<PAGE>
Securities and Exchange Commission
Washington, DC 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From To
------- -------
Commission File Number: 000-21621
KEVCO, INC.
(Exact name of registrant as specified in its charter)
Texas
-----
(State or other jurisdiction of 75-2666013
incorporation or organization) ----------
(IRS Employer ID No.)
University Centre I
1300 S. University Drive
Suite 200
Fort Worth, Texas
-----------------
(Address of principal 76107
executive offices) -----
(Zip Code)
(817-332-2758)
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding for each of the issuer's classes or
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 6,843,429 shares
- -------------------------------------- ----------------
(Class) (Outstanding as of April 30, 1998)
<PAGE>
KEVCO, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1998 (unaudited)
and December 31, 1997 ............................................. 3
Consolidated Statements of Income for the three-month
periods ended March 31, 1998 and 1997 (unaudited).................. 4
Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 1998 and 1997 (unaudited).................. 5
Notes to Consolidated Financial Statements............................ 6
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 10
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K............................. 14
Signatures............................................................ 20
Exhibit index......................................................... 21
Exhibits.............................................................. 22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
KEVCO, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 581 $ 271
Trade accounts receivable, less allowance for
doubtful accounts of $641 in 1998 and 1997, respectively 56,534 41,006
Inventories, less reserve for obsolete inventory of $2,710
and $2,692 in 1998 and 1997, respectively 86,541 83,540
Assets held for sale 176 3,032
Other current assets 3,327 4,981
--------------- ----------------
Total current assets 147,159 132,830
Property and equipment, net 43,101 42,442
Intangible assets, net 119,972 120,190
Deferred tax asset 4,339 4,339
Other assets 8,766 8,393
--------------- ----------------
Total assets $ 323,337 $ 308,194
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,222 $ 2,932
Trade accounts payable 58,032 47,007
Accrued liabilities 15,517 24,496
Other current liabilities 1,853 950
--------------- ----------------
Total current liabilities 78,624 75,385
Long-term debt, less current portion 201,095 191,288
Deferred compensation obligation 806 874
--------------- ----------------
Total liabilities 280,525 267,547
--------------- ----------------
Stockholders' equity:
Common stock, $.01 par value; 100,000 shares authorized;
6,831 and 6,828 shares issued and outstanding in
1998 and 1997, respectively 68 68
Additional paid-in capital 33,057 33,020
Retained earnings 9,687 7,559
--------------- ----------------
Total stockholders' equity 42,812 40,647
--------------- ----------------
Total liabilities and stockholders' equity $ 323,337 $ 308,194
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net sales $ 212,051 $ 72,099
Cost of sales 183,108 61,976
--------------- ---------------
Gross profit 28,943 10,123
Commission income 1,854 1,279
--------------- ---------------
30,797 11,402
Selling, general and administrative expenses 21,868 7,681
--------------- ---------------
Operating income 8,929 3,721
Interest expense 5,068 528
--------------- ---------------
Income before income taxes 3,861 3,193
Income taxes 1,733 1,277
--------------- ---------------
Net income $ 2,128 $ 1,916
=============== ===============
Earnings per share - basic $ 0.31 $ 0.28
=============== ===============
Earnings per share - diluted $ 0.31 $ 0.27
=============== ===============
Weighted average shares outstanding - basic 6,830 6,809
=============== ===============
Weighted average shares outstanding - diluted 6,928 6,946
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,128 $ 1,916
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,022 580
Gain on sale of assets - (2)
Deferred compensation obligation (68) 10
Changes in assets and liabilities (14,527) 3,261
---------------- ----------------
Net cash provided (used) by operating activities (10,445) 5,765
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired - (31,846)
Purchase of equipment (2,468) (417)
Proceeds from sale of assets 649 810
Proceeds from assets held for sale 2,870 -
Decrease in other assets (373) (380)
---------------- ----------------
Net cash provided (used) by investing activities 678 (31,833)
Cash flows from financing activities:
Proceeds (payments) on line of credit, net 2,525 (5,824)
Proceeds from long-term debt 10,000 30,000
Payments of long-term debt (2,430) (106)
Stock options exercised 37 -
Other (55) -
---------------- ----------------
Net cash provided by financing activities 10,077 24,070
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 310 (1,998)
Beginning cash and cash equivalents 271 2,078
---------------- ----------------
Ending cash and cash equivalents $ 581 $ 80
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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, 1997, for
Kevco, Inc. includes a summary of significant accounting policies and should be
read in conjunction with this Form 10-Q. The accompanying consolidated
financial statements of Kevco, Inc. and its wholly-owned subsidiaries ("Kevco"
or 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 March 31, 1998 and
December 31, 1997, the statements of income for the three-month periods ended
March 31, 1998 and 1997 and the statements of cash flows for the three-month
periods ended March 31, 1998 and 1997. The results of operations for the three-
month periods ended March 31, 1998 are not necessarily indicative of the results
of operations for the entire fiscal year ending December 31, 1998.
2. ACQUISITIONS
During the year ended December 31, 1997, Kevco acquired Shelter Components
Corporation ("Shelter") on December 1, 1997 (the "Shelter Acquisition"), the
inventory and certain distribution rights from Shepherd Products Company on
December 12, 1997 (the "Shepherd Acquisition"), Bowen Supply, Inc. on February
28, 1997 (the "Bowen Acquisition") and Consolidated Forest Products, L.L.C. on
February 27, 1997 (the "Consolidated Forest Acquisition") (collectively, the
"1997 Acquisitions") for total purchase prices approximating $144.8 million,
$8.0 million, $20.2 million and $14.1 million, respectively. The 1997
Acquisitions were made utilizing borrowings under the Company's amended and
restated credit facility and, in the case of the Shelter Acquisition, net
proceeds from the issuance of $105 million of 10 3/8% senior subordinated notes
due 2007. Each of the 1997 Acquisitions was accounted for as a purchase and the
results of operations of the acquired companies were included in the
consolidated results of operations of the Company from their respective
acquisition dates. As a result of such acquisitions, approximately $105.8
million of goodwill was recorded by the Company, which reflects the adjustments
necessary to allocate the individual purchase prices to the fair value of assets
acquired, liabilities assumed and additional purchase liabilities recorded.
