United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Fiscal Year Ended December 30, 2000

                                       or

[ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Transition Period From ______ To ______


                           Commission File No. 1-14967

                                   WICKES INC.
                                   -----------
             (Exact name of registrant as specified in its charter)

                  Delaware                                 36-3554758
                  --------                                 ----------
         (State of Incorporation)              (IRS Employer Identification No.)

             706 North Deerpath Drive, Vernon Hills, Illinois 60061
             ------------------------------------------------------
                    (Address of principal executive offices)

                                 (847) 367-3400
                                 --------------
              (Registrant's telephone number, including area code)

          Securities Registered Pursuant to Section 12 (b) of the Act:

                                      None
                                      ----

          Securities Registered Pursuant to Section 12 (g) of the Act:
                    Common Stock, par value of $.01 per share
                    -----------------------------------------

     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 by check mark if disclosure of delinquent  filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ ]

     As of February 28, 2001,  the  Registrant  had  8,273,685  shares of Common
Stock, par value $.01 per share, outstanding,  and the aggregate market value of
outstanding  voting stock  (based on the last sale price on the Nasdaq  National
Market of Common  Stock on that date) held by  nonaffiliates  was  approximately
$15,200,000  (includes  the  market  value of all such stock  other than  shares
beneficially owned by 10% stockholders, executive officers and directors).

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

     Portions of the Registrant's  Proxy Statement in connection with its Annual
Meeting of  Stockholders  tentatively  scheduled to be held on May 23, 2001, are
incorporated by reference into Part III hereof, as more  specifically  described
herein.



<PAGE>2




                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                          Page No.
                                                          --------
                                     PART I
                                     ------

<S>      <C>                                               <C>

Item 1.    Business..........................................3
Item 2.    Properties.......................................21
Item 3.    Legal Proceedings................................22
Item 4.    Submission of Matters To a Vote
                of Security Holders.........................23


                                     PART II
                                     -------

Item 5.    Market For Registrant's Common Equity
                and Related Stockholder Matters.............24
Item 6.    Selected Financial Data..........................24
Item 7.    Management's Discussion and Analysis
                of Financial Condition and Results
                of Operations...............................29
Item 7A.   Quantitative and Qualitative Disclosures
                About Market Risk...........................44
Item 8.    Financial Statements and Supplementary Data......45
Item 9.    Changes In and Disagreements With Accountants
                On Accounting and Financial Disclosure......45


                                    PART III
                                    --------

Item 10.   Directors and Executive Officers
                of the Registrant...........................46
Item 11.   Executive Compensation...........................46
Item 12.   Security Ownership of Certain
                Beneficial Owners and Management............46
Item 13.   Certain Relationships and Related Transactions...46


                                     PART IV
                                     -------

Item 14.   Exhibits, Financial Statement Schedules,
                and Reports on Form 8-K.....................47

SIGNATURES..................................................48
</TABLE>


<PAGE>3



                                     PART I
                                     ------

Item 1. BUSINESS.
-----------------

     Wickes Inc.  ("Wickes") and its  subsidiaries  (Wickes and its subsidiaries
are referred to as "the  Company") are a leading  supplier and  manufacturer  of
building  materials  in the United  States.  The Company  sells its products and
services primarily to residential and commercial building professionals,  repair
and  remodeling   ("R&R")   contractors   and,  to  a  lesser  extent,   project
do-it-yourself  consumers ("DIY's") involved in major home improvement projects.
At  February  28,  2001,  the  Company   operated  101  sales  and  distribution
facilities,  as well as 27 component  manufacturing  facilities that produce and
distribute roof and floor trusses,  framed wall panels,  and pre-hung door units
principally in the Midwest, Northeast, and South regions of the United States.


Background
----------

     The  Company  was  formed  in  1987 as a  Delaware  corporation  under  the
corporate  name "Wickes Lumber  Company." In June 1997, the Company  changed its
corporate  name to "Wickes  Inc." The Company has and  continues  to conduct its
primary operations under the "Wickes Lumber" name.

     In April 1988, the Company completed the acquisition from Wickes Companies,
Inc. of operations that had commenced in 1952. These operations consisted of 223
sales and distribution  centers and 10 component  manufacturing  facilities.  In
subsequent  periods the Company  modified its operations to reduce its number of
sales and distribution  centers to the current 101 and to strategically grow its
component manufacturing capabilities to 27 locations.

     For further information see "Business Strategy".


Industry Overview
-----------------

     According  to  the  Home  Improvement   Research   Institute  ("HIRI")  (an
independent research  organization for manufacturers,  retailers and wholesalers
allied to the home improvement  industry),  sales of home  improvement  products
(defined as lumber, building materials,  hardware, paint, plumbing,  electrical,
tools,  floor  coverings,  glass,  wallpaper,  and  lawn  and  garden  products)
associated with the  maintenance and repair of residential  housing and new home
construction  were  estimated  to  be  $266.8  billion  in  2000.  Despite  some
consolidation over the last ten years,  particularly in metropolitan  areas, the
building material industry remains highly fragmented.  The Company believes that
no building material supplier  accounted for more than 17.1% of the total market
in 2000.
<PAGE>4

     In general, building material suppliers concentrate their marketing efforts
either on building  professionals or consumers.  Professional-oriented  building
material  suppliers,  such  as the  Company,  tend  to  focus  on  single-family
residential  contractors,  R&R  contractors,  project DIY's and, to some extent,
commercial  contractors.  These  suppliers  compete  principally on the basis of
price, service,  product assortment,  scheduled job-site delivery,  manufactured
building    components   and   trade   credit    availability.    In   contrast,
consumer-oriented  building material  retailers target the mass consumer market,
where  competition  is  based  principally  on  price,  merchandising,   product
assortment,  location  and  advertising.  Consumer-oriented  warehouse  and home
center  retailers  typically do not offer as wide a range of  services,  such as
specialist advice, trade credit, manufactured building components, and scheduled
job-site delivery, as do professional-oriented building material suppliers.

     Industry sales are linked to a significant  degree to the level of activity
in the residential  building  industry,  which tends to be cyclical and seasonal
due to weather. New residential  construction is determined largely by household
formations,  interest  rates,  housing  affordability,  availability of mortgage
financing,  regional demographics,  consumer confidence, job growth, and general
economic  conditions.  According to the U.S. Bureau of the Census,  U.S. housing
starts were 1.48 million in 1996,  1.47  million in 1997,  1.62 million in 1998,
1.66 million in 1999 and 1.59 million in 2000. The Blue Chip Economic Indicators
Consensus  Forecast,  dated March 10, 2001,  projects 2001 housing  starts to be
1.54 million,  down slightly from housing starts in 2000.  Housing starts in the
Company's  primary  geographical  market,  the Midwest,  decreased  7.8% housing
starts in that region in 2000. The Company's two other geographical markets, the
Northeast and South,  experienced  decreases in 2000 housing  starts of 1.4% and
4.9%, respectively. Nationally, single family housing starts, which generate the
majority of the Company's sales to building professionals,  decreased by 5.5% to
1.26 million starts in 2000 from 1.33 million starts in 1999.

