                            
 monthly..........................................        3,200        5,600
                                                     ----------   ----------
                                                      5,976,906    7,438,274
Less current maturities...........................    1,798,077    1,586,967
                                                     ----------   ----------
Long-term portion.................................   $4,178,829   $5,851,307
                                                     ==========   ==========

Future maturities of long-term debt are as follows:                         

                                                                [Download Table]

YEARS ENDING SEPTEMBER 29:                                  
                                                            
    1997......................................... $1,798,077
    1998.........................................  2,828,829
    1999.........................................  1,050,000
    2000.........................................    300,000
                                                  ----------
                                                  $5,976,906
                                                  ==========

The Company operates under a revolving line of credit agreement with Fleet  
Capital Corporation (the Bank), a commercial bank, which provides borrowings    
based upon certain inventory and accounts receivable                            

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CONSOLIDATED FOREST PRODUCTS, L.L.C.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

levels up to a maximum amount of $7,608,000. Advances bear interest at 1.5% in  
excess of the prime rate. The interest rate was 9.75% at September 29, 1996.    
At September 29, 1996, the outstanding borrowings under this line of credit     
totaled $2,956,194 and the total unused availability under this agreement was   
approximately $1,540,000. Total outstanding borrowings under this line of       
credit become due January 6, 1998.                                              

The revolving line of credit agreement, as well as the senior notes payable 
to the Bank, places certain restrictive covenants upon the Company, such as     
maintaining specified equity levels, meeting certain financial ratios, and      
achieving certain net income and cash flow levels. At September 29, 1996 and    
for the year then ended, the Company was in compliance with or had received     
appropriate waivers of these covenants. Substantially all of the assets of the  
Company are pledged as collateral for the line-of-credit and long-term debt.    

The note payable to member of $1,190,681 at September 29, 1996 represents   
the unpaid portion of the purchase price as described in Note 1. Principal      
payments on the note are subordinate to the debt owed to the Bank; however,     
the Bank did allow payment of the first installment on the note in January of   
1996 of approximately $65,000. Further, absent any defaults under the bank      
agreements, the Company is allowed to make annual interest payments on this     
note as well. During the period ended October 1, 1995, the Company obtained     
working capital loans of $300,000 each from two of its members to fund working  
capital needs of the Company. An additional $150,000 was borrowed from one of   
its members during the year ended September 29, 1996. Each of these loans are   
subordinated to the Company's bank debt with only interest payments required    
until the January 6, 1999 maturity of the notes.                                

6. RETIREMENT PLAN                                                              

The Company has made available to all eligible employees a defined          
contribution retirement plan (the Plan). Employees are eligible to participate  
after completing six months of service and attaining the age of eighteen. The   
Plan provides that employees may elect to defer up to 15% of compensation, as   
defined in the plan agreement. The Company will match 50% of employee           
deferrals up to 6% of compensation. The Company made contributions of           
approximately $40,500 and $26,000 for the year ended September 29, 1996 and     
the period December 2, 1994 to October 1, 1995, respectively.                   

7. COMMITMENTS AND CONTINGENCIES                                                

LEASES                                                                        

The Company leases office and warehouse space under various operating       
leases. The leases generally are for terms of three to five years and do not    
contain purchase options. Rent expense was approximately $184,000 and $115,000  
for the year ended September 29, 1996 and the period December 2, 1994 to        
October 1, 1995, respectively.                                                  

The future minimum lease payments required under noncancelable operating        
leases with initial or remaining terms of one or more years at September 29,    
1996 were approximately as follows:                                             

                                                                [Download Table]

FISCAL YEARS:                                               
                                                            
 1997.............................................. $182,000
 1998..............................................  178,500
 1999..............................................  177,000
 2000..............................................   64,500
 2001..............................................    2,250
                                                    --------
                                                    $604,250
                                                    ========

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CONSOLIDATED FOREST PRODUCTS, L.L.C.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

LITIGATION                                                                    

There are claims and pending actions incident to the business operations of 
the Company. Management does not expect resolution of these matters to have a   
material adverse effect on the Company's financial position or future results   
of operations or cash flows.                                                    

8. RELATED PARTIES                                                              

On January 3, 1995, the Company entered into a sales agreement with Caney   
Creek, Inc. (Caney Creek), a sales company owned by individuals with a          
minority membership position in the Company. Under this agreement, Caney Creek  
has exclusive rights to sell products manufactured by the Company to all but    
one of the Company's customers. The initial term of this agreement was for the  
three-year period ending December 31, 1997. After the initial term, this        
agreement shall automatically renew for successive one-year terms unless        
otherwise canceled by either party. Upon termination of the sales agreement,    
the Company is obligated to pay Caney Creek an amount equal to one-half of the  
sales commissions paid to them during the previous twelve-month period in       
exchange for a one-year covenant not to compete from Caney Creek and its        
employees. This amount will be paid in twelve monthly installments beginning    
the month after the agreement is effectively terminated. Sales commissions      
paid to Caney Creek totaled approximately $2,886,000 and $2,000,000 for the     
year ended September 29, 1996 and the period December 2, 1994 to October 1,     
1995, respectively.                                                             

9. SUBSEQUENT EVENT                                                             

On February 27, 1997, Kevco, Inc., through a wholly-owned subsidiary,       
acquired substantially all of the assets and assumed certain liabilities of     
the Company pursuant to the terms of a certain asset purchase agreement, dated  
as of January 31, 1997.                                                         

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INDEPENDENT AUDITOR'S REPORT  

To the Board of Directors and Stockholders of Service Supply Systems, Inc.      

We have audited the accompanying consolidated statements of income and cash 
flows of Service Supply Systems, Inc. and Subsidiary for the year ended         
December 31, 1994. These consolidated financial statements are the              
responsibility of the Company's management. Our responsibility is to express    
an opinion on these consolidated financial statements based on our audit.       

We conducted our audit in accordance with generally accepted auditing       
standards. 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. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audit provides a reasonable basis   
for our opinion.                                                                

In our opinion, the consolidated financial statements referred to above     
present fairly, in all material respects, the consolidated results of           
operations and cash flows of Service Supply Systems, Inc. and Subsidiary for    
the year ended December 31, 1994 in conformity with generally accepted          
accounting principles.                                                          

/s/ RUMSEY & HUCKABY, P.C.                                                      

Cordele, Georgia                                                                
February 28, 1995                                                               

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SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)

                                                                [Download Table]

                                                                     YEAR ENDED 
                                                                    DECEMBER 31,
                                                                        1994    
                                                                    ------------
                                                                                
Net sales..........................................................   $100,910  
Cost of sales......................................................     88,029  
                                                                      --------  
  Gross profit.....................................................     12,881  
Commission income..................................................      1,953  
                                                                      --------  
                                                                        14,834  
Selling, general and administrative expenses.......................     11,899  
                                                                      --------  
  Operating income.................................................      2,935  
Other income.......................................................         33  
Interest income....................................................        --   
Interest expense...................................................       (582) 
                                                                      --------  
  Income before income taxes.......................................      2,386  
Provision for income taxes.........................................        871  
                                                                      --------  
  Net income.......................................................   $  1,515  
                                                                      ========  

The accompanying notes are an integral part of the consolidated financial 
statements. 