Additional purchase liabilities included approximately $1.2 million for
severance and related costs associated primarily with the elimination of certain
administrative and corporate positions recorded in connection with the Shelter
Acquisition in December, $0.9 million of which is outstanding at March 31, 1998.
The Company expects to complete its termination of employees during 1998.
6
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. INVENTORIES
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Raw materials $ 20,718 $ 17,006
Work-in process 596 1,317
Finished goods 7,807 3,760
Goods held for resale 57,420 61,457
------------ ------------
$ 86,541 $ 83,540
============ ============
</TABLE>
4. CREDIT AGREEMENT
In December 1997, Kevco and its lender entered into the second amended and
restated credit agreement, which was subsequently amended on February 12, 1998
(the "Credit Agreement") at closing of the Shelter Acquisition (see Note 2) to
allow for aggregate senior borrowings of up to $125 million comprised of a
revolving credit facility of $45 million and a term loan facility of $80
million. The revolving credit facility and $40 million of the term loan
facility mature in 2003 with the remaining term loan facility maturing in 2004.
The term loan and revolving credit facilities are collateralized by
substantially all of the assets of the Company and its subsidiaries as well as
the capital stock of such subsidiaries.
In addition to funds available under the Credit Agreement, the Company
issued $105 million of 10 3/8% senior subordinated notes due 2007 (the "Notes")
under the indenture dated as of December 1, 1997, as supplemented (the
"Indenture"), to complete the acquisition of Shelter. Interest is payable on
June 1 and December 1 of each year commencing June 1, 1998. 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 in the Indenture. 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 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.
The Credit Agreement and Indenture contain 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 agreements).
7
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. EARNINGS PER SHARE
Basic earnings per share excludes dilution, and diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised and converted into common stock.
The reconciliation between basic and diluted weighted average shares
outstanding, follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Weighted average shares - basic 6,830 6,809
Plus shares applicable to stock
option plans 98 137
----------- -----------
Weighted average shares - diluted 6,928 6,946
=========== ===========
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion includes the operations of Kevco for each of the
periods discussed. This discussion and analysis should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
1997.
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 whom 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 increases or decreases in shipment volume.
ACQUISITIONS
On February 27, 1997, the Company acquired 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 promissory notes in the aggregate principal amount of
approximately $0.7 million. On February 28, 1997, the Company 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 promissory notes in the aggregate
principal amount of $1.5 million. The Consolidated Forest Acquisition continued
the Company's expansion into the wood products industry, and the Bowen
Acquisition expanded the Company's product lines by adding new products in
electronics, drapery and door hardware, industrial tape, adhesives and caulks.
The Consolidated Forest and Bowen acquisitions were accounted for as purchases
and, accordingly, the operating results of the acquired companies have been
included in the operating results of the Company since their respective
acquisition dates. The aggregate Consolidated Forest and Bowen acquisition cost
in excess of the fair value of net assets acquired of approximately $24.2
million has been accounted for as goodwill.
Effective December 1, 1997, the Company acquired approximately 95.5% of the
common stock of Shelter through a tender offer for a purchase price of $17.50
per share of common stock of Shelter; the Company acquired the remaining
untendered shares through a subsequent merger for a like price. The Shelter
Acquisition was accounted for as a purchase and, accordingly, the operating
results have been included in the operating results of the Company since
December 1, 1997. As a result of the Shelter Acquisition, approximately $81.6
million of goodwill was recorded by the Company, which reflects the acquisition
costs in excess of the fair value of net assets acquired. On June 27, 1997,
prior to the acquisition of Shelter by Kevco, Shelter acquired the net assets of
Plastic Solutions, Inc., a manufacturer of injection molded plastic parts, for
approximately $0.9 million in cash and $3.5 million in notes payable to the
sellers.
9
<PAGE>
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 of $6.0 million, with an
additional $2.0 million payable over a five year period following the
acquisition and an additional $2.0 million payable over a period of up to seven
years upon the satisfaction of certain conditions.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
Consolidated Statements of Income data as a percentage of the Company's net
sales.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 86.3 86.0
---------- ----------
Gross profit 13.7 14.0
Commission income 0.9 1.8
---------- ----------
14.6 15.8
Selling, general and administrative expenses 10.3 10.6
---------- ----------
Operating income 4.3 5.2
Interest expense, net 2.4 0.7
---------- ----------
Income before income taxes 1.9% 4.5%
========== ==========
</TABLE>
Comparison of Three Months Ended March 31, 1998 and 1997
Net sales increased by $140.0 million, or 194.2%, to $212.1 million for the
three month period ended March 31, 1998 from $72.1 million for the comparable
1997 period. The net sales increase primarily resulted from the effect of the
Shelter Acquisition in December 1997. Net sales, without the effect of the
Shelter Acquisition, increased from $72.1 million in 1997 to $91.1 million in
1998, an increase of 26.4%, which is primarily due to the effect of the
Consolidated Forest and Bowen acquisitions as well as a reported manufactured
housing shipment increase of 2.7% from January through February 1998, as
compared to the prior period. Sales to the manufactured housing industry
represented approximately 80% of net sales for the three months ended March 31,
1998.
Gross profit increased by $18.8 million, or 186.1%, to $28.9 million for the
three month period ended March 31, 1998 from $10.1 million for the comparable
1997 period due primarily to the 1997 Acquisitions. Gross profit, as a percent
of net sales, decreased to 13.7% for the three month period ended March 31, 1998
from 14.0% for the comparable 1997 period. The decrease in gross profit, as a
percent of net sales, was related primarily to the fact that wood products
margins, affected by lower than historical lumber prices, continued to be lower
than historical levels, to start-up costs related to the opening of two wood
products plants in Arizona and North Carolina (such wood products represent
approximately 17% of net sales) and to some initial margin pressure related to
the Shelter Acquisition.