     Repair  and  remodeling  expenditures  tend to be less  cyclical  than  new
residential construction.  These expenditures generally are undertaken with less
regard  to  economic  conditions,   but  both  repair  and  remodeling  projects
(including  projects undertaken by DIY's) tend to increase with increasing sales
of both existing and newly constructed residences.  HIRI estimates that sales of
home  improvement  products to repair and remodeling  professionals  represented
$50.8  billion,  or  approximately  19.0% of total  2000  sales of the  building
material supply industry, while direct sales to DIY's amounted to $127.6 billion
or 47.8% of such sales.

<PAGE>5



Business Strategy
-----------------

     General
     -------

     The Company's  mission is to be the premier provider of building  materials
and  services  and  manufacturer  of  value-added  building  components  to  the
professional segments of the building and construction industry.

     The Company targets five customer groups: the production or volume builder;
the custom builder; the tradesman;  the repair and remodeler; and the commercial
developer.  Its marketing  approach  encompasses  three channels of distribution
which it refers to as: Major Markets,  Conventional  Markets, and Wickes Direct.
In Major  Markets,  the Company serves the national,  regional,  and large local
builder  with  a  total  solutions   approach  and  specialized   services.   In
Conventional  Markets,  the Company  provides the smaller  builder with tailored
products and  services.  Wickes  Direct  provides  materials  flow and logistics
management  services to commercial  customers.  The Company also serves building
professionals through its network of 27 component manufacturing  facilities that
produce value-added,  wood framed wall panels, roof and floor truss systems, and
pre-hung interior and exterior doors.

     In 1999, the Company  introduced its "Build 2003" program that outlines its
seven corporate objectives,  using 1998 results as a performance baseline. These
are:  (1)  generate a  compounded  annual  sales growth rate of at least 6%; (2)
internally manufacture 75% of the Company's wall panels, roof and floor trusses,
and pre-hung doors distributed; (3) increase EBITDA (see Part II, Item 6 for the
definition of "EBITDA") as a percentage  of net sales to a minimum of 4.2%;  (4)
improve  debt-to-equity  ratio and achieve 1:1  debt-to-equity by year-end 2003;
(5) generate a return on capital employed in excess of the Company's peer group;
(6) extend its earnings season; and (7) provide consistency in earnings growth.

     Regarding  the "Build 2003"  objectives,  the Company has had the following
accomplishments,  in the order that the objectives are listed above. Sales gains
for 1999 were  19.2%.  Although  net sales for 2000 were below the prior year by
5.5%, primarily due to "lumber deflation" (see "Item 7. Management`s  Discussion
and Analysis of Financial  Condition  and Results of  Operations"),  the Company
continues to track ahead of its 6% compound  annual sales growth rate objective.
In 2000, the Company improved its production of internally manufactured building
components to 56.7% from 50.9% in 1999, in line with the objective.  With regard
to the EBITDA objective, the effects of lumber deflation,  higher fuel costs and
other operating factor more fully explained in "Item 7. Management's  Discussion
and Analysis of Financial Condition and Results of Operations",  the Company was
unable to progress on this  objective.  Management  continues to believe it will
attain  this goal by 2003.  The  redemption  of $36.0  million of 11-5/8  Senior
Subordinated  Debt helped Wickes to improve its debt to equity ratio to 6.1:1 at
December  30, 2000 from 7.2:1 and 8.3:1 at fiscal  years' end for 1999 and 1998,
respectively.  For the 2000 fiscal year,  Wickes' return on capital employed was
8.2%. Based on the most recently available  information for its publicly traded,



<PAGE>6

building  materials  distribution  peer group,  the Company  continues to exceed
their  rolling  four  quarter  average of 5.0%.  With  regard to  extending  its
earnings  season,  the Company  achieved  positive  EBITDA in all four quarters,
despite  severe  weather  and  lumber  deflation  issues  which  resulted  in  a
significant  decrease in the fourth quarter of 2000, compared to the same period
in the prior year.  Finally,  as more fully  discussed in "Item 7.  Management's
Discussion and Analysis of Financial  Condition and Results of Operations",  the
effects of lumber  deflation  throughout the year,  severe weather in the fourth
quarter  of 2000 and  other  economic  factors,  such as the  effects  of higher
interest rates and fuel prices,  significantly hampered the Company's efforts to
continue its prior earnings growth trend during 2000.

     Major Markets
     -------------

     The Company operates in 22 Major Markets,  which are served by 33 sales and
distribution facilities.  In this market group, the Company targets the national
top 400  builders,  both  regional  and large local  builders  with  specialized
services and a total solutions approach, including its unique "Frame A Home in A
Day" program in six markets. These facilities are designed,  stocked and staffed
to meet the needs of the  particular  markets in which they are  located.  Major
Markets also are served by all of the Company's manufacturing facilities.

     Major Markets generally are large  metropolitan areas with favorable growth
projections and are  characterized by the active presence of national,  regional
and large local builders. The Company believes that the building supply industry
in these Major Markets remains heavily  fragmented.  The Company's Major Markets
programs  seek to  provide  the large  builder  with  specialized  products  and
services that integrate  various methods of  distribution.  The Company provides
these programs and services on a "virtual  store" basis;  that is,  products and
services may be provided from multiple  facilities serving the Major Market on a
coordinated  basis with centralized  customer  contact and support.  The Company
invests  significant  efforts to redefine  and improve  customer  service with a
comprehensive,  total solutions package of core building materials, supply chain
management, material flow and logistics management.

     During  1997 and 1998,  the  Company  researched  the  levels  and types of
customer  service it would  provide as part of its Major  Markets  strategy.  By
first  understanding  the cost drivers,  inefficiencies,  and needs of the large
builders who dominate the more  densely  populated  regions of the country,  the
Company  could focus its strategy on meeting  their  needs.  The outcome of that
research  was to  restructure  our Major  Markets  programs  to  address a clear
opportunity  to assist  builders in reducing  their total cost of  production by
utilizing the Company's manufacturing and logistics expertise.

     The Company  initiated a "Target  Major  Markets"  program in 1997.  Target
Major  Markets are those Major  Markets that the Company  aggressively  promotes
with updated sales and distribution centers,  targeted high volume builders, and
concentrated  component  manufacturing  support.  Since  then,  the  Company has
developed Target Major Markets programs in 14 Major Markets. Over the next three

<PAGE>7

years,  the  Company  will   progressively   target  additional  Major  Markets.
Management  believes  that these  markets  continue to offer  opportunities  for
growth as a  traditional  building  materials  supplier,  as well as to  provide
opportunities  to grow and  introduce  new,  value-added  services  and  product
initiatives.

     The Company's value-added  manufacturing  operations constitute an integral
element  supporting  the Target Major  Markets  strategy.  This support  network
enables the Company to provide its customers with custom engineered, value-added
manufactured framing component systems. For instance, in six markets the Company
operates its "Frame a Home in a Day" concept.  This  initiative  allows builders
significant  cost  savings  by  completely  framing  and  sheathing  an  average
two-story  residence  in as little  as one day,  rather  than the  substantially
longer period involved in traditional framing methods.

     The Company's  operations in Major Markets contributed  approximately 42.6%
of the Company's net sales in 2000, compared to 44.3% in 1999 and 42.2% in 1998.
For the 14 Target Major Market  programs in place at the end of 2000,  net sales
represented approximately 25.6% of the Company's net sales compared to 26.7% and
25.0% for 1999 and 1998, respectively.