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SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

                                                                [Download Table]

                                                                    YEAR ENDED 
                                                                   DECEMBER 31,
                                                                       1994    
                                                                   ------------
                                                                               
Cash flows from operating activities:                                          
  Net income......................................................    $1,515   
  Adjustments to reconcile net income to net cash used by operat-              
   ing activities:                                                             
    Depreciation and amortization.................................       515   
    Gain on disposal of assets....................................       (33)  
    Increase in deferred tax asset................................      (266)  
    Changes in assets and liabilities:                                         
      Accounts receivable, net....................................    (2,279)  
      Inventories.................................................    (2,346)  
      Other receivables...........................................      (206)  
      Prepaid expenses............................................      (250)  
      Accounts payable............................................       590   
      Accrued expenses............................................     1,239   
                                                                      ------   
        Net cash used by operating activities.....................    (1,521)  
                                                                      ------   
Cash flows from investing activities:                                          
  Purchase of property and equipment..............................    (3,850)  
  Proceeds from sale of assets....................................        77   
  Other assets....................................................       (25)  
  Cash surrender value of insurance policies......................       (34)  
                                                                      ------   
        Net cash used by investing activities.....................    (3,832)  
                                                                      ------   
Cash flows from financing activities:                                          
  Proceeds from new borrowings....................................     8,290   
  Payments of long-term debt......................................    (3,113)  
  Dividends paid..................................................      (123)  
  Collections on loan to stockholders.............................       153   
  Stock subscriptions receivable..................................       149   
                                                                      ------   
        Net cash provided by financing activities.................     5,356   
                                                                      ------   
Net increase in cash and cash equivalents.........................         3   
Beginning cash and cash equivalents...............................        25   
                                                                      ------   
Ending cash and cash equivalents..................................    $   28   
                                                                      ======   

The accompanying notes are an integral part of the consolidated financial 
statements. 

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SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

NATURE OF BUSINESS                                                            

Service Supply Systems, Inc. (the "Company") is in the business of          
procuring, producing, transporting, storing and wholesaling plumbing and        
building parts to the housing industry. It also acts as warehousing and sales   
agent for certain manufacturers of housing components. The Company has          
operations in Georgia, Florida, Alabama, North Carolina and Texas. The Company  
extends credit to its customers in these states during the normal course of     
business.                                                                       

PROPERTY AND EQUIPMENT                                                        

Property and equipment are recorded at cost. The Company uses the straight- 
line and declining-balance methods to recognize depreciation over the           
estimated useful lives of the related assets. Estimated useful lives range      
from three to thirty-nine years.                                                

PRINCIPLES OF CONSOLIDATION                                                   

The financial statements are a presentation of Service Supply Systems, Inc. 
consolidated with its wholly-owned subsidiary, Sunbelt Wood Components, Inc.    
All intercompany accounts and transactions are eliminated in consolidation.     

INVENTORIES                                                                   

Inventories are valued at the lower of cost or market. Market is replacement
cost or net realizable value. Inventories purchased for resale are valued       
using the last-in, first-out (LIFO) method. Manufactured inventories are        
valued using the first-in, first-out (FIFO) method. For the year ended          
December 31, 1994, the percentage of inventory valued at LIFO was 79%. The      
LIFO reserve at December 31, 1994 was $565,150.                                 

INCOME TAXES                                                                  

Income taxes are provided on pre-tax earnings reported in the financial     
statements. Deferred income taxes have been provided on the future tax effects  
of differences between the financial statement and tax values of assets and     
liabilities.                                                                    

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)                                          

Dividends on shares held by the ESOP are charged to retained earnings.      

2. INCOME TAXES                                                                 

The provision for income taxes is summarized as follows:                    

                                                                [Download Table]

                                                                      1994   
                                                                             
Federal income taxes............................................... $993,793 
State income taxes.................................................  142,222 
Deferred income taxes on temporary differences..................... (265,015)
                                                                    -------- 
Provision for income taxes......................................... $871,000 
                                                                    ======== 

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SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

A reconciliation between the taxes due on pre-tax income using the effective
Federal and State tax rates and the provision for income taxes is as follows:   

                                                                [Download Table]

                                                                             
Tax at effective rates............................................. $905,000 
Permanent differences and other adjusting items....................  (34,000)
                                                                    -------- 
                                                                    $871,000 
                                                                    ======== 

At December 31, 1994, a deferred tax asset of $300,000 is included in       
prepaid expenses. This represents the estimated future tax effects              
attributable to temporary differences in tax and financial accounting for       
accounts receivable, inventory and accrued liabilities.                         

3. LEASES AND RELATED PARTIES                                                   

The Company leases land, buildings, autos, trucks, trailers and equipment   
under operating leases. Rental expense for the year ended December 31, 1994     
amounted to $1,136,784.                                                         

Some of these leases were paid to partnerships which are comprised of       
stockholders and officers of the Company. Rental expenses paid to these         
partnerships for the year ended December 31, 1994 amounted to $136,000.         

As of December 31, 1994, future minimum lease payments under noncancelable  
terms were as follows for the five succeeding years:                            

                                                                [Download Table]
                                                                 
1995.................................................. $  866,567
1996..................................................    808,925
1997..................................................    795,325
1998..................................................    739,571
1999..................................................    319,944
                                                       ----------
  Total............................................... $3,530,332
                                                       ==========

4. EMPLOYEE STOCK OWNERSHIP PLAN                                                

The Company has an Employee Stock Ownership Plan covering all of its        
employees. It provides for discretionary contributions by the Company as        
determined annually by the Board of Directors, up to the maximum amount         
permitted under the Internal Revenue Code. The plan is a qualified profit       
sharing plan required to invest primarily in Company stock. Contributions are   
allocated to participants on a nondiscriminatory formula basis.                 

The Company contributed $732,286 to the plan in 1994. The plan purchased    
6,200 shares of stock in 1994 for $148,800.                                     

The plan owned 234,140 shares at December 31, 1994. These shares were       
subject to a repurchase obligation by the Company at $40.00 per share at        
December 31, 1994.                                                              

5.SUPPLEMENTAL CASH FLOW INFORMATION                                            

The Company considers all short-term investments with an original maturity  
of three months or less to be cash equivalents.                                 

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SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Cash paid for interest and income taxes for period was as follows:          

                                                                [Download Table]

                                                                      1994   
                                                                             
Interest.......................................................... $  582,000
                                                                   ==========
Income Taxes...................................................... $1,615,000
                                                                   ==========

6.COMMITMENTS AND CONTINGENCIES                                                 

The Company is party to a shareholders' agreement giving the Company an     
option to purchase all or part of the stock proposed for sale by any            
shareholder and requiring the Company to purchase all of those shares upon      
death of a shareholder. Terminating employees must offer all of their stock     
for purchase by the Company. The purchase price is the fair market value as of  
the most recent Annual Valuation Date as determined by independent appraisal    
required by the Employee Stock Ownership Plan.                                  