10
<PAGE>
Selling, general and administrative expenses increased by $14.2 million, or
184.4%, to $21.9 million for the three month period ended March 31, 1998 from
$7.7 million for the comparable 1997 period. The increase was primarily due to
increased sales volume related to the 1997 Acquisitions. Selling, general and
administrative expenses, as a percent of net sales, decreased to 10.3% for 1998
from 10.6% for the comparable 1997 period primarily reflecting economies of
scale and cost synergies from the Shelter Acquisition.
Interest expense increased by $4.6 million to $5.1 million for the three
months ended March 31, 1998 from $0.5 million for the comparable 1997 period
principally due to borrowings related to the 1997 Acquisitions.
Net income increased by $0.2 million, or 10.5%, to $2.1 million for the
three months ended March 31, 1998 from $1.9 million for the comparable 1997
period. The increase is due primarily to increased sales volume due to the 1997
Acquisitions offset by increased interest expense as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's growth has been financed through cash flow from operations,
borrowings under its bank credit facilities, proceeds from the November 1996
initial public offering, proceeds from the issuance of the Notes and the
expansion of trade credit. Net cash used by operating activities was $10.4
million and capital expenditures were $2.5 million for the three months ended
March 31, 1998. Kevco is obliged to make payments on various capital leases in
varying amounts, maturing through 2007 as well as payments under various
noncompete and consulting agreements, related to recent acquisitions, in varying
amounts, through 2002.
In connection with the acquisitions of Consolidated Forest and Bowen, the
Company amended its credit agreement to allow for a term loan of $30.0 million
and to increase the revolving credit facility to $35.0 million from $20.0
million. The aggregate cash purchase price of these acquisitions was
approximately $33.2 million, and the assumed debt of approximately $8.4 million
was immediately paid with proceeds from the term loan.
In December 1997, the Company acquired Shelter for an aggregate purchase
price of approximately $144.8 million. In connection with the acquisition of
Shelter, the Company entered into the Credit Agreement, which increased the
aggregate borrowings available under the credit facility to $125.0 million
consisting of an $80.0 million term loan facility and a $45.0 million revolving
credit facility. The revolving credit facility and a portion of the term loan
matures in 2003 with the remaining term loan portion maturing in 2004.
Borrowings under the term loan and revolving credit facilities require
monthly, bi-monthly or quarterly interest payments (depending on whether
interest accrues based on 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. The term loan
and revolving credit facilities are collateralized by substantially all of the
assets of the Company and its subsidiaries as well as the capital stock of such
subsidiaries. The 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
11
<PAGE>
of property and equipment, distributions to stockholders and certain events
constituting a Change of Control (as defined in the credit agreement).
In addition to the funds available under the amended credit facility, the
Company issued $105.0 million of the Notes under the Indenture to complete the
acquisition of the outstanding shares of Shelter. The Indenture contains
certain covenants that include, but are not limited to, restrictions or
limitations on the following: the incurrence of additional debt or liens, the
payment of dividends by the Company, the payment of dividends by restricted
subsidiaries to the Company, the sale of certain assets, the ability to
consolidate with or merge into another person, the entering into certain
transactions with affiliates and the engagement in certain lines of business.
ASSET MANAGEMENT
The Company actively manages its assets and liabilities through
compensating its corporate and facility managers for receivable collection,
inventory control and profits in relation to these and other net assets
employed.
For the three months ended March 31, 1998, days sales in average
receivables was approximately 23 days, days sales in average inventory was
approximately 43 days and days sales in average payables was approximately 28
days.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this quarterly report that are not
historical facts are forward-looking statements that involve risks and
uncertainties, including, but not limited to, the Company's substantial
leverage; risks associated with the integration of two companies that have
previously operated independently; the impact of competitors' pricing, product
quality and related features; the cyclical nature and seasonality of the
manufactured housing and recreational vehicle markets; the dependence of the
Company on its principal customers and key suppliers; and other risks detailed
in the Company's Securities and Exchange Commission filings, including those set
forth in the Company's Annual Report on Form 10-K.