     Conventional Markets
     --------------------

     The Company operates 68 sales and distribution  facilities in small,  rural
Conventional  Markets,  where Wickes targets the smaller building  professionals
such as single-family  residential contractors and R&R contractors with tailored
products and services. Wickes provides a service offering mix that includes tool
rental,  specialized delivery,  and installation services. The Company typically
is the market  leader in these  fragmented,  relatively  slow growth  markets of
populations  generally  below  100,000.  The  Company  believes  it  possesses a
significant  competitive  advantage in rural markets and small communities where
it primarily competes with local,  independent lumberyards and regional building
chains.

     Since the beginning of 1997, the Company has completed re-merchandising and
re-marketing programs ("Resets") in 15 sales and distribution facilities located
in  Conventional  Markets.  These programs  typically  include  upgrading of the
showroom  layout and product  presentation;  expansion  of product  assortments,
typically  adding a significant  number of stock keeping units  ("SKU's") with a
view towards achieving  category dominance in the market; and increasing service
offerings such as installed sales,  tool rental,  specialized  delivery services
and  additional  in-store  sales  specialists.  The  Company  intends to perform
additional  Resets  in  2001  and  future  years.  The  Company's  manufacturing
operations  also  provide  significant  support for the  Company's  Conventional
Market  sales  activities,  particularly  through  the  manufacture  of pre-hung
interior and exterior doors.
<PAGE>8

     Wickes Direct
     -------------

     Wickes  Direct  focuses on the large volume needs of  commercial  builders,
much of which are shipped  directly from the  manufacturer to the customer's job
site.  This marketing  group  concentrates  on five specific types of commercial
wood projects: assisted care facilities, extended care facilities, hotels/motels
(three stories and under), restaurants, and multi-family housing. In addition to
selling  building  materials  and  engineered  wood  components,  Wickes  Direct
provides  building  design,   value-added  engineering  processes,   estimating,
logistics,  and material  delivery  services to large customers  anywhere in the
world,  all accomplished  without the need for a physical  facility close to the
customer.  Wickes Direct has project sales specialists that focus exclusively on
selling building  solutions to the commercial  developers.  Wickes  Construction
Services, launched in 2000, is a hybrid construction group that provides turnkey
framing services, bids, contracts, and takeoffs, and provides installation labor
and general contractor services for Wickes Direct customers.

     Manufacturing Operations
     ------------------------

     The Company owns and operates 27 component  manufacturing  facilities  that
supply the Company's customers with higher-margin,  value-added products such as
framed wall panels,  roof and floor trusses,  and pre-hung interior and exterior
doors. Two locations were added in 2000. These facilities include 18 stand-alone
operations  as well as nine  additional  operations  that exist at the Company's
sales and distribution  facilities.  Value-added  component  manufacturing is an
important element supporting the Company's Major Markets,  Conventional  Markets
and Wickes Direct. In Target Major Markets,  manufacturing  provides key support
to Wickes' position as a value-added  partner,  including its "Frame A Home In A
Day" concept in six Target Markets. In Conventional  Markets,  trusses,  panels,
and pre-hung doors are sold to local builders.  For Wickes Direct,  manufactured
components, particularly framed wall panels, provide an important value-add. The
Company  believes that these  engineered  products  improve customer service and
provide an attractive  alternative to job-site  construction.  In 2000 and 1999,
the Company internally manufactured approximately 56.7% and 50.9%, respectively,
by dollar volume,  of its total building  components  distributed.  As resources
permit,  the Company intends to expand its manufacturing  facilities to supply a
greater number of its sales and distribution  facilities with these  value-added
products.

     Other Initiatives
     -----------------

     Since 1997,  the  Company  has also  initiated  several  other  programs to
supplement its Major Markets and Conventional Markets.

     The  Company's  tool rental  program  was  developed  to rent  specialized,
professional  quality  tools and equipment to customers in need of equipment for
unique or short-term projects.  The program is designed to attract new customers

<PAGE>9

as well  as to  provide  the  Company  with an  opportunity  to  supply  current
customers with a greater portion of their total construction  needs. The program
currently  is in place  in 31  sales  and  distribution  facilities  and will be
expanded to additional facilities in 2001.

     The Company's  installed  insulation  program consists of specially trained
installation crews using specialized equipment and vehicles to install blown and
batt insulation in new construction or major renovations.  Installed  insulation
is one of the  value-added  services that the Company  believes it provides on a
cost-effective  basis to meet its  customers'  needs.  The installed  insulation
program currently is operating in 59 sales and distribution  facilities,  having
increased by 9 in 2000.  The Company is planning to expand to more  locations in
2001.

     In 2000,  the Company  initiated  installed  siding and gutter  programs to
further service its Major Markets and Conventional Markets strategies.  Like the
installed  insulation  program,  siding and gutters are installed with specially
trained crews equipped with specialized tools and vehicles.  At the end of 2000,
the  Company  had 13  installed  siding  and 6  installed  gutter  locations  in
operation.  The Company plans to expand the number of locations  providing  this
value-added service in 2001.

     In total,  the tool rental and  installed  programs  initiatives  represent
approximately 4% of Company net revenues in 2000. However,  these represent high
margin programs with strong expansion potential.

     The  Company  currently  has in place an  Internet  and  software  strategy
designed to provide enhanced service levels to its customers. Employed correctly
and integrated properly,  Internet and software technology will broaden the base
of products  offered and the ability to service new and existing  customers over
the long-term.  The Company has entered into several  agreements  with companies
providing Internet based services to the construction  industry. In addition, in
2000 the  Company  acquired  Tres-Ark  Enterprises,  Inc.,  the  developer  of a
software package  ("BuilderCentral  2000(TM)") designed to provide  professional
building contractors an enterprise system to manage their construction projects.
(See also Note 5 to the Consolidated Financial Statements).

     BuilderCentral 2000 is an integrated software system designed to assist the
professional builder in managing its construction  business. It consists of four
integrated modules representing: (1) construction management, (2) accounting and
finance,  (3)  project  estimating  capabilities,   and  (4)  on-site  hand-held
applications.  In 2001, a new application will be introduced to provide a direct
Internet link to the builders' customized Wickes bill of materials,  pricing and
trade account for online ordering.

     Wickes has entered into other strategic  alliances to enable the Company to
capitalize  on  joint  marketing  efforts  and to  promote  Wickes'  value-added
component manufacturing  capabilities.  While these programs have yet to produce
significant sales results, the Company continues to develop these and to explore
additional opportunities.
<PAGE>10

     In March 2000, the Company entered into an agreement with Buildscape, Inc.,
an entity  controlled by Riverside Group,  Inc. and Imagine  Investments,  Inc.,
each of which  may be deemed  an  affiliate  of the  Company.  Pursuant  to this
agreement,  the Company and Buildscape,  Inc. are jointly conducting an Internet
distribution program. Buildscape(R) is an Internet service designed for builders
that allows the Company's  customers to buy products and  materials  from Wickes
and other  suppliers.  It provides  real-time  online access to the professional
builders'  specific Wickes price list,  bill of materials and trade account.  It
also provides job management  tools to help keep projects on time and on budget.
Additionally,  the system is  accessible  by  wireless  devices.  Wickes'  sales
through the Buildscape site were not material in 2000.