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INDEX TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS 

                                                                [Download Table]
                                                                               
Kevco, Inc.                                                                    
 Unaudited Pro Forma Condensed Combined Balance Sheet and Notes thereto as     
  of                                                                           
  September 30, 1997......................................................  P-3
 Unaudited Pro Forma Condensed Combined Statement of Income and Notes          
  thereto                                                                      
  for the Last Twelve Months Ended September 30, 1997.....................  P-5
 Unaudited Pro Forma Condensed Combined Statement of Income and Notes          
  thereto                                                                      
  for the Nine Months Ended September 30, 1997............................ P-11
 Unaudited Pro Forma Condensed Combined Statement of Income and Notes          
  thereto                                                                      
  for the Year Ended December 31, 1996.................................... P-17

P-1 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA 

The unaudited pro forma condensed combined financial data is based on the   
consolidated financial statements of Kevco, Inc. ("Kevco"), the consolidated    
financial statements of Bowen Supply, Inc. ("Bowen"), the consolidated          
financial statements of Consolidated Forest Products, L.L.C. ("Consolidated     
Forest") and the consolidated financial statements of Shelter Components        
Corporation ("Shelter") included elsewhere in this Prospectus. The unaudited    
pro forma financial data gives effect to (i) the effect on weighted average     
shares and earnings per share of the sale of 2,415,000 shares of common stock   
of Kevco and the tax impact of Kevco's conversion from an S corporation to a C  
corporation in November 1996 (including an over-allotment option of 315,000     
shares exercised in December 1996) ("Public Offering"), (ii) the acquisition    
by Kevco of Bowen ("Bowen Acquisition") and Consolidated Forest ("Consolidated  
Forest Acquisition" and, collectively with the Bowen Acquisition, the "Kevco    
Acquisitions"), (iii) Shelter's sale of the operations and certain assets of    
Danube Carpet Mills, Inc. ("Danube") by Shelter and the acquisition by Shelter  
of PSI ("PSI Acquisition"), (iv) the acquisition by Kevco of Shelter ("Shelter  
Acquisition"), (v) the Senior Credit Facility and (vi) the Old Notes Offering   
(collectively, the "Pro Forma Transactions") as if these transactions had       
occurred on January 1, 1996.                                                    

The unaudited pro forma condensed combined balance sheet at September 30,   
1997 is based on the consolidated financial statements of Kevco adjusted to     
give effect to the Shelter Acquisition and the Old Notes Offering as if such    
transactions had occurred on September 30, 1997. The unaudited pro forma        
condensed combined statements of income for the year ended December 31, 1996,   
the nine month-period ended September 30, 1997 and the last twelve months       
ended September 30, 1997, are based on the consolidated financial statements    
of Kevco and adjusted to give effect to the Pro Forma Transactions as if such   
transactions had occurred on January 1, 1996. The acquisition adjustments and   
offering adjustments are based upon historical financial information of Kevco,  
Bowen, Consolidated Forest, PSI and Shelter and certain assumptions that        
management of Kevco believes are reasonable. The Kevco Acquisitions, the PSI    
Acquisition and the Shelter Acquisition are accounted for under the purchase    
method of accounting. Under this method of accounting, the purchase price has   
been allocated to the assets and liabilities acquired based on preliminary      
estimates of fair value. The actual fair value is determined as of the          
consummation of each of the acquisitions. The unaudited pro forma financial     
data does not necessarily reflect the results of operations or the financial    
position of Kevco that actually would have resulted had the Pro Forma           
Transactions occurred at the date indicated, or project the results of          
operations or financial position of Kevco for any future date or period.        

The unaudited pro forma condensed combined financial data should be read in 
conjunction with the consolidated financial statements of Kevco, Bowen,         
Consolidated Forest and Shelter and the notes thereto included elsewhere in     
this Prospectus.                                                                

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

SEPTEMBER 30, 1997
(IN THOUSANDS)

                                                                [Download Table]

                                                       SHELTER        PRO   
                                KEVCO     SHELTER    ACQUISITION     FORMA  
                              HISTORICAL HISTORICAL ADJUSTMENTS(1)   TOTAL  
           ASSETS             ---------- ---------- --------------  --------
                                                                            
Current Assets:                                                             
  Cash and cash                                                             
   equivalents..............   $     77   $ 13,139     $(13,139)(2) $     77
  Trade accounts receivable,                                                
   net .....................     25,190     33,010           --       58,200
  Inventories...............     34,988     43,001           --       77,989
  Other current assets .....      1,447      3,327           --        4,774
                               --------   --------     --------     --------
    Total current assets....     61,702     92,477      (13,139)     141,040
Property and equipment,                                                     
 net........................     18,563     25,929           --       44,492
Intangible assets, net .....     33,600     13,126      (13,126)(3)  127,549
                                                         88,024 (3)         
                                                          5,925 (4)         
Other assets................        713      1,322           --        2,035
                               --------   --------     --------     --------
    Total assets............   $114,578   $132,854     $ 67,684     $315,116
                               ========   ========     ========     ========

      LIABILITIES AND                                                       
    STOCKHOLDERS' EQUITY                                                    
                                                                            
Current liabilities:                                                        
  Trade accounts payable....   $ 22,245   $ 33,079     $     --     $ 55,324
  Accrued liabilities.......      4,050      7,279           --       11,329
  Current portion of long-                                                  
   term debt................        112      3,007       (2,271)(5)      848
  Other liabilities.........        168      1,023          935 (6)    2,126
                               --------   --------     --------     --------
    Total current                                                           
     liabilities............     26,575     44,388       (1,336)      69,627
Long-term debt, less current                                                
 portion....................     45,737     17,208      (14,444)(7)  202,255
                                                        153,754 (7)         
Other liabilities...........      1,869        968           --        2,837
                               --------   --------     --------     --------
    Total liabilities.......     74,181     62,564      137,974      274,719
    Total stockholders'                                                     
     equity.................     40,397     70,290      (70,290)(8)   40,397
                               --------   --------     --------     --------
    Total liabilities and                                                   
     stockholders' equity...   $114,578   $132,854     $ 67,684     $315,116
                               ========   ========     ========     ========

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET 

SEPTEMBER 30, 1997  
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)  

(1) The Shelter Acquisition was accounted for using the purchase method of      
accounting. The aggregate purchase price was determined as follows:     

                                                                [Download Table]
                                                                          
Shares outstanding at September 30, 1997.......................     7,765 
Options outstanding at September 30, 1997......................       376 
                                                                --------- 
  Total........................................................     8,141 
Purchase price per share....................................... $   17.50 
                                                                --------- 
                                                                $ 142,468 
Exercise of options outstanding (a)............................    (3,625)
                                                                --------- 
Purchase price................................................. $ 138,843 
Acquisition costs (b)..........................................     5,410 
                                                                --------- 
  Total purchase price......................................... $ 144,253 
                                                                ========= 