12
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
2.1 - Merger Agreement, dated June 6, 1995 by and among Kevco, Inc. and Service Supply
Systems, Inc., joined by a wholly-owned subsidiary of Kevco, Inc.(1)
2.2 - Form of Plan and Agreement of Merger between
Kevco Texas, Inc. and Kevco Delaware, Inc.(1)
2.3 - Form of Bill of Sale and General Assignment from Kevco Delaware, Inc., as Assignor, to
Sunbelt Wood Components, Inc., as Assignee.(1)
2.4 - Form of Assumption Agreement between Kevco Delaware, Inc. and Sunbelt Wood Components,
Inc.(1)
2.5 - Asset Purchase Agreement by and among Consolidated Forest Products, Inc., Consolidated
Forest Products, L.L.C. and the members of Consolidated Forest Products, L.L.C.(2)
2.6 - Stock Purchase Agreement by and among Kevco Delaware, Inc. and the shareholders of
Bowen Supply, Inc.(2)
2.7 - Agreement and Plan of Merger, dated as of October 21, 1997, between Kevco, Inc., SCC
Acquisition Corp. and Shelter Components Corporation.(6)
3.1 - Articles of Incorporation of Kevco, Inc., as amended.(1)
3.2 - Bylaws of Kevco, Inc.(1)
3.3 - Certificate of Incorporation of Kevco Delaware, Inc.(9)
3.4 - Bylaws of Kevco Delaware, Inc.(9)
3.5 - Certificate of Incorporation of Sunbelt Wood Components, Inc.(9)
3.6 - Bylaws of Sunbelt Wood Components, Inc.(9)
3.7 - Articles of Incorporation of Bowen Supply, Inc. and amendments.(9)
3.8 - Bylaws of Bowen Supply, Inc.(9)
3.9 - Articles of Incorporation of Encore Industries, Inc.(9)
3.10 - Bylaws of Encore Industries, Inc.(9)
3.11 - Certificate of Limited Partnership of Shelter Distribution, L.P.(9)
3.12 - Limited Partnership Agreement of Shelter Distribution, L.P.(9)
3.13 - Articles of Restatement of the Articles of Incorporation of Shelter Newco, Inc. n/k/a
Shelter Components Corporation.(9)
3.14 - Bylaws of Shelter Components Corporation.(9)
3.15 - Articles of Incorporation of BPR Holdings, Inc.(9)
3.16 - Bylaws of BPR Holdings, Inc.(9)
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
3.17 - Restated Articles of Incorporation of SC Acquisition Corp. n/k/a Shelter Components of
Indiana, Inc. and amendment.(9)
3.18 - Bylaws of SC Acquisition Corp. n/k/a Shelter
Components of Indiana, Inc.(9)
3.19 - Articles of Incorporation of MP Acquisition Corp. n/k/a Design Components, Inc. and
amendments.(9)
3.20 - Bylaws of Design Components, Inc.(9)
3.21 - Articles of Incorporation of Duo-Form of Michigan, Inc. and amendments.(9)
3.22 - Bylaws of Duo-Form of Michigan, Inc.(9)
3.23 - Restated Charter of Danube Carpet Mills, Inc. n/k/a DCM, Inc. and amendments.(9)
3.24 - Bylaws of Danube Carpet Mills, Inc. n/k/a DCM, Inc.(9)
4.1 - Form of certificate evidencing ownership of the Common Stock of Kevco, Inc.(1)
10.1 - Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995 Stock Option Plan
of Kevco, Inc.) and Supplementary Letter.(1)
10.2 - 1996 Stock Option Plan of Kevco, Inc., as amended, and Supplementary Letter.(1)
10.3 - Form of Amended and Restated Employment Agreement between Gerald E. Kimmel and Kevco,
Inc., joined therein by Kevco Delaware, Inc. and Sunbelt Wood Components, Inc.(1)
10.4 - Employment Agreement between C. Lee Denham and Kevco, Inc. dated June 30, 1995.(1)
10.5 - Lease between K & E Land & Leasing and Kevco, Inc. dated December 1, 1977.(1)
10.6 - Amendment No. 1 to Lease, by and between K & E Land & Leasing and Kevco, Inc.
dated March , 1982.(1)
10.7 - Amendment No. 2 to Lease, by and between K & E Land & Leasing and Kevco, Inc.
dated May 30, 1983.(1)
10.8 - Amendment No. 3 to Lease, by and between K & E Land & Leasing and Kevco, Inc.
dated February 1, 1993.(1)
10.9 - Lease dated April 1, 1980 between City of Newton, Kansas and K & E Land & Leasing.(1)
10.10 - Sublease and Lease Guarantee Agreement dated April 1, 1980 between K & E
Land & Leasing and Kevco, Inc.(1)
10.11 - Amendment No. 1 to Sublease and Lease Guaranty Agreement by and between K & E Land &
Leasing and Kevco, Inc. dated May 30, 1983.(1)
10.12 - Lease Agreement dated October 12, 1987 between 1741 Conant Partnership & Kevco Inc.(1)
10.13 - Equipment Lease Agreement dated January 1, 1991 between K & E
Land & Leasing and Kevco, Inc.(1)
10.14 - Amendment No. 1 to Equipment Lease Agreement between K & E Land & Leasing and Kevco,
Inc. dated February 12, 1993.(1)
10.15 - Amendment No. 2 to Equipment Lease Agreement between K & E Land & Leasing and Kevco,
Inc. dated October 26, 1993.(1)
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
10.16 - Amendment No. 3 to Equipment Lease Agreement between K & E Land & Leasing and Kevco,
Inc. dated May 23, 1994.(1)
10.17 - Deferred Compensation Agreement between Kevco, Inc. and Clyde A. Reed, Jr. dated May
24, 1977.(1)
10.18 - Amendment No. 1 to Deferred Compensation Agreement dated May , 1980.(1)
10.19 - Amendment No. 2 to Deferred Compensation Agreement dated March 10, 1992.(1)
10.20 - Amended and Restated Health and Accident Plan of Kevco, Inc.(1)
10.21 - Investment and Tax Advice Plan of Kevco, Inc.(1)
10.22 - Credit Agreement among Kevco, Inc., certain Lenders and NationsBank of Texas, N.A., as
Administrative Lender dated June 30, 1995.(1)
10.23 - First Amendment to Credit Agreement, dated as of September 1, 1995, among Kevco, Inc.,
the banks listed on the signature pages thereof, and NationsBank of Texas, N.A.(1)
10.24 - Second Amendment to Credit Agreement, dated as of November 29, 1995, among Kevco, Inc.,
the banks listed on the signature pages thereof, and NationsBank of Texas, N.A.(1)
10.25 - Revolving Credit Note of Kevco, Inc. to NationsBank of Texas, N.A. dated September 1,
1995 in the amount of $14,285,714.28.(1)
10.26 - Term Loan Note of Kevco, Inc. to NationsBank of Texas, N.A. dated September 1, 1995 in
the amount of $10,714,285.72.(1)
10.27 - Revolving Credit Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated February 2, 1996
in the amount of $5,714,285.72.(1)
10.28 - Term Loan Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated February 2, 1996 in the
amount of $4,285,714.28.(1)
10.29 - PaineWebber Standardized 401(K) Profit-Sharing Adoption Agreement (No. 005) (To be used
with Basic Plan Document No. 03 Only) for Kevco, Inc. dated May 24, 1996 and
PaineWebber Defined Contribution Plan.(1)
10.30 - Promissory Note of Gerald E. Kimmel to Kevco, Inc. dated October 26, 1993 in the amount
of $5,000,000.(1)
10.31 - Amendment No. 4 to Lease dated December 1, 1977 by and between K&E Land & Leasing and
Kevco, Inc. dated October 26, 1993.(1)
10.32 - Assignment and Acceptance dated February 2, 1996 between The Daiwa Bank, Limited and
The Sumitomo Bank, Ltd., Chicago Branch.(1)
10.33 - Form of Tax Indemnification and Distribution
Agreement.(1)
10.34 - Form of Promissory Note made by Kevco Texas, Inc. in the amount of $3,733,000 (the
Prior S Corporation Earnings Note).(1)
10.35 - Form of Promissory Note made by Kevco Texas,
Inc. (the Future S Corporation Earnings Note).(1)
10.36 - Form of Assignment of $5,000,000 Note made by Kevco, Inc.