Acquisition Strategy
--------------------

     The Company intends to complement its existing  operations by acquisitions,
as  attractive   opportunities   present  themselves.   The  Company  made  four
acquisitions  of  component  facilities  during  1999.  In January,  the Company
acquired  the  assets  of a  wall  panel  manufacturer  located  in  Cookeville,
Tennessee.  In March,  the  Company  acquired  the  assets  of  Porter  Building
Products,  a manufacturer of trusses and wall panels located in Bear,  Delaware.
In October,  the Company acquired the assets of Advanced Truss Systems,  Inc. of
Kings  Mountain,  North  Carolina.  Advanced Truss Systems is a manufacturer  of
engineered wood trusses servicing the greater Charlotte,  North Carolina market.
In November, the Company acquired the assets of United Building Systems, Inc. of
Lexington,  Kentucky.  United Building  Systems is a manufacturer of wall panels
and roof and floor trusses in the Lexington market.

     There were no acquisitions of component  manufacturing  operations in 2000.
However,  there was one plant addition to supplement  the Wisconsin  market that
went  into  operation  at the end of  2000  and the  development  of wall  panel
production capabilities at a distribution center earlier in the year.

     In addition, in 2000 the Company acquired Tres-Ark  Enterprises,  Inc., the
developer of a software package ("BuilderCentral  2000(TM)") designed to provide
professional   building   contractors  an  enterprise  system  to  manage  their
construction   projects.   (See  also  Note  5  to  the  Consolidated  Financial
Statements).


Markets
-------

     The Company operates in 22 Major Markets, (14 of which are designated
"Target Major Markets"), which are served by 33 sales and distribution
facilities and twelve manufacturing facilities. The Company also operates 68
building centers in less populous areas, or Conventional Markets. For a further
discussion of Major Markets and Conventional Markets see "Business Strategy."
<PAGE>11

     The following table sets forth the  distribution of the Company's sales and
distribution  facilities  located  in  Conventional  and  Major  Markets,  as of
February 28, 2001 by size of the local market:
<TABLE>
<CAPTION>

                                                          Number of Sales and
                              Total                   Distribution    Facilities
                         Households in              Conventional        Major
                        Thirty Mile Radius             Markets          Markets
                        ------------------             -------          -------
                      <S>                              <C>              <C>

                        Under 50,000                     16                0
                        50,000-100,000                   15                2
                        100,000-250,000                  21               10
                        250,000-500,000                  13                9
                        500,000 and over                  3               12
                                                         --               --
                        Total                            68               33
                                                         ==               ==
</TABLE>

     Geographical Distribution
     -------------------------

     The  Company's  101 sales and  distribution  facilities  are  located in 23
states  in  the  Midwest,  Northeast  and  South.  The  Company's  27  component
manufacturing  operations  also are  located in  certain of these  states and in
Delaware.  The Company believes that its geographic  diversity generally lessens
the impact of economic  downturns and adverse  weather  conditions in any one of
the  Company's  geographic  markets.  The  following  table sets  forth  certain
information   with  respect  to  the  locations  of  the  Company's   sales  and
distribution facilities as of February 28, 2001:
<TABLE>
<CAPTION>

            Midwest                                   Northeast                              South
-------------------------------         -----------------------------------     ------------------------------

                   Number of                                   Number of                          Number of
                   Sales and                                   Sales and                          Sales and
                  Distribution                                 Distribution                       Distribution
  State            Facilities               State              Facilities           State         Facilities
  -----           ------------              -----             -------------         -----        -------------
<S>                    <C>            <C>                          <C>        <C>                      <C>

Michigan                 30             Pennsylvania                 6          Alabama                  3
Wisconsin                14             New York                     3          Kentucky                 3
Indiana                  11             Maine                        2          Texas                    2
Ohio                      5             New Hampshire                2          Florida                  2
Illinois                  4             Connecticut                  1          Mississippi              2
Colorado                  3             New Jersey                   1          North Carolina           2
                         ---
                                        Massachusetts                1          Georgia                  1
                                        Maryland                     1          Louisiana                1
                                                                    ---
                                                                                Tennessee                1
                                                                                                        ---
        Total            67                     Total               17                   Total          17
                         ==                                         ==                                  ==

</TABLE>
<PAGE>12





     Facilities Opened, Closed and Consolidated
     ------------------------------------------

     During the first quarter of 1998, the Company closed or consolidated  eight
building centers and two component  manufacturing  facilities and sold two other
building centers,  all in Conventional  Markets. The Company also opened two new
component manufacturing facilities at existing sales and distribution sites, and
purchased a third component manufacturing facility in Indianapolis, Indiana. The
Company also  acquired  four  manufacturing  facilities  in 1999.  See "Business
Strategy - Acquisition Strategy."

     There were no acquisitions of component  manufacturing  operations in 2000.
However,  there was one plant addition to supplement  our Wisconsin  market that
went  into  operation  at the end of  2000  and the  development  of wall  panel
production capabilities at a distribution center earlier in the year.

     The  following  table  reconciles  the  number  of sales  and  distribution
facilities  and component  manufacturing  facilities  operated by the Company at
December 27, 1997, December 26, 1998, December 25, 1999 and December 30, 2000.
<TABLE>
<CAPTION>

                                Sales and       Component
                              Distribution    Manufacturing
                               Facilities      Facilities
                               ----------      ----------
<S>                             <C>             <C>

As of December 27, 1997           111             11

     Expansion                     --              2
     Acquisition                   --              1
     Sold                          (2)            --
     Closings                      (7)            (2)
     Consolidations                (1)            --
                                 ----            ---
As of December 26, 1998           101             12

     Expansion                                     1
     Acquisition                   --              4
                                 ----            ---
As of December 25, 1999           101*            17


     Expansion                      1
     Acquisition                   --             --
                                 ----            ---
As of December 30, 2000           101*            18
                                 ====            ===
</TABLE>

*As of the fiscal year-end for 2000 and 1999, respectively,  there were nine and
eight additional  component  manufacturing  facilities located in existing sales
and distribution facilities.
<PAGE>13

Customers
---------

     The  Company  has a  broad  base of  customers,  with  no  single  customer
accounting  for more than 1.5% of net sales in 2000.  In 2000,  86.9%  (compared
with  91.4% in 1999)  of the  Company's  sales  were on trade  credit,  with the
remaining 13.1% as cash and credit card transactions.

     Home Builders
     -------------

     The Company's primary customers are single-family  home builders.  In 2000,
all home builder customers accounted for 61.8% of the Company's sales,  compared
with 62.3% in 1999. The majority of the Company's  sales to these  customers are
of  high-volume  commodity  items,  such  as  lumber,  building  materials,  and
manufactured housing components.  The Company will continue its intense focus on
this customer segment,  offering new products and developing additional services
to meet their needs.

     Commercial / Multi-family Contractors
     -------------------------------------

     Wickes Direct  concentrates on sales to commercial  contractors  (primarily
those engaged in constructing motels, restaurants,  nursing homes, extended stay
facilities,  and similar  projects) and  multi-family  residential  contractors.
Sales to these customers are made on a direct ship basis, as well as through the
Company's sales and distribution  facilities.  In 2000, sales to these customers
accounted for approximately 19.6% of the Company's sales, compared with 18.4% in
1999.  The  Wickes  Direct  program  is closely  integrated  with the  Company's
component manufacturing operations.