(a) Represents cash to be received by Kevco in settlement of stock options  
   outstanding as of September 30, 1997 (376,000 options outstanding at an
average price of $9.64 per share).                                  
(b) Represents fees and costs directly associated with the Shelter          
Acquisition consisting of investment banking, legal and other       
professional costs.                                                 
(2) Reflects the utilization of existing cash to finance a portion of the       
Shelter Acquisition.                                                    
(3) Goodwill was adjusted to reflect: (i) the elimination of existing goodwill  
  of Shelter and (ii) the excess of purchase cost over the fair value of net
assets acquired which amount will be amortized on a straight line basis 
over an estimated life of 40 years.                                     
(4) Intangibles were adjusted to reflect the capitalization of financing costs  
  that will be amortized over the life of the Senior Credit Facility and the
Notes.                                                                  
(5) Current portion of long-term debt was adjusted to reflect the retirement    
of a portion of long-term debt. See note (7).                           
(6) The adjustment reflects accrued severance costs related to the involuntary  
termination of employees resulting from the Shelter Acquisition.        
(7) Long-term debt was adjusted to reflect gross proceeds of $105,000 from the  
  issuance of the Notes and additional borrowings of $48,754 from the Senior
Credit Facility, net of $14,444 of long-term debt of Shelter that was   
retired.                                                                
(8) The adjustment reflects the elimination of the stockholders' equity of      
Shelter.                                                                

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME  

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                 THE OLD               
                          KEVCO PRO  SHELTER PRO   SHELTER        NOTES         KEVCO  
                            FORMA       FORMA    ACQUISITION    OFFERING      COMBINED 
                          TOTALS(A)   TOTALS(B)  ADJUSTMENTS   ADJUSTMENTS    PRO FORMA
                          ---------  ----------- -----------   -----------    ---------
                                                                                       
Net sales...............  $384,269    $470,907     $   --       $     --      $855,176 
Cost of sales...........   330,583     404,977         --             --       735,560 
                          --------    --------     ------       --------      -------- 
  Gross profit..........    53,686      65,930         --             --       119,616 
Commission income.......     6,224       2,706         --             --         8,930 
                          --------    --------     ------       --------      -------- 
                            59,910      68,636         --             --       128,546 
Selling, general and ad-                                                               
 ministrative expenses..    41,035      54,356     (5,346)(1)                   91,014 
                                                   (1,232)(2)                          
                                                    2,201 (3)                          
                          --------    --------     ------       --------      -------- 
  Operating income......    18,875      14,280      4,377             --        37,532 
Interest expense........    (4,068)     (1,039)                  (18,580)(4)   (19,536)
                                                                   4,862 (4)           
                                                                    (711)(4)           
Other income (expense)..       174         447         --             --           621 
                          --------    --------     ------       --------      -------- 
Income before income                                                                   
 taxes..................    14,981      13,688      4,377        (14,429)       18,617 
Income taxes............     5,992       5,267      1,751 (5)     (4,632)(5)     8,378 
                          --------    --------     ------       --------      -------- 
  Net income............  $  8,989    $  8,421     $2,626       $ (9,797)     $ 10,239 
                          ========    ========     ======       ========      ======== 
Earnings per share......  $   1.30                                            $   1.48 
                          ========                                            ======== 
Weighted average shares                                                                
 outstanding............     6,916                                               6,916 
                          ========                                            ======== 
Other Data:                                                                            
  Operating income......  $ 18,875    $ 14,280     $4,377       $     --      $ 37,532 
  Depreciation and                                                                     
   amortization.........     3,346       3,839        969             --         8,154 
                          --------    --------     ------       --------      -------- 
  EBITDA (6)............  $ 22,221    $ 18,119     $5,346       $     --      $ 45,686 
                          ========    ========     ======       ========      ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Public Offering and the Kevco          
Acquisitions.                                                           
(B) Includes the pro forma effect of the sale of the operations and certain     
assets of Danube and the PSI Acquisition.                               

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of  
$4,862 to be repaid from the proceeds of the Senior Credit Facility and 
(iii) the amortization of financing costs of $711 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

(A) KEVCO PRO FORMA                                                             

                                                        [Enlarge/Download Table]

                                      PUBLIC                   CONSOLIDATED                   KEVCO  
                           KEVCO     OFFERING    BOWEN SUPPLY     FOREST     ACQUISITION    PRO FORMA
                         HISTORICAL ADJUSTMENTS  HISTORICAL(3) HISTORICAL(4) ADJUSTMENTS     TOTALS  
                         ---------- -----------  ------------- ------------- -----------    ---------
                                                                                                     
Net sales...............  $334,253     $ --         $17,666       $32,350      $   --       $384,269 
Cost of sales...........   287,790       --          13,915        28,960         (82)(5)    330,583 
                          --------     ----         -------       -------      ------       -------- 
  Gross profit..........    46,463       --           3,751         3,390          82         53,686 
Commission income.......     5,810       --             414            --          --          6,224 
                          --------     ----         -------       -------      ------       -------- 
                            52,273       --           4,165         3,390          82         59,910 
Selling, general and                                                                                 
 administrative                                                                                      
 expenses...............    35,870       --           2,869         2,811        (213)(6)     41,035 
                                                                                 (622)(7)            
                                                                                  303(8)             
                                                                                   17(9)             
                          --------     ----         -------       -------      ------       -------- 
  Operating income......    16,403       --           1,296           579         597         18,875 
Interest expense........    (2,786)     108 (1)        (149)         (381)     (1,100)(10)    (4,068)
                                                                                  254 (11)           
                                                                                  (14)(9)            
Other income (expense)..        --       --             227           (53)         --            174 
                          --------     ----         -------       -------      ------       -------- 
 Income before income                                                                                
  taxes.................    13,617      108           1,374           145        (263)        14,981 
Income taxes............     5,377       43 (2)         551            --          21 (12)     5,992 
                          --------     ----         -------       -------      ------       -------- 
  Net income............  $  8,240     $ 65         $   823       $   145      $ (284)      $  8,989 
                          ========     ====         =======       =======      ======       ======== 
Earnings per share......  $   1.19                                                          $   1.30 
                          ========                                                          ======== 
Weighted average shares                                                                              
 outstanding............     6,916                                                             6,916 
                          ========                                                          ======== 
Other Data:                                                                                          
  Operating income......  $ 16,403     $ --         $ 1,296       $   579      $  597       $ 18,875 
  Depreciation and                                                                                   
   amortization.........     2,641       --             138           460         107          3,346 
                          --------     ----         -------       -------      ------       -------- 
  EBITDA(13)............  $ 19,044     $ --         $ 1,434       $ 1,039      $  704       $ 22,221 
                          ========     ====         =======       =======      ======       ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(DOLLARS IN THOUSANDS)  

(A)  KEVCO PRO FORMA                                                            

(1)  To reflect a decrease in interest expense for the month ended October 31,  
  1996, as if debt of $16.9 million, at an average interest rate of 7.65%,
had been repaid on October 1, 1996 from the net proceeds of the Public
    Offering consummated on November 1, 1996. Indebtedness repaid reflects the
portion of net proceeds that were available to repay debt after making
final S corporation distributions of $9.1 million in 1996.            

(2)  To reflect a provision for income taxes at an effective rate of 40%        
     associated with the Kevco's conversion to a C corporation offset by the tax
effect of the decrease in interest expense referred to in (1).        

(3)  The Bowen Acquisition was consummated on February 28, 1997. Historical     
 results represent unaudited results of operations of Bowen for the five
months ended February 28, 1997.                                       

(4)  The Consolidated Forest Acquisition was consummated on February 27, 1997.  
Historical results represent unaudited results of operations of       
Consolidated Forest for the five months ended February 27, 1997.      

(5)  To reflect the amortization of the fair value adjustment to inventory of   
$82 related to the Bowen Acquisition.                                 