(n/k/a Kevco Delaware, Inc.).(1)
10.37 - Form of Adoption Agreement by Kevco, Inc. and Kevco Texas, Inc. (re: 1995 Stock Option
Plan and 1996 Stock Option Plan).(1)
</TABLE>
15
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<TABLE>
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10.38 - Amendment No. 1 dated September 21, 1988, to Lease Agreement by 1741 Conant Partnership
as lessor and Kevco, Inc. (n/k/a Kevco Delaware, Inc.).(1)
10.39 - Letter Agreement dated June 22, 1982, between Kevco, Inc. (n/k/a Kevco Delaware, Inc.)
and K&E Land & Leasing. (re: lease rentals).(1)
10.40 - Letter Agreement dated October 1, 1996 by Kevco, Inc., K&E Land & Leasing, and 1741
Conant Partnership (re: lease rental).(1)
10.41 - Form of Parent Pledge Agreement.(1)
10.42 - Consent and Waiver, dated as of October 21, 1996, by and among NationsBank of Texas,
N.A., The Sumitomo Bank, Ltd. and Kevco Texas, Inc.(1)
10.43 - Amended and Restated Credit Agreement, dated as of February 27, 1997, by and among
Kevco Delaware, Inc., certain lenders and NationsBank of Texas, N.A.(4)
10.44 - Amendment No. 1 to Amended and Restated 1995 Stock Option Plan of Kevco, Inc. (10)
10.45 - Senior Commitment Letter dated October 27, 1997 from NationsBank of Texas, N.A. and
NationsBanc Montgomery Securities, Inc.(6)
10.46 - First Amendment to Amended and Restated Credit Agreement dated as of November 25, 1997
between Kevco Delaware, Inc., certain lenders and NationsBank of Texas, N.A.(7)
10.47 - Second Amended and Restated Credit Agreement dated December 1, 1997 between Kevco,
Inc., certain lenders and NationsBank of Texas, N.A.(7)(8)
10.48 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and NationsBank of
Texas, N.A. in the original principal amount of $11,666,666.66.(7)
10.49 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and National City Bank
of Kentucky in the original principal amount of $8,166,666.67.(7)
10.50 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and Guaranty Federal
Bank, F.S.B. in the original principal amount of $7,000,000.00.(7)
10.51 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and The Sumitomo Bank,
Limited in the original principal amount of $8,166,666.67.(7)
10.52 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and NationsBank of
Texas, N.A. in the original principal amount of $13,333,333.34.(7)
10.53 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and National City
Bank Kentucky in the original principal amount of $9,333,333.33.(7)
10.54 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and Guaranty
Federal Bank, F.S.B. in the original principal amount of $8,000,000.00.(7)
10.55 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and The Sumitomo
Bank, Limited in the original principal amount of $9,333,333.33.(7)
10.56 - Facility B Term Loan Note dated December 1, 1997 between Kevco, Inc. and NationsBank of
Texas, N.A. in the original principal amount of $50,000,000.00.(7)
10.57 - Security Agreement dated December 1, 1997 between Kevco, Inc. and NationsBank of Texas,
N.A. as Administrative Agent.(7)
10.58 - Registration Rights Agreement dated December 1, 1997 by and among Kevco, Inc., as
Issuer, the Subsidiaries of Kevco, Inc. identified therein as Subsidiary Guarantors and
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation and NationsBanc Montgomery
Securities, Inc., as Initial Purchasers.(9)
10.59 - Indenture dated December 1, 1997 among Kevco, Inc., SCC Acquisition Corp., Kevco
Delaware, Inc., Sunbelt Wood Components, Inc., Consolidated Forest Products, Inc.,
Bowen Supply, Inc. and Encore Industries, Inc., as Subsidiary Guarantors and United
States Trust Company of New York, as Trustee.(9)
10.60 - Supplemental Indenture between Shelter Components Corporation, a Subsidiary of Kevco,
Inc., and United States Trust Company of New York, as Trustee.(9)
10.61 - Supplemental Indenture dated as of December 1, 1997 between Shelter Distribution, L.P.,
a Subsidiary of Kevco, Inc., and United States Trust Company of New York, as Trustee.(9)
10.62 - Supplemental Indenture dated as of December 1, 1997 between DCM, Inc., a Subsidiary of
Kevco, Inc., and United States Trust Company of New York, as Trustee.(9)
10.63 - Supplemental Indenture dated as of December 1, 1997 between Duo-Form of Michigan, Inc.,
a Subsidiary of Kevco, Inc., and United States Trust Company of New York, as Trustee.(9)
10.64 - Supplemental Indenture dated as of December 1, 1997 between Design Components, Inc., a
Subsidiary of Kevco, Inc., and United States Trust Company of New York, as Trustee.(9)
10.65 - Supplemental Indenture dated as of December 1, 1997 between Shelter Components of
Indiana, Inc., a Subsidiary of Kevco, Inc., and United States Trust Company of New
York, as Trustee.(9)
10.66 - Supplemental Indenture dated as of December 1, 1997 between BPR Holdings, Inc., a
Subsidiary of Kevco, Inc., and United States Trust Company of New York, as Trustee.(9)
10.67 - First Amendment to Credit Agreement dated February 12, 1998 between Kevco, Inc.,
certain lenders and NationsBank of Texas, N.A.(10)
10.68 - Registered Global Note dated March 5, 1998 among Kevco, Inc., Kevco Delaware, Inc.,
Sunbelt Wood Components, Inc., Bowen Supply, Inc., Encore Industries, Inc., Shelter
Components Corporation, BPR Holdings, Inc., Shelter Components of Indiana, Inc., Design
Components, Inc., Duo-Form of Michigan, Inc., DCM, Inc. and Shelter Distribution, L.P.,
as Subsidiary Guarantors and United States Trust Company of New York, as Trustee.(11)
27.1 - Financial Data Schedule.(11)
</TABLE>
- ----------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-11173) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated February 27, 1997, and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's registration statement on
Form S-8 (No. 333-19959), and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q, for the quarter ended March 31, 1997 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q, for the quarter ended June 30, 1997 and incorporated herein by
reference.