     Repair & Remodelers
     -------------------

     In 2000, R&R customers  accounted for  approximately  9.0% of the Company's
sales,  compared with 9.2% in 1999. The R&R segment consists of a broad spectrum
of  customers,   from  part-time  handymen  to  large,   sophisticated  business
enterprises.  Some R&R contractors are involved  exclusively with single product
application,  such as roofing,  siding, or insulation,  while some specialize in
remodeling  jobs, such as kitchen or bathroom  remodeling or the construction of
decks,  garages,  or full room  additions.  The  Company  offers the product and
project expertise, special order capability, design assistance, and credit terms
to serve the widely varying needs of this diverse market.

     DIY's
     -----

     Sales to DIY's (both project and convenience) represented about 9.6% of the
Company's sales in 2000, compared with 10.1% in 1999. The percentage of sales to
DIY's varies widely from one sales and distribution  facility to another,  based
primarily  on the degree of local  competition  from  warehouse  and home center
retailers. The Company's sales and distribution facilities do not have the large
retail  selling spaces or broad product  assortments  of the major  warehouse or
home center retailers. For small purchases, the facilities' showrooms serve as a

<PAGE>14

convenience rather than a destination store.  Consequently,  the Company's focus
on consumer  business is toward  project  DIY's -- customers who are involved in
major  projects  such as building  decks and  storage  buildings  or  remodeling
kitchens and baths.


Sales and Marketing
-------------------

     The Company employs a number of marketing  initiatives designed to increase
sales and to support the Company's  goal of being the dominant force in the sale
of lumber and other building materials to building  professionals in each of its
markets.

     Building Professional
     ---------------------

     The  Company   seeks  to  establish   long-term   relationships   with  its
professional  customers by providing a higher level of customer  assistance  and
services than are generally available at independently-owned building centers or
large warehouse and home center retailers.

     The  Company  provides  a wide  range  of  customer  services  to  building
professionals,  including expert assistance,  technical  support,  trade credit,
scheduled job-site  delivery,  manufacture of customized  components,  installed
sales,  specialized equipment,  logistical and material flow design and support,
and other special  services.  Building  professionals  generally select building
material  suppliers based on price,  job-site  delivery,  quality and breadth of
product lines, reliability of inventory levels, and the availability of credit.

     For a  description  of the programs  designed  for and the  emphasis  being
applied to professional  customers in Major Markets,  see " Business  Strategy -
Major Markets."

     In both  Conventional and Major Markets,  the Company's primary link to the
building  professional market is its experienced sales staff. As of February 28,
2001 the Company's 383 outside sales representatives  ("OSR's") are commissioned
sales persons who work with  professional  customers on an on-going basis at the
contractors'  job sites and offices.  Typically,  a sale to a contractor is made
through a competitive  bid prepared by the OSR from plans made  available by the
contractor.  From these plans, the OSR or sales support  associate  prepares and
provides to the  contractor a bid and a complete  list,  or  "take-off,"  of the
materials  required to complete the project.  Preparation of a take-off requires
significant time and effort by trained and experienced sales representatives and
support associates.  The Company has equipped most of its sales and distribution
facilities  with a  computerized  system  that  significantly  reduces  the time
required to prepare take-offs.  In addition,  this system instantly recalculates
changes and  automatically  includes  add-on  products  needed to  complete  the
project, which generally improves  productivity,  sales and margins. The ability
of  the  OSR to  provide  prompt  and  accurate  take-offs,  to  arrange  timely
deliveries,  and to provide  additional  products or services as necessary is an
important  element of the Company's  marketing  strategy and  distinguishes  the
Company from many of its competitors.
<PAGE>15

     As of February 28, 2001 the Company  employed 118 specialty  salespeople in
its sales and distribution  facilities who provide expert advice to customers in
project design,  product selection and  applications.  A staff of 34 trained R&R
sales specialists offer special services to R&R contractors,  equivalent to that
accorded home builders.  In many of its sales and distribution  facilities,  the
Company  maintains  separate R&R offices.  The Company currently has kitchen and
bath  departments  in most of its sales and  distribution  facilities  and has a
staff of 78 kitchen  and bath  specialists.  The  Company  also  employs 6 sales
specialists in other departments.

     The  Company  extends  credit,  generally  due on the 10th day of the month
following the sale, to qualified and approved  contractors.  Approximately 86.9%
of the  Company's  sales during 2000 were on credit,  with the  remaining  13.1%
consisting of cash or credit card sales. Overall credit policy is established at
the corporate  level,  with each sales and  distribution  facility manager and a
district  credit manager  responsible for the  administration  and collection of
accounts.  The accounts generally are not  collateralized,  except to the extent
the Company is able to take advantage of the favorable  materialmen's  lien laws
of most states applicable in the case of delinquent accounts.

     The Company operates a large fleet of trucks and other vehicles,  including
vehicles  specialized for the delivery of certain of the Company's products.  As
of February 28, 2001, the fleet included approximately 217 heavy duty trucks, 92
of which  provide  roof-top  or  second  story  delivery  and 56 other  vehicles
equipped with truck mounted forklifts. In addition, the Company's fleet includes
541 medium duty trucks,  589 light duty trucks and  automobiles,  599 forklifts,
117 specialized millwork delivery vehicles,  and 62 vehicles equipped to install
blown insulation. The Company will continue to add these specialized vehicles to
other markets where there is sufficient demand for such services.

     Over the past several years, the Company has installed and will continue to
increase its base of computer-aided design hardware and software.  These systems
include  design  and  take-off  software  for  kitchens,  decks,   outbuildings,
additions and houses.  With these tools, sales  representatives  and specialists
are able to provide customers with  professional-quality  plans, in an efficient
manner.

     In 1997,  the Company began an equipment  rental program at 25 of its sales
and distribution facilities.  Under this program, the Company rents specialized,
professional  quality  tools and equipment to customers in need of equipment for
unique or short-term projects. The program currently is in place in 31 sales and
production facilities and will be expanded to additional facilities in 2001.

     In 1997, the Company also began its installed  insulation program.  Through
the  use of  specialized  equipment  and  vehicles  and  its  specially  trained
installation  crews,  the Company  installs blown and batt  insulation in new or
existing construction.  There currently are 59 sales and distribution facilities
that offer this service.
<PAGE>16

     In 2000,  the Company  initiated its installed  aluminum  siding and gutter
programs  in several of its sales and  distribution  centers.  Currently,  it is
operating 13 installed  siding and six installed  gutter programs with continued
plans for expansion.

     DIY's
     -----

     Most sales and distribution facilities,  primarily building centers located
in Conventional  Markets, also pursue sales to project DIY's through their staff
of  specially-trained  inside  sales  representatives  and  specialists.   These
representatives  provide  professional  advice to consumers for home improvement
projects  and  assist  these  customers  in  designing  specific  projects  with
sophisticated  computer  design  software.  The sales  representatives  also can
provide a  comprehensive  list of  materials  and  detailed  drawings  to assist
customers in completing their projects.  The Company believes that project DIY's
are  attracted to its sales and  distribution  facilities  by this high level of
service.

     The Company's  showrooms  generally feature product  presentations  such as
kitchen,   bath,  door  and  window   displays.   The  showrooms  are  regularly
re-merchandised  to reflect  product  trends,  service  improvements  and market
requirements. During 1997 and 1998 the Company completed Resets in five and six,
respectively,  of its sales and distribution facilities' showrooms. During 1999,
the Company completed additional Resets in two facilities.  In 2000, the Company
completed  two more  Rests in  Conventional  Markets,  bringing  the total to 15
stores.  Additional  showroom  improvements are contemplated for 2001 and future
years.