(6)  To eliminate amortization of historical goodwill of $10 and $203 related   
to Bowen and Consolidated Forest, respectively.                       

(7)  To eliminate expense of $196 related to an executive of Bowen who was      
   retired in connection with the Bowen Acquisition, to eliminate historical
  management fees of Consolidated Forest of $69 and to reflect a reduction
  in commission expense of $357 resulting from the amendment of a contract
    with a third party in connection with the Consolidated Forest Acquisition.

(8)  To reflect the amortization of the fair value adjustments to property and  
 equipment of $25 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $18 and $18 and  
    goodwill of $155 and $87 related to the Bowen Acquisition and Consolidated
Forest Acquisition, respectively.                                     

(9)  To reflect the amortization and interest expense related to the non-       
    compete agreements entered into in connection with the Consolidated Forest
Acquisition.                                                          

(10) To reflect interest expense on borrowings to fund the Kevco Acquisitions   
at an assumed interest rate of 7.6% totalling $648 and $452 related to
  the Bowen Acquisition and Consolidated Forest Acquisition, respectively.

(11) To eliminate historical interest expense related to long-term debt not     
assumed by Kevco in the Consolidated Forest Acquisition.              

(12) Income tax expense was adjusted to reflect an effective tax rate of 40%,   
which is the expected effective tax rate of Kevco.                    

(13) EBITDA is defined as net income plus interest expense, income taxes,       
depreciation, amortization, and other expenses less other income      
reflected in the determination of net income.                         

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(IN THOUSANDS)

(B)SHELTER PRO FORMA                                                            

                                                                [Download Table]

                                                                            SHELTER 
                           SHELTER    SALE OF        PSI      ACQUISITION  PRO FORMA
                          HISTORICAL DANUBE(1)  HISTORICAL(2) ADJUSTMENTS   TOTALS  
                          ---------- ---------  ------------- -----------  ---------
                                                                                    
Net sales...............   $481,836  $(16,836)     $5,907        $ --      $470,907 
Cost of sales...........    416,058   (16,022)      5,246        (305)(3)   404,977 
                           --------  --------      ------        ----      -------- 
  Gross profit..........     65,778      (814)        661         305        65,930 
Commission income.......      2,706        --          --          --         2,706 
                           --------  --------      ------        ----      -------- 
                             68,484      (814)        661         305        68,636 
Selling, general and                                                                
 administrative expenses                                                            
 .......................     56,713    (3,000)        576          67 (4)    54,356 
                           --------  --------      ------        ----      -------- 
  Operating income......     11,771     2,186          85         238        14,280 
Interest expense........       (822)        4        (151)        (70)(5)    (1,039)
Other income (expense)..      6,366    (5,919)         --          --           447 
                           --------  --------      ------        ----      -------- 
  Income before income                                                              
   taxes................     17,315    (3,729)        (66)        168        13,688 
Income taxes............      7,107    (1,880)         --          40 (6)     5,267 
                           --------  --------      ------        ----      -------- 
  Net income............   $ 10,208  $ (1,849)     $  (66)       $128      $  8,421 
                           ========  ========      ======        ====      ======== 
Other Data:                                                                         
  Operating income......   $ 11,771  $  2,186      $   85        $238      $ 14,280 
  Depreciation and                                                                  
   amortization.........      3,359      (140)        327         293         3,839 
                           --------  --------      ------        ----      -------- 
  EBITDA (7)............   $ 15,130  $  2,046      $  412        $531      $ 18,119 
                           ========  ========      ======        ====      ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997 
(DOLLARS IN THOUSANDS)  

(B) SHELTER PRO FORMA                                                           

(1) The operations and certain assets of Danube were sold on December 31,       
  1996. Historical results represent results of operations related to Danube
for the three months ended December 31, 1996.                           

(2) The PSI Acquisition was consummated on June 27, 1997. Historical results    
 represent results of operations of PSI for the nine months ended June 27,
1997.                                                                   

(3) To: (i) eliminate one-time bonuses given to employees of PSI in connection  
with the sale; (ii) reduce compensation expense pursuant to post        
  acquisition employment agreements and (iii) record additional depreciation
  expense for equipment adjusted to fair market value in connection with the
PSI Acquisition.                                                        

(4) To: (i) record amortization of goodwill; (ii) reduce compensation expense   
for a certain employment agreement and (iii) eliminate non-recurring    
charges incurred in connection with the PSI Acquisition.                

(5) To reflect interest expense on debt issued, net of interest expense on the  
repayment of existing debt in connection with the PSI Acquisition.      

(6) Income tax expense was adjusted to reflect Shelter's effective tax rate of  
38.5%.                                                                  

(7) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                THE OLD              
                          KEVCO PRO   SHELTER     SHELTER        NOTES        KEVCO  
                            FORMA    PRO FORMA  ACQUISITION    OFFERING     COMBINED 
                          TOTALS(A)  TOTALS(B)  ADJUSTMENTS   ADJUSTMENTS   PRO FORMA
                          ---------  ---------  -----------   -----------   ---------
                                                                                     
Net sales...............  $289,952   $362,139     $   --        $    --     $652,091 
Cost of sales...........   250,896    311,329         --             --      562,225 
                          --------   --------     ------        -------     -------- 
  Gross profit..........    39,056     50,810         --             --       89,866 
Commission income.......     4,506      2,074         --             --        6,580 
                          --------   --------     ------        -------     -------- 
                            43,562     52,884         --             --       96,446 
Selling, general and                                                                 
 administrative expenses                                                             
 .......................    30,667     41,239     (3,597)(1)         --       69,077 
                                                    (883)(2)                         
                                                   1,651 (3)                         
                          --------   --------     ------        -------     -------- 
  Operating income......    12,895     11,645      2,829             --       27,369 
Interest expense........    (2,869)      (612)                  (13,935)(4)  (14,652)
                                                                  3,297 (4)          
                                                                   (533)(4)          
Other income (expense)..        52        447         --             --          499 
                          --------   --------     ------        -------     -------- 
Income before income                                                                 
 taxes..................    10,078     11,480      2,829        (11,171)      13,216 
Income taxes............     4,031      4,422      1,054 (5)     (3,561)(5)    5,946 
                          --------   --------     ------        -------     -------- 
  Net income............  $  6,047   $  7,058     $1,775        $(7,610)    $  7,270 
                          ========   ========     ======        =======     ======== 
Earnings per share......  $   0.87                                          $   1.05 
                          ========                                          ======== 
Weighted average shares                                                              
 outstanding............     6,916                                             6,916 
                          ========                                          ======== 
Other Data:                                                                          
  Operating income......  $ 12,895   $ 11,645     $2,829        $    --     $ 27,369 
  Depreciation and                                                                   
   amortization.........     2,455      2,864        768             --        6,087 
                          --------   --------     ------        -------     -------- 
  EBITDA (6)............  $ 15,350   $ 14,509     $3,597        $    --     $ 33,456 
                          ========   ========     ======        =======     ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Kevco Acquisitions.                    
(B) Includes the pro forma effect of the PSI Acquisition.                       