17
<PAGE>
(6) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1, filed October 28, 1997, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1/A, filed December 12, 1997, and incorporated herein by
reference.
(8) Schedules and similar attachments to this exhibit have not been previously
file herewith, but the nature of their contents is described in the body of
this exhibit. The Company agrees to furnish a copy of any such omitted
schedules and attachments to the Securities and Exchange Commission upon
request.
(9) Previously filed as an exhibit to the Company's registration statement on
Form S-4 (No. 333-43691), and incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K,
for the year ended December 31, 1997 and incorporated herein by reference.
(11) Filed herewith.
(b) REPORTS ON FORM 8-K
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Commission Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
KEVCO, INC.
Date: April 30, 1998
By:/s/ Jerry E. Kimmel
---------------------------------
Jerry E. Kimmel
Chairman of the Board, President
and Chief Executive Officer
Date: April 30, 1998
By:/s/ Ellis L. McKinley, Jr.
---------------------------------
Ellis L. McKinley, Jr.
Vice President,
Chief Financial
Officer, Treasurer and Director
(Principal Financial Officer)
19
<PAGE>
KEVCO, INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.68 Registered Global Note
27.1 Financial Data Schedule.
20
<PAGE>
EXHIBIT 10.68
REGISTERED GLOBAL NOTE
Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be transferred except as a whole by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) ("DTC") to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
KEVCO, INC.
10 3/8% Series B Senior Subordinated Notes due 2007
CUSIP No. 492716AB1 $105,000,000
KEVCO, INC., a Texas corporation, promises to pay to Cede & Co. or
registered assigns, the principal sum of One Hundred Five Million and No/100
Dollars ($105,000,000.00), or such greater or lesser amount as may from time
to time be endorsed on Schedule A hereto, on December 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing June 1, 1998
Record Dates: May 15 and November 15 (whether or not a Business Day)
Reference is hereby made to the further provisions of this Senior
Subordinated Note set forth on the following pages, which further provisions
shall for all purposes have the same effect as if set forth at this place.
Dated: March 5, 1998
KEVCO, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President & CEO
-----------------------------
<PAGE>
By: /s/ Ellis L. McKinley, Jr.
-----------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------
Title: V.P., CFO and Treasurer
-----------------------------
<PAGE>
TRUSTEE CERTIFICATE OF
AUTHENTICATION
This is one of the
Notes referred to in the
within-mentioned Indenture
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /s/ Ana Espinosa
-------------------------
(Authorized Signatory)
<PAGE>
10 3/8% Series B Senior Subordinated Notes Due 2007
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Kevco, Inc., a Texas corporation (the "Company"), promises
to pay interest on the principal amount of this Note at the rate and in the
manner specified below and shall pay the Liquidated Damages, if any, payable
pursuant to Section 5 of the Registration Rights Agreement referred to
below. Interest on the Notes will accrue at the rate of 10 3/8% per annum
and will be payable semi-annually in arrears on June 1 and December 1 in
each year, commencing on June 1, 1998, or if any such day is not a Business
Day, the next succeeding Business Day (each an "Interest Payment Date"), to
Holders of record on the immediately preceding May 15 and November 15,
respectively.
Interest will be computed on the basis of a 360-day year of twelve 30-
day months. Interest on the Notes shall accrue from the most recent date to
which interest has been paid or duly provided for or, if no interest has
been paid or duly provided for, from the Issue Date of original issuance of
the Notes. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal at the applicable interest rate on the Notes plus one
percent; it shall pay interest on overdue installments of interest (without
regard to applicable grace periods) at the same rate, to the extent lawful,
(i) if payment is made during the period of five Business Days following the
date on which such interest was due, to the Persons who were to receive
payment on the date such interest was due or (ii) if payment is made after
such period, to the Persons who are Holders on a subsequent special record
date, which date shall be at the earliest practicable date but in all events
at least five Business Days prior to the payment date.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the record date next
preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date. Principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes shall
be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York, or at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments with
respect to Notes the Holders of which have given wire transfer instructions
to the Company and the Trustee shall be required to be made by wire transfer
of immediately available funds to the
<PAGE>
accounts specified by the Holders thereof. The Company shall pay principal,
premium, if any, interest and Liquidated Damages, if any, on the Notes in
money of the United States that at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the Indenture
will act as Paying Agent and Registrar. The Company may change any Paying
Agent or Registrar without notice to any Holder of Notes. The Company or
any of its Subsidiaries may act as Paying Agent or Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
December 1, 1997 ("Indenture") among 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
part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
The Notes are subject to all such terms, and Holders of Notes are referred
to the Indenture and such Trust Indenture Act for a statement of such terms.