     While the  Company's  product  offerings  in hardlines  generally  are more
limited  than its  consumer-oriented  competitors,  the Company  stocks a larger
selection of commodity products and offers a special order program for custom or
specialty products.  The Company emphasizes project packages,  which include all
materials  and detailed  instructions  for the  assembly of the larger  projects
frequently undertaken by project DIY's.

     The  Company's  internet  site on the World Wide Web  provides  information
about Wickes' services and products,  facilitates doing business with customers,
allows customers to look up their own  transactional  information,  and features
extensive links to suppliers and other industry  references.  The Company's home
page can be found on the web at: http://www.wickes.com.

     The Company  advertises in trade journals and produces  specialized  direct
mail promotional  materials  designed to attract specific target customers.  The
Company does some select newspaper advertising,  which may include circulars and
run-of-press advertisements.  It also has numerous product displays in its sales
and distribution facilities to highlight special products and services.
<PAGE>17

     To increase  customer loyalty and strengthen  customer  relationships,  the
Company, in many cases with vendor support, sponsors or participates in numerous
special marketing activities,  such as trade show events,  informational product
seminars, various outings, and professional builder trips.


Products
--------

     To provide its customers with the quality products needed to build, remodel
and repair  residential  and  commercial  properties,  the Company offers a wide
variety  of  building  products  and the  ability to  special  order  additional
products.  The Company  believes that these special order services are extremely
important to its customers,  particularly  the building  professional.  In 2000,
approximately  35% of the Company's sales were of special order items,  compared
with  32% in 1999.  Each of the  Company's  sales  and  distribution  facilities
tailors its product mix to meet the demands of its local market.

     The Company categorizes its product sales (excluding Tool Rental, Installed
Programs and other service-related  revenues), which aggregate approximately 96%
and 97% of the  Company's  net sales in 2000 and 1999,  respectively,  into four
groups. These include Commodity Wood Products (lumber,  plywood, treated lumber,
sheathing,  wood siding and specialty lumber); Building Products (roofing, vinyl
siding, doors, windows, mouldings, drywall and insulation);  Hardlines (hardware
products,  paint,  tools,  kitchen and  bathroom  cabinets,  plumbing  products,
electrical  products,  light  fixtures and floor  coverings);  and  Manufactured
Housing  Components  (roof and floor  trusses,  and interior  and exterior  wall
panels). Commodity Wood Products, Building Products, Hardlines, and Manufactured
Housing Components  represented  36.7%,  35.6%, 10.5% and 17.2% of the Company's
product sales respectively, for 2000 and 40.0%, 34.0%, 9.8%, and 16.2% for 1999,
respectively.


Manufacturing
-------------

     The Company operates 27 component manufacturing  facilities that supply the
Company's customers with higher-margin, value-added products such as framed wall
panels, roof and floor trusses,  and pre-hung interior and exterior doors. These
facilities  include  18  stand-alone  operations  as  well  as  nine  additional
operations that exist at the Company's sales and distribution facilities.  These
manufacturing   operations  enable  the  Company  to  serve  the  needs  of  its
professional  customers for such quality,  custom-made  products.  In 2000,  the
Company's  manufacturing  operations supplied  approximately 56.7% of the framed
wall panels, roof and floor trusses, and pre-hung doors sold by the Company. The
Company  believes  that  these  value-added,  engineered  manufactured  products
improve  customer  service and  provide an  attractive  alternative  to job-site
construction. As resources permit, the Company plans to expand its manufacturing
facilities to take advantage of these  increased  opportunities  and to supply a
greater number of its sales and distribution facilities with these products.
<PAGE>18

Suppliers and Purchasing
------------------------

     The  Company  purchases  its  products  from  numerous  vendors.  The great
majority of commodity items are purchased directly from mills and manufacturers,
while the remaining  products are purchased from a combination of manufacturers,
wholesalers and other  intermediaries.  No single vendor accounted for more than
5.0% of the Company's  purchases in 2000 and the Company is not  dependent  upon
any  single  vendor  for  any  material  product.   The  Company  believes  that
alternative sources of supply are readily available for substantially all of the
products it offers.

     The majority of the Company's  commodity purchases are made on the basis of
individual purchase orders rather than longer-term supply contracts.  In certain
product lines,  though,  the Company has  negotiated  some  advantageous  volume
pricing  agreements  for a portion  of the  product  line's  purchases.  Because
approximately  56% of the  Company's  annual  sales  consist of  commodity  wood
products,  drywall and manufactured housing components, all of which are subject
to price  volatility,  the  Company  attempts to match its  inventory  levels to
short-term  demand in order to minimize its exposure to price  fluctuations.  In
addition, the Company enters into futures contracts to hedge longer-term pricing
commitments.  The Company has  developed  an  effective  coordinated  purchasing
program  that allows it to minimize  costs  through  volume  purchases,  and the
Company believes that it has greater  purchasing power than many of its smaller,
local independent competitors.  The Company seeks to develop close relationships
with  its   suppliers  in  order  to  obtain   favorable   pricing  and  service
arrangements.

     The Company's  computerized  inventory tracking and forecasting  system, as
part of its inventory  replenishment  system,  is designed to track and maintain
appropriate  levels of products at each sales and distribution  facility.  These
systems have  increased the  Company's  operating  efficiencies  by providing an
automated inventory replenishment system.

     The Company  receives its product by truck and rail. The Company has active
rail sidings at 60 of its sales and distribution and  manufacturing  facilities,
enabling  suppliers to ship products  purchased by the Company directly to these
facilities by rail. The Company also utilizes one distribution center owned by a
third party, located in Chicago, Illinois, through which approximately 2% of the
Company's wood products inventory is delivered.
<PAGE>19

Seasonality
-----------

     Historically,  the Company's  first quarter and,  occasionally,  its fourth
quarter are adversely affected by weather patterns in the Midwest and Northeast,
that result in seasonal  decreases in levels of  construction  activity in these
areas. The extent of such decreases in activity is a function of the severity of
winter weather conditions.  See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."


Competition
-----------

     The building material industry is highly competitive. Due to the fragmented
nature of the industry, the Company's competitive environment varies by location
and by customer  segment.  Reduced levels of construction  activity have, in the
past,  resulted in intense price competition  among building material  suppliers
that has, at times, adversely affected the Company's gross margins.

     Within the building  professionals  market,  the Company competes primarily
with local  independent  lumber yards and regional and local  building  material
chains.  Building  professionals  generally select building  material  suppliers
based on price,  job site  delivery,  quality  and  breadth  of  product  lines,
reliability of inventory  levels,  and the  availability of credit.  The Company
believes that it competes favorably on each of these bases. The Company believes
that it has a  significant  competitive  advantage  in rural  markets  and small
communities (i.e. Conventional Markets),  where it primarily competes with local
independent  lumber yards and regional  building  material  chains.  To a lesser
extent, the Company also competes in these markets with national building center
chains and warehouse and home center  retailers,  which  generally  locate their
units in more densely  populated  areas. In Major Markets,  the Company believes
that its total  package of products  and  services  and its ability to serve the
large builder provide it with a competitive advantage.