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

NINE MONTHS ENDED SEPTEMBER 30, 1997  
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $13,935 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of  
 $3,297 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $533 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

(A) KEVCO PRO FORMA                                                             

                                                        [Enlarge/Download Table]

                                                                                KEVCO   
                                                   CONSOLIDATED                  PRO    
                            KEVCO    BOWEN SUPPLY     FOREST     ACQUISITION    FORMA   
                          HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS    TOTALS  
                          ---------- ------------- ------------- -----------   -------- 
                                                                                        
Net sales...............   $271,957     $6,710        $11,285       $ --       $289,952 
Cost of sales...........    235,138      5,398         10,393        (33)(3)    250,896 
                           --------     ------        -------       ----       -------- 
  Gross profit..........     36,819      1,312            892         33         39,056 
Commission income.......      4,413         93             --         --          4,506 
                           --------     ------        -------       ----       -------- 
                             41,232      1,405            892         33         43,562 
Selling, general and ad-                                                                
 ministrative expenses..     28,738      1,097          1,038        (85)(4)     30,667 
                                                                    (249)(5)            
                                                                     121 (6)            
                                                                       7 (7)            
                           --------     ------        -------       ----       -------- 
  Operating income......     12,494        308           (146)       239         12,895 
Interest expense, net...     (2,354)       (51)          (120)      (440)(8)     (2,869)
                                                                     102 (9)            
                                                                      (6)(7)            
Other income (expense)..         --         46              6         --             52 
                           --------     ------        -------       ----       -------- 
  Income before income                                                                  
   taxes................     10,140        303           (260)      (105)        10,078 
Income taxes............      4,056        123             --       (148)(10)     4,031 
                           --------     ------        -------       ----       -------- 
  Net income............   $  6,084     $  180        $  (260)      $ 43       $  6,047 
                           ========     ======        =======       ====       ======== 
Earnings per share......   $   0.88                                            $   0.87 
                           ========                                            ======== 
Weighted averaged shares                                                                
 outstanding............      6,916                                               6,916 
                           ========                                            ======== 
Other Data:                                                                             
  Operating income......   $ 12,494     $  308        $  (146)      $239       $ 12,895 
  Depreciation and                                                                      
   amortization.........      2,172         56            184         43          2,455 
                           --------     ------        -------       ----       -------- 
  EBITDA (11)...........   $ 14,666     $  364        $    38       $282       $ 15,350 
                           ========     ======        =======       ====       ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

NINE MONTHS ENDED SEPTEMBER 30, 1997  
(DOLLARS IN THOUSANDS)  

(A)  KEVCO PRO FORMA                                                            

(1)  The Bowen Acquisition was consummated on February 28, 1997. Historical     
results represent unaudited results of operations of Bowen for the two
months ended February 28, 1997.                                       

(2)  The Consolidated Forest Acquisition was consummated on February 27, 1997.  
Historical results represent unaudited results of operations of       
Consolidated Forest for the two months ended February 27, 1997.       

(3)  To reflect the amortization of the fair value adjustment to inventory of   
$33 related to the Bowen Acquisition.                                 

(4)  To eliminate amortization of historical goodwill of $4 and $81 related to  
Bowen and Consolidated Forest, respectively.                          

(5)  To eliminate expense of $78 related to an executive of Bowen who was       
   retired in connection with the Bowen Acquisition, to eliminate historical
  management fees of Consolidated Forest of $28 and to reflect a reduction
  in commission expense of $143 resulting from the amendment of a contract
    with a third party in connection with the Consolidated Forest Acquisition.

(6)  To reflect the amortization of the fair value adjustments to property and  
 equipment of $10 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $7 and $7 and    
   goodwill of $62 and $35 related to the Bowen Acquisition and Consolidated
Forest Acquisition, respectively.                                     

(7)  To reflect the amortization and interest expense related to the non-       
    compete agreements entered into in connection with the Consolidated Forest
Acquisition.                                                          

(8)  To reflect interest expense on borrowings to fund the Kevco Acquisitions   
    at an assumed interest rate of 7.6% totalling $259 and $181 related to the
Bowen Acquisition and Consolidated Forest Acquisition, respectively.  

(9)  To eliminate historical interest expense related to long-term debt not     
assumed by Kevco in the Consolidated Forest Acquisition.              

(10) Income tax expense was adjusted to reflect an effective tax rate of 40%,   
which is the expected effective tax rate of Kevco.                    

(11) EBITDA is defined as net income plus interest expense, income taxes,       
depreciation, amortization, and other expenses less other income      
reflected in the determination of net income.                         

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)

(B) SHELTER PRO FORMA                                                           

                                                                [Download Table]

                                                                      SHELTER 
                                SHELTER        PSI      ACQUISITION  PRO FORMA
                               HISTORICAL HISTORICAL(1) ADJUSTMENTS   TOTALS  
                               ---------- ------------- -----------  ---------
                                                                              
Net sales.....................  $357,879     $4,260        $  --     $362,139 
Cost of sales.................   307,906      3,682         (259)(2)  311,329 
                                --------     ------        -----     -------- 
  Gross profit................    49,973        578          259       50,810 
Commission income.............     2,074         --           --        2,074 
                                --------     ------        -----     -------- 
                                  52,047        578          259       52,884 
Selling, general and                                                          
 administrative expenses......    40,810        380           49 (3)   41,239 
                                --------     ------        -----     -------- 
  Operating income............    11,237        198          210       11,645 
Interest expense..............      (464)      (113)         (35)(4)     (612)
Other income (expense)........       447         --           --          447 
                                --------     ------        -----     -------- 
  Income before income taxes..    11,220         85          175       11,480 
Income taxes..................     4,320         --          102 (5)    4,422 
                                --------     ------        -----     -------- 
  Net income..................  $  6,900     $   85        $  73     $  7,058 
                                ========     ======        =====     ======== 
Other Data:                                                                   
  Operating income............  $ 11,237     $  198        $ 210     $ 11,645 
  Depreciation and                                                            
   amortization...............     2,454        215          195        2,864 
                                --------     ------        -----     -------- 
  EBITDA (6)..................  $ 13,691     $  413        $ 405     $ 14,509 
                                ========     ======        =====     ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

NINE MONTHS ENDED SEPTEMBER 30, 1997  
(DOLLARS IN THOUSANDS)  

(B) SHELTER PRO FORMA                                                           

(1) The PSI Acquisition was consummated on June 27, 1997. Historical results    
represent results of operations of PSI for the six months ended June 27,
1997.                                                                   

(2) To: (i) eliminate one-time bonuses given to employees of PSI in connection  
with the sale; (ii) reduce compensation expense pursuant to post        
  acquisition employment agreements and (iii) record additional depreciation
  expense for equipment adjusted to fair market value in connection with the
PSI Acquisition.                                                        

(3) To: (i) record amortization of goodwill; (ii) reduce compensation expense   
for a certain Employment Agreement and (iii) eliminate non-recurring    
charges incurred in connection with the PSI Acquisition.                

(4) To reflect interest expense on debt issued, net of interest expense on the  
repayment of existing debt in connection with the PSI Acquisition.      