The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Notes. Terms not otherwise defined herein shall have the
meanings assigned in the Indenture. The Notes are general unsecured
obligations of the Company limited to $105,000,000 in aggregate principal
amount.
5. OPTIONAL REDEMPTION. Except as set forth in the next paragraph, the
Notes are not redeemable at the Company's option prior to December 1, 2002.
Thereafter, the Notes will be subject to redemption for cash at any time at
the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days notice, at the redemption prices (expressed as percentages
of principal amount) if redeemed during the 12-month period commencing
December 1 of the years indicated below (subject to the right of Holders of
Notes of record on an interest record date to receive interest due on an
Interest Payment Date that is on or prior to such date of redemption), plus
accrued and unpaid interest and Liquidated Damages, if any, to the
applicable redemption date:
Year Percentage
---- ----------
2002 105.188%
2003 103.458%
2004 101.729%
2005 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to December 1, 2000, the
Company may on any one or more occasions redeem up to an aggregate 35% of
the original aggregate principal amount of the Notes at a redemption price
of 110.375% of the principal amount of the Notes (subject to the right of
Holders of Notes of record on an interest record date to receive interest
due on an Interest Payment Date that is on or
<PAGE>
prior to such date of redemption), together with accrued and unpaid interest
and Liquidated Damages, if any, to the redemption date, with the Net
Proceeds of one or more Public Equity Offerings; provided that at least 65%
of the aggregate principal amount of the Notes originally outstanding remain
outstanding immediately after such redemption; and provided, further, that
such redemption shall occur within 90 days of the date of the closing of any
such Public Equity Offering.
6. MANDATORY REDEMPTION. Except as set forth in Section 3.08 of the
Indenture and as provided in paragraph 7 below, the Company is not required
to make mandatory redemption or sinking fund payments with respect to the
Notes.
7. REPURCHASE AT OPTION OF HOLDERS.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase. Holders of Notes that
are subject to an offer to purchase will receive an offer to purchase from
the Company prior to any related purchase date, and may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) If the Company consummates any Asset Sale, the Company shall be
required, under certain circumstances, to apply the Excess Proceeds thereof
to an offer to all Holders of Notes to purchase the maximum principal amount
of Notes that may be purchased out of the Excess Proceeds at an offer price
in cash equal to 100% of the principal amount of the Notes, 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. Holders of Notes
that are subject to an offer to purchase will receive an offer to purchase
from the Company prior to any related purchase date, and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face denominations
of $1,000 and integral multiples of $1,000. The Notes may be transferred
and exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to
pay any taxes and fees required by law or permitted by the Indenture.
Neither the Company nor the Registrar will be required to issue, register
the transfer of, or exchange (i) any Note or portion of a Note selected for
redemption or tendered pursuant to an offer, except the unredeemed portion
of any Note being redeemed in part or (ii) any Notes during the period
between (a) beginning on the date the Trustee receives a notice of a
redemption from the Company and ending at the close of business on the date
the Notes to be redeemed are selected by the Trustee or (b) an interest
record date and ending at the close of business on the next succeeding
Interest Payment Date.
<PAGE>
9. SUBORDINATION. The Notes and the Subsidiary Guarantees are subordinated in
right of payment, to the extent and in the manner provided in Article 11 and
Section 10.08 of the Indenture, to the prior payment in full of all Senior
Indebtedness. The Company agrees, and each Holder of Notes by accepting a
Note consents and agrees, to the subordination provided in the Indenture and
authorizes the Trustee to give it effect.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered
as its absolute owner for the purpose of receiving payment of principal of
and interest on this Note and for all other purposes whatsoever, whether or
not this Note is overdue, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary. The registered Holder of a
Note shall be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Notes, the Subsidiary Guarantees and the Escrow Agreement may
be amended or supplemented with the written consent of the Holders of Notes
of at least a majority in principal amount of the then outstanding Notes,
and any existing Default or Event of Default (other than a Default or Event
of Default relating to the payment of principal, premium, if any, interest
or Liquidated Damages, if any, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of
the Indenture, the Notes, the Subsidiary Guarantees or the Escrow Agreement
may be waived with the written consent of the Holders of Notes of at least a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of Notes, the Indenture, the Notes or the Escrow
Agreement may be amended or supplemented to 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 of the Company's
or a Subsidiary Guarantor's obligations to Holders of Notes in case of a
merger or consolidation, to provide for additional Subsidiary Guarantors, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not materially adversely affect the legal
rights of any such Holder under the Indenture, or to comply with the
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to allow any
Restricted Subsidiary to guarantee the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (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 of Sections 3.08, 4.06, 4.07, 4.21, 5.01 or
5.02 of the Indenture; (iv) failure by the Company for 30 days after written
notice from the Trustee or the Holders of at least 25% in principal amount
of
<PAGE>
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
herein, (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
$10,000,000 or more; (vii) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $10,000,000,
which judgments are not paid, discharged or stayed for a period of 60 days
and are not covered by insurance; or (viii) certain events of bankruptcy or
insolvency with respect to the Company or any Restricted Subsidiary. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to the Company or any Restricted Subsidiary, all
outstanding Notes will become due and payable without further action or
notice. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. 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. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, premium, if any, interest or
Liquidated Damages, if any) if it determines that withholding notice is in
their interest. 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.
13. TRUSTEE DEALINGS WITH THE COMPANY. Subject to the provisions of the
Indenture, the Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee.
<PAGE>
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or
stockholder of the Company or any Restricted Subsidiary, as such, shall have
any liability for any obligations of the Company or any Subsidiary Guarantor
under the Notes, the Indenture or any Subsidiary Guarantee or for any claim
based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes and Subsidiary Guarantees.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set
forth in the Registration Rights Agreement dated as of the date of the
Indenture, between the Company and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Kevco, Inc.