Environmental and Product Liability Matters
-------------------------------------------

     Many of the  sales  and  distribution  facilities  presently  and  formerly
operated by the Company contained  underground  petroleum  storage tanks.  Other
than tanks at one acquired  facility,  which is in compliance with current legal
standards,  all such tanks known to the Company  located on facilities  owned or
operated  by the  Company  have  been  filled  or  removed  in  accordance  with
applicable environmental laws in effect at the time. As a result of reviews made
in connection with the sale or possible sale of certain facilities,  the Company
has found petroleum  contamination  of soil and ground water on several of these
sites and has taken remedial  actions with respect thereto.  In addition,  it is
possible that similar  contamination  may exist on properties no longer owned or
operated by the  Company,  the  remediation  of which the Company  could,  under

<PAGE>20

certain circumstances, be held responsible. Since 1988, the Company has incurred
approximately $2.0 million of costs, net of insurance and regulatory recoveries,
with respect to the filling or removing of underground storage tanks and related
investigatory and remedial actions.  Insignificant amounts of contamination have
been found on excess properties sold over the past five years.

     The Company previously had been identified as a potential responsible party
in two Superfund landfill clean up sites. Both of these actions were settled for
immaterial amounts.

     For  information   concerning   certain  litigation   concerning   products
containing asbestos or silica dust, see "Item 3. Legal Proceedings."

     Although  the Company has not  expended  material  amounts in the past with
respect to the  foregoing  and  expenditures  in the most recent five years have
been significantly  reduced,  there can be no assurances that these matters will
not give rise to additional compliance or other costs that could have a material
adverse effect on the Company.


Employees
---------

     As of February 28,  2001,  the Company had 4,090  employees,  of whom 3,686
were employed on a full-time basis. The number of employees generally fluctuates
with the seasonal nature of the Company's business. The Company believes that it
has maintained  favorable  relations  with its employees.  None of the Company's
employees are covered by a collective bargaining agreement.


Trademarks and Patents
----------------------

     The Company has no material patents, trademarks,  licenses,  franchises, or
concessions other than the name "Wickes Lumber" and the "Flying W" trademark.


                         --------------------------

     Forward-looking  statements  in this Item 1 are made  pursuant  to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. There
are certain important factors that could cause results to differ materially from
those anticipated by the forward-looking statements made above. These statements
are based on the current plans and  expectations  of the Company and readers are
cautioned that all  forward-looking  statements  involve risks and  uncertainty.
Among the factors that could cause actual  results to differ  materially are the
effects of seasonality  and cyclicality  discussed under the headings  "Industry
Overview"  and  "Seasonality".  Also,  there  are the  effects  of  competition;
interest rates and the Company's ability to service and comply with the terms of
its debt; lumber prices; the success of the Company's  operational  initiatives;
and the outcome of the  contingencies  discussed  in Note 9 to the  Consolidated
Financial Statements included elsewhere herein.
<PAGE>21

Item 2.  PROPERTIES.
--------------------

     The  Company's  101 sales and  distribution  facilities  are  located in 23
states,  with 67 in the Midwest,  17 in the Northeast and 17 in the South.  When
combined with its 27 component manufacturing operations, the Company operates in
24 states.  See "Item 1.  Business -  Markets."  The Company  believes  that its
facilities  generally are in good condition and will meet the Company's needs in
the foreseeable future.

     The Company's Conventional Markets sales and distribution centers generally
consist of a showroom  averaging 9,600 square feet and covered storage averaging
38,400 square feet. The Company's sales and distribution  facilities  located in
Major  Markets tend to be more  specialized.  Since the  beginning of 1997,  the
Company has completed Resets in 15 sales and distribution  facilities located in
Conventional  Markets.  The  Company's  sales and  distribution  facilities  are
situated on  properties  ranging from 1.0 to 28.2 acres and averaging 9.3 acres.
The Company also operates 18  stand-alone  component  manufacturing  facilities,
which have an average of 40,300 square feet under roof on 6.9 acres.

     The Company owns 84 of its sales and distribution  facilities and 82 of the
sites  on which  such  facilities  are  located.  The  remaining  17  sales  and
distribution  facilities  and 19 sites are leased.  As of December 30, 2000, the
Company  also held for sale the  assets of 3 closed  facilities  with a net book
value of $1.5 million. In addition to its sales and distribution facilities, the
Company operates 18 stand-alone component  manufacturing plants, 12 of which are
owned  sites and 6 of which are on leased  sites.  Nine  additional  plants  are
located on sales and  distribution  facility sites.  All of the owned properties
are pledged as  collateral  under the Company's  Amended and Restated  Revolving
Credit Agreement.

     For further  information see "Item 7. Management's  Discussion and Analysis
of  Financial  Condition  and  Results of  Operations  -  Liquidity  and Capital
Resources" and Note 8 to the Consolidated Financial Statements.

     The Company also owns or leases a large fleet of trucks and other vehicles,
including  vehicles  specialized  for the  delivery of certain of the  Company's
products.  As of February 28, 2001, the fleet included  approximately  217 heavy
duty trucks,  92 of which provide roof-top or second story delivery and 56 other
vehicles equipped with truck mounted forklifts. In addition, the Company's fleet
includes  541 medium duty  trucks,  589 light duty trucks and  automobiles,  599
forklifts,  117 specialized millwork delivery vehicles, and 62 vehicles equipped
to install blown insulation.

     The  Company  leases  its  corporate  headquarters,  a portion  of which is
subleased, located at 706 North Deerpath Drive in Vernon Hills, Illinois.
<PAGE>22



Item 3.  LEGAL PROCEEDINGS.
---------------------------

     The Company  previously was identified as a potential  responsible party in
two Superfund landfill clean up sites. In Browning-Ferris  Industries,  et al v.
                                          --------------------------------------
Richard Ter Maat, et al. v. Wickes Lumber  Company,  et al., Case No. 92 C 22059
--------------------------------------------------------------------------------
filed in the United State District Court for the Northern  District of Illinois,
Wickes  was  named  as a  potentially  responsible  party  for  cleanup  of  the
MIG-DeWanne  Landfill  located in Boone County,  Illinois.  The Company also was
named by the United  States  Environmental  Protection  Agency as a  potentially
responsible  party  regarding  cleanup  of the  Adams/Quincy  Landfills  #2 & #3
located in Quincy,  Illinois.  Both of these actions were settled for immaterial
amounts.

     The Company is one of many  defendants  in two class  action suits filed in
August of 1996 by  approximately  200  claimants  for  unspecified  damages as a
result of health  problems  claimed to have been caused by  inhalation of silica
dust, a byproduct of concrete  and mortar mix,  allegedly  generated by a cement
plant with which the Company has no connection other than as a customer. Librado
                                                                         -------
Amador,  et al. v. Alamo Concrete Products  Limited,  Wickes Lumber Company,  et
--------------------------------------------------------------------------------
al., Case No. 16696,  was filed in the 229th  Judicial  District  Court of Duval
--
County, Texas. Javier Benavides,  et al. v. Magic Valley Concrete,  Inc., Wickes
               -----------------------------------------------------------------
Lumber  Company,  et al.,  Case No.  DC-96-89  was filed in the  229th  Judicial
---------------------------------------------
District  Court  of  Starr  County,  Texas.  The  Company  has  entered  into  a
cost-sharing  agreement with its insurers,  and any liability is not expected to
be material.