(5) Income tax expense was adjusted to reflect Shelter's effective tax rate of  
38.5%.                                                                  

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                               THE OLD               
                           KEVCO     SHELTER     SHELTER        NOTES         KEVCO  
                         PRO FORMA  PRO FORMA  ACQUISITION    OFFERING      COMBINED 
                         TOTALS(A)  TOTALS(B)  ADJUSTMENTS   ADJUSTMENTS    PRO FORMA
                         ---------  ---------  -----------   -----------    ---------
                                                                                     
Net sales............... $401,119   $454,567     $    --      $     --      $855,686 
Cost of sales...........  341,473    391,440          --            --       732,913 
                         --------   --------     -------      --------      -------- 
  Gross profit..........   59,646     63,127          --            --       122,773 
Commission income.......    6,900      2,459          --            --         9,359 
                         --------   --------     -------      --------      -------- 
                           66,546     65,586          --            --       132,132 
Selling, general and                                                                 
 administrative                                                                      
 expenses...............   42,264     50,553      (4,914)(1)        --        88,722 
                                                  (1,382)(2)        --               
                                                   2,201 (3)        --               
                         --------   --------     -------      --------      -------- 
  Operating income......   24,282     15,033       4,095            --        43,410 
Interest expense........   (4,420)    (1,994)         --       (18,580)(4)   (19,536)
                                                                 6,169 (4)           
                                                                  (711)(4)           
Other income............       61         --          --            --            61 
                         --------   --------     -------      --------      -------- 
  Income before income                                                               
   taxes................   19,923     13,039       4,095       (13,122)       23,935 
Income taxes............    7,969      5,072       1,535 (5)    (3,805)(5)    10,771 
                         --------   --------     -------      --------      -------- 
  Net income............ $ 11,954   $  7,967     $ 2,560      $ (9,317)     $ 13,164 
                         ========   ========     =======      ========      ======== 
Earnings per share...... $   1.73                                           $   1.90 
                         ========                                           ======== 
Weighted average shares                                                              
 outstanding............    6,911                                              6,911 
                         ========                                           ======== 
Other Data:                                                                          
  Operating income...... $ 24,282   $ 15,033     $ 4,095      $     --      $ 43,410 
  Depreciation and                                                                   
   amortization.........    3,418      3,596         819            --         7,833 
                         --------   --------     -------      --------      -------- 
  EBITDA (6)............ $ 27,700   $ 18,629     $ 4,914      $     --      $ 51,243 
                         ========   ========     =======      ========      ======== 

---------------------                                                           
(A) Includes the pro forma effect of the Public Offering and the Kevco          
Acquisitions.                                                           
(B) Includes the pro forma effect of the sale of Danube and the PSI             
Acquisition.                                                            

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

YEAR ENDED DECEMBER 31, 1996  
(DOLLARS IN THOUSANDS)  

(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary    
termination of certain employees which are included in the financial    
  statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees. 
Kevco believes that the elimination of duplicate employees will have no 
material effect on the other reported amounts within the unaudited pro  
forma condensed combined financial statements.                          

(2) To eliminate the historical amortization of goodwill of Shelter.            

(3) Represents the amortization of excess purchase price over fair value of     
  net assets acquired related to the Shelter Acquisition over a period of 40
years.                                                                  

(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the    
effective interest rate of the Senior Credit Facility at 8.25% and the  
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of  
 $6,169 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the  
indebtedness.                                                           

(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,    
which is the expected effective tax rate of the Company after giving    
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of  
goodwill resulting from the Shelter Acquisition.                        

(6) EBITDA is defined as net income plus interest expense, income taxes,        
  depreciation, amortization, and other expenses less other income reflected
in the determination of net income.                                     

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

(A) KEVCO PRO FORMA                                                             

                                                        [Enlarge/Download Table]

                                       PUBLIC         BOWEN    CONSOLIDATED                   KEVCO  
                            KEVCO     OFFERING        SUPPLY      FOREST     ACQUISITION    PRO FORMA
                          HISTORICAL ADJUSTMENTS    HISTORICAL HISTORICAL(3) ADJUSTMENTS     TOTALS  
                          ---------- -----------    ---------- ------------- -----------    ---------
                                                                                                     
Net sales...............   $267,344    $    --       $41,301      $92,474      $    --      $401,119 
Cost of sales...........    226,653         --        33,270       81,746         (196)(4)   341,473 
                           --------    -------       -------      -------      -------      -------- 
  Gross profit..........     40,691         --         8,031       10,728          196        59,646 
Commission income.......      5,497         --         1,403           --           --         6,900 
                           --------    -------       -------      -------      -------      -------- 
                             46,188         --         9,434       10,728          196        66,546 
Selling, general and                                                                                 
 administrative                                                                                      
 expenses...............     29,723         --         6,180        7,597         (511)(5)    42,264 
                                                                                (1,493)(6)           
                                                                                   727 (7)           
                                                                                    41 (8)           
                           --------    -------       -------      -------      -------      -------- 
  Operating income......     16,465         --         3,254        3,131        1,432        24,282 
Interest expense........     (2,058)     1,296 (1)      (364)      (1,230)      (2,641)(9)    (4,420)
                                                                                   611 (10)          
                                                                                   (34)(8)           
Other income (expense)..         --         --            15           46           --            61 
                           --------    -------       -------      -------      -------      -------- 
  Income before income                                                                               
   taxes................     14,407      1,296         2,905        1,947         (632)       19,923 
Income taxes............      1,695      4,643 (2)     1,149           --          482 (11)    7,969 
                           --------    -------       -------      -------      -------      -------- 
  Net income............   $ 12,712    $(3,347)      $ 1,756      $ 1,947      $(1,114)     $ 11,954 
                           ========    =======       =======      =======      =======      ======== 
Historical income before                                                                             
 income taxes...........   $ 14,407                                                                  
Income tax expense                                                                                   
 adjustment(2)..........      5,475                                                                  
                           --------                                                                  
Pro forma net income....   $  8,932                                                                  
                           ========                                                                  
Pro forma earnings per                                                                               
 share..................   $   1.61                                                         $   1.73 
                           ========                                                         ======== 
Pro forma weighted                                                                                   
 average shares                                                                                      
 outstanding............      5,531      1,380 (13)                                            6,911 
                           ========    =======                                              ======== 
Other Data:                                                                                          
  Operating income......   $ 16,465    $    --       $ 3,254      $ 3,131      $ 1,432      $ 24,282 
  Depreciation and                                                                                   
   amortization.........      1,792         --           308        1,061          257         3,418 
                           --------    -------       -------      -------      -------      -------- 
  EBITDA(12)............   $ 18,257    $    --       $ 3,562      $ 4,192      $ 1,689      $ 27,700 
                           ========    =======       =======      =======      =======      ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 
YEAR ENDED DECEMBER 31, 1996  
(DOLLARS IN THOUSANDS)  

(A)  KEVCO PRO FORMA                                                            

(1)  To reflect a decrease in interest expense as if debt of $16.9 million, at  
    an average interest rate of 7.65%, had been repaid on January 1, 1996 from
   the net proceeds of the Public Offering. Indebtedness repaid reflects the
portion of net proceeds that were available to repay debt after making
final S corporation distributions of $9.1 million in 1996.            

(2)  To reflect a provision for income taxes at an effective rate of 40%        
 associated with the Kevco's conversion to a C corporation offset by the
tax effect of the decrease in interest expense referred to in (1).    