1300 South University Drive
Suite 200
Fort Worth, Texas 76107
Attention: Ellis L. McKinley, Jr.
Telecopier No.: (817) 332-2765
<PAGE>
SUBSIDIARY GUARANTEE
The Subsidiary Guarantors listed below (hereinafter referred to as the
"Subsidiary Guarantors," which term includes any successors or assigns under
the hereinafter defined Indenture and any additional Subsidiary Guarantors),
jointly and severally have irrevocably and unconditionally guaranteed to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns (i) the due and punctual payment of
the principal of, premium, if any, interest and Liquidated Damages, if any,
on the 10 3/8% Senior Subordinated Notes due December 1, 2007 (the "Notes")
of Kevco, Inc., a Texas corporation (the "Company"), whether at stated
maturity, by acceleration, call for redemption, upon a Change of Control
Offer, upon an Asset Sale Offer, pursuant to the Escrow Agreement or
otherwise, the due and punctual payment of interest on the overdue
principal, and premium, if any, and (to the extent permitted by law)
interest on any interest, if any, and Liquidated Damages, if any, on the
Notes, and the due and punctual performance of all other obligations of the
Company to the Holders of Notes or the Trustee under the Notes or the
Indenture, dated as of December 1, 1997, among the Company, the Subsidiary
Guarantors and United States Trust Company of New York, as Trustee (the
"Indenture"), all in accordance with the terms set forth in Article 10 of
the Indenture, (ii) in case of any extension of time of payment or renewal
of any Notes or any such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration, call for
redemption, upon an offer to purchase or otherwise, and (iii) the payment of
any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder of Notes in enforcing any rights under
the Notes or the Indenture.
The obligations of the Subsidiary Guarantors to the Holders of Notes and to
the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article 10 of the Indenture and reference is hereby
made to such Indenture for the precise terms of this Subsidiary Guarantee.
No director, officer, employee, incorporator or stockholder of any
Subsidiary Guarantor, as such, shall have any liability for any obligations
of the Company or any Restricted Subsidiary under the Notes, the Indenture
or hereunder or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes and Subsidiary Guarantees.
This is a continuing Guarantee and shall remain in full force and effect and
shall be binding upon the Subsidiary Guarantors and their respective
successors and assigns until full and final payment of all of the Company's
obligations under the Notes and
<PAGE>
the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders of Notes, and, in the event of any transfer
or assignment of rights by any Holder of Notes or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend
to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. This is a Guarantee of payment and not of
collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
The obligations of the Subsidiary Guarantors under their Subsidiary
Guarantees shall be limited to the extent necessary to insure that it does
not constitute a fraudulent conveyance under applicable law.
Each Subsidiary Guarantor covenants (to the extent it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and each Subsidiary Guarantor (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any
power granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein and not otherwise defined herein shall
have the same meanings given them in the Indenture unless otherwise
indicated.
SUBSIDIARY GUARANTORS:
KEVCO DELAWARE, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
<PAGE>
SUNBELT WOOD COMPONENTS, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
BOWEN SUPPLY, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
ENCORE INDUSTRIES, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
SHELTER COMPONENTS
CORPORATION
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
BPR HOLDINGS, INC.
<PAGE>
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
SHELTER COMPONENTS
OF INDIANA, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
DESIGN COMPONENTS, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
DUO-FORM OF MICHIGAN, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
DCM, INC.
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
Title: Chairman, President and CEO
-----------------------------
SHELTER DISTRIBUTION, L.P.
<PAGE>
By: BPR Holdings, Inc., its general partner
By: /s/ Jerry E. Kimmel
-----------------------------
Name: Jerry E. Kimmel
-----------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
____________________________________________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to act
for him.
Date:______________ Your Name:
(Print your name as it appears on the face of this Note)
Your Signature:
(Sign exactly as your name appears on the face of this
Note)
Signature Guarantee:
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.06 or 4.07 of the Indenture, check the box
below:
[ ] Section 4.06 [ ] Section 4.07
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.06 or 4.07 of the Indenture, state the amount you
elect to have purchased (if all, write "ALL"): $___________
Date:___________ Your Name:
(Print your name exactly as it appears on the face of this
Note)
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Social Security or Tax Identification No.
____________:
Signature Guarantee:
<PAGE>
SCHEDULE A
----------
SCHEDULE OF EXCHANGES OF INTERESTS IN GLOBAL NOTES
The following exchanges of a part of this Global Note for interests in
another Global Note or for Certificated Notes, or exchanges of a part of
another Global Note or Certificated Note for an interest in this Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of Decrease Amount of Increase in This Global Note Authorized Officer of
Date of in Principal Amount Principal Amount of Following Such Trustee or Note
Exchange of this Global Note this Global Note Decrease (or Increase) Custodian
- ------------- --------------------- -------------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF KEVCO, INC. FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 581
<SECURITIES> 0<F1>
<RECEIVABLES> 57,175<F2>
<ALLOWANCES> 641
<INVENTORY> 86,541
<CURRENT-ASSETS> 147,159
<PP&E> 51,186
<DEPRECIATION> 8,085
<TOTAL-ASSETS> 323,337
<CURRENT-LIABILITIES> 78,624
<BONDS> 0
0
0
<COMMON> 68
<OTHER-SE> 42,744
<TOTAL-LIABILITY-AND-EQUITY> 323,337
<SALES> 212,051
<TOTAL-REVENUES> 213,905
<CGS> 183,108
<TOTAL-COSTS> 204,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,068
<INCOME-PRETAX> 3,861
<INCOME-TAX> 1,733
<INCOME-CONTINUING> 2,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,128
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
<FN>
<F1>Amounts inapplicable or not disclosed as a separate line on the Statement of
Financial Position or Results of Operations are reported as 0 herein.
<F2>Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Statement of Financial Position.
</FN>
</TABLE>