(3)  For the year ended September 29, 1996, which represents Consolidated       
Forest's fiscal year end.                                             

(4)  To reflect the amortization of the fair value adjustment to inventory of   
$196 related to the Bowen Acquisition.                                

(5)  To eliminate amortization of historical goodwill of $23 and $488 related   
to Bowen and Consolidated Forest, respectively.                       

(6)  To eliminate expense of $471 related to an executive of Bowen who was      
   retired in connection with the Bowen Acquisition, to eliminate historical
   management fees of Consolidated Forest of $166 and to reflect a reduction
  in commission expense of $856 resulting from the amendment of a contract
    with a third party in connection with the Consolidated Forest Acquisition.

(7)  To reflect the amortization of the fair value adjustments to property and  
 equipment of $60 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $42 and $42 and  
goodwill of $372 and $211 related to the Bowen Acquisition and        
Consolidated Forest Acquisition, respectively.                        

(8)  To reflect the amortization and interest expense related to the non-       
    compete agreements entered into in connection with the Consolidated Forest
Acquisition.                                                          

(9)  To reflect interest expense on borrowings to fund the Kevco Acquisitions   
    at an assumed interest rate of 7.6% totalling $1,556 and $1,085 related to
  the Bowen Acquisition and Consolidated Forest Acquisition, respectively.

(10) To eliminate historical interest expense related to long-term debt not     
assumed by the Kevco in the Consolidated Forest Acquisition.          

(11) Income tax expense was adjusted to reflect an effective tax rate of 40%,   
which is the expected effective tax rate of Kevco.                    

(12) EBITDA is defined as net income plus interest expense, income taxes,       
depreciation, amortization, and other expenses less other income      
reflected in the determination of net income.                         

(13) To reflect the incremental weighted average shares issued in connection    
with the Public Offering in November 1996.                            

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KEVCO, INC. 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

(B) SHELTER PRO FORMA                                                           

                                                                [Download Table]

                                                                            SHELTER 
                          SHELTER    SALE OF        PSI       ACQUISITION  PRO FORMA
                         HISTORICAL DANUBE(1)  ACQUISITION(2) ADJUSTMENTS   TOTALS  
                         ---------- ---------  -------------- -----------  ---------
                                                                                    
Net sales...............  $521,022  $(74,851)      $8,396        $  --     $454,567 
Cost of sales...........   447,701   (63,403)       7,180          (38)(3)  391,440 
                          --------  --------       ------        -----     -------- 
  Gross profit..........    73,321   (11,448)       1,216           38       63,127 
Commission income.......     2,459        --           --           --        2,459 
                          --------  --------       ------        -----     -------- 
                            75,780   (11,448)       1,216           38       65,586 
Selling, general and                                                                
 administrative                                                                     
 expenses...............    60,194   (10,547)         673          233 (4)   50,553 
                          --------  --------       ------        -----     -------- 
  Operating income......    15,586      (901)         543         (195)      15,033 
Interest expense........    (1,654)        4         (243)        (101)(5)   (1,994)
Other income (expense)..     5,919    (5,919)          --           --           -- 
                          --------  --------       ------        -----     -------- 
  Income before income                                                              
   taxes................    19,851    (6,816)         300         (296)      13,039 
Income taxes............     8,153    (3,083)          --            2 (6)    5,072 
                          --------  --------       ------        -----     -------- 
  Net income............  $ 11,698  $ (3,733)      $  300        $(298)    $  7,967 
                          ========  ========       ======        =====     ======== 
Other Data:                                                                         
  Operating income......  $ 15,586  $   (901)      $  543        $(195)    $ 15,033 
  Depreciation and                                                                  
   amortization.........     3,350      (560)         437          369        3,596 
                          --------  --------       ------        -----     -------- 
  EBITDA (7)............  $ 18,936  $ (1,461)      $  980        $ 174     $ 18,629 
                          ========  ========       ======        =====     ======== 

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KEVCO, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME 

YEAR ENDED DECEMBER 31, 1996  
(DOLLARS IN THOUSANDS)  

(B) SHELTER PRO FORMA                                                           

(1) The operations and certain assets of Danube were sold on December 31,       
  1996. Historical results represent results of operations related to Danube
for the year ended December 31, 1996.                                   

(2) The PSI Acquisition was consummated on June 27, 1997. Historical results    
represent results of operations of PSI for the year ended December 31,  
1996.                                                                   

(3) To: (i) eliminate non-recurring compensation expense; (ii) reduce           
compensation expense pursuant to post acquisition employment agreements 
  and (iii) record additional depreciation expense for equipment adjusted to
fair market value in connection with the PSI Acquisition.               

(4) To: (i) record amortization of goodwill; (ii) reduce compensation expense   
for a certain Employment Agreement and (iii) eliminate non-recurring    
charges incurred in connection with the PSI Acquisition.                

(5) To reflect interest expense on debt issued, net of interest expense on the  
repayment of existing debt in connection with the PSI Acquisition.      

(6) Income tax expense was adjusted to reflect Shelter's effective tax rate of  
39%.                                                                    

(7) EBITDA is defined as net income plus interest expense, income taxes,        
depreciation and amortization, and other expenses less other income     
reflected in the determination of net income.                           

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA- 
TIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE SUCH INFORMATION  
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE      
COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER  
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE EX-  
CHANGE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SO-   
LICITATION OF AN OFFER TO BUY ANY OF THE EXCHANGES NOTES TO ANYONE OR BY ANY-   
ONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL   
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS  
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICA-  
TION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS      
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.              

------------  

TABLE OF CONTENTS 

------------  

                                                                [Download Table]

                                                                          PAGE
                                                                              
Available Information....................................................   4 
Prospectus Summary.......................................................   5 
Risk Factors.............................................................  17 
The Transactions.........................................................  23 
Use of Proceeds..........................................................  23 
Capitalization...........................................................  24 
Unaudited Pro Forma Condensed Combined Financial Data....................  25 
Selected Consolidated Financial Data of Kevco............................  34 
Selected Consolidated Financial Data of Shelter..........................  35 
Management's Discussion and Analysis of Financial Condition and Results       
 of Operation............................................................  36 
Business.................................................................  46 
Management...............................................................  58 
Management Compensation..................................................  60 
Principal Shareholders...................................................  64 
Description of Senior Credit Facility....................................  65 
The Exchange Offer.......................................................  67 
Description of the Notes.................................................  75 
Certain United States Federal Income Tax Considerations.................. 104 
Plan of Distribution..................................................... 105 
Legal Matters............................................................ 105 
Experts.................................................................. 106 
Index to Financial Statements............................................ F-1 

UNTIL MAY 3, 1998, (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER),    
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR     
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-   
TUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO   
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-  
SOLD ALLOTMENTS OR SUBSCRIPTIONS.                                               

------------------------------------------------------------------------------- 
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KEVCO, INC. 

[LOGO OF KEVCO, INC. APPEARS HERE]  

OFFER TO EXCHANGE 
ITS 10 3/8% SENIOR SUBORDINATED 
NOTES DUE 2007 (SERIES B) 
FOR ANY AND ALL OF OUTSTANDING  
10 3/8% SENIOR SUBORDINATED 
NOTES 
DUE 2007 (SERIES A) 

----------------  

PROSPECTUS  

----------------  

JANUARY 30, 1998  

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