     The Company is one of many defendants in approximately 300 actions, each of
which seeks  unspecified  damages,  in various  Michigan  state  courts  against
manufacturers and building  material  retailers by individuals who claim to have
suffered injuries from products containing  asbestos.  Each of the plaintiffs in
these  actions  is  represented  by  one  of  two  law  firms.  The  Company  is
aggressively  defending  these  actions and does not believe that these  actions
will have a material adverse effect on the Company.  Since 1993, the Company has
settled 30 similar actions for insignificant  amounts,  and another 246 of these
actions have been dismissed. None of these suits have made it to trial.

     The  Company  is a  defendant  in a lawsuit  arising  from a 1998  accident
involving an employee truck driver that resulted in personal injuries to a third
party. Plaintiffs seek compensatory damages in an unspecified amount.  Recently,
plaintiffs have amended their complaint to include a claim for punitive  damages
in an  unspecified  amount,  for  which  insurance  coverage  may or may  not be
available.  While the Company  does not believe that any  proceedings  regarding
this  matter  will have a material  adverse  effect on the  Company's  financial
position, annual results of operations or liquidity,  there can be no assurances
of this result.

     The Company also is involved in various other legal  proceedings  which are
incidental to the conduct of its business.  Certain of these proceedings involve
potential damages for which the Company's insurance coverage may be unavailable.

<PAGE>23

While the Company  does not believe  that any of these  proceedings  will have a
material adverse effect on the Company's financial  position,  annual results of
operations or liquidity, there can be no assurance of this result.

     The Company's  assessment of the matters  described in this Item 3 are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform Act of 1995 and are inherently subject to uncertainty. The outcome of the
matters  described in this Item 3 may differ from the  Company's  assessment  of
these matters as a result of a number of factors including,  but not limited to:
matters  unknown  to the  Company at the  present  time,  development  of losses
materially  different from the Company's  experience,  the Company's  ability to
prevail  against  its  insurers  with  respect to coverage  issues to date,  the
financial  ability of those insurers and other persons from whom the Company may
be entitled to indemnity, and the unpredictability of matters in litigation.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
-------------------------------------------------------------

     None.




<PAGE>24




                                     PART II
                                     -------

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
------------------------------------------------------------------------------

     The Company's Common Stock is authorized for trading on the Nasdaq National
Market  under the  trading  symbol  "WIKS." As of  February  28, 2001 there were
8,273,685 shares  outstanding held by approximately  122 stockholders of record.
In addition,  the Company believes  approximately 2,000 additional  stockholders
hold their shares in street name at various brokerage houses.

     The following  table sets forth for the periods  indicated the high and low
sale prices for the  Company's  Common Stock as reported on the NASDAQ  National
Market System. Prices do not include retail markups, markdowns or commissions.

<TABLE>
<CAPTION>

               Three Months Ended                    High                  Low
               ------------------                   ------               ------

             <S>                                   <C>                  <C>
               Fiscal 2000
               -----------
               March 25                         $    7.500           $    5.000
               June 24                               6.500                4.656
               September 23                          6.438                4.125
               December 30                           6.188                3.375

               Fiscal 1999
               -----------
               March 27                         $    5.188           $    3.750
               June 26                               6.250                3.188
               September 25                          6.813                4.250
               December 25                           6.750                4.688
</TABLE>

     The Company has not  declared or paid any  dividends on Common Stock in the
past three years and has no present  intention  to pay cash  dividends on Common
Stock  in the  foreseeable  future.  The  Company's  revolving  credit  facility
prohibits cash dividends on Common Stock, and the trust indenture related to the
Company's 11-5/8% senior  subordinated  notes restricts cash dividends on Common
Stock. See "Item 7. Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations"  and  Footnote  8 to  the  Consolidated  Financial
Statements.


Item 6.  SELECTED FINANCIAL DATA.
---------------------------------

     The  following  table  presents  selected  financial  data derived from the
audited  consolidated  financial  statements of the Company for each of the five
years in the period ended  December 30, 2000. The following  selected  financial
data should be read in  conjunction  with "Item 7.  Management's  Discussion and
Analysis of Financial  Condition and Results of Operations" and the Consolidated
Financial Statements and Notes thereto contained elsewhere in this report.


<PAGE>25
<TABLE>
<CAPTION>


                                                 WICKES INC. AND SUBSIDIARIES
                                             SELECTED CONSOLIDATED FINANCIAL DATA
                                       (in thousands, except ratios and per share data)



                                                             Dec. 30,        Dec. 25,       Dec. 26,     Dec. 27,    Dec. 28,
                                                               2000           1999           1998         1997         1996
                                                               ----           ----           ----         ----         ----
<S>                                                       <C>            <C>              <C>          <C>          <C>

Income Statement Data:
   Net sales (1)                                          $ 1,027,604    $ 1,087,402    $   912,190    $ 885,901    $ 850,131
   Gross profit (1)                                           223,092        224,604        195,119      186,006      176,696
   Selling, general and administrative
     expense (1)                                              199,889        185,884        166,420      167,790      148,772
   Depreciation, goodwill and trademark
     amortization (1)                                           5,877          5,295          4,513        4,422        5,081
   Provision for doubtful accounts                                983          1,724          2,915        1,707        1,067
   Other operating income                                       3,292          4,932          6,017        9,673        5,670
   Restructuring and unusual items (2)                           --             --            5,932         (559)         745
   Income from operations                                      19,635         36,633         21,356       22,319       26,751
   Interest expense (3)                                        24,322         23,302         21,632       21,417       21,750
   Equity in loss of affiliated company                          --             --             --          1,516        3,183
   (Loss) income before income taxes                           (4,687)        13,331           (276)        (614)       1,818
   Income tax (benefit) provision                                (735)         5,743            689          946        1,310
   (Loss) income before extraordinary gain                     (3,952)         7,588           (965)      (1,560)         508
   Extraordinary gain, net of
     taxes of $4,313 (4)                                        6,806           --             --           --           --
   Net income (loss)                                            2,854          7,588           (965)      (1,560)         508
   Ratio of earnings to fixed charges (5)                        --             1.48           --           --           1.08
   Interest coverage (6)                                         1.17           1.97           1.32         1.36         1.61
   Adjusted interest coverage (7)                                1.17           1.97           1.61         1.33         1.65

Per Share Data:
   Net loss before extraordinary gain per
     common share - basic and diluted                          ($0.48)          --             --           --           --
   Net income (loss) per common
     share - basic                                        $      0.35    $      0.92    ($     0.12)   ($   0.19)   $    0.07
   Net income (loss) per common
     share - diluted                                      $      0.34    $      0.91    ($     0.12)   ($   0.19)   $    0.07
   Weighted average common
     shares -basic                                          8,249,774      8,216,265      8,197,542    8,168,257    7,207,761
   Weighted average common
     shares -diluted                                        8,466,383      8,330,571      8,197,542    8,168,257    7,221,082

Operating and Other Data:
   EBITDA (8)                                             $    26,985    $    43,106    $    26,609  $    27,182    $  32,118
   Adjusted EBITDA (9)                                         26,985         43,106         32,541       26,623       32,863
   Cash interest expense (10)                                  23,048         21,792         20,185       20,016       19,969
   Depreciation and amortization                                5,877          5,295          4,513        4,422        5,081
   Deferred financing cost amortizatio                          1,274          1,510          1,447        1,401        1,781
   Capital expenditures                                         9,734          8,624          5,854        7,758        2,893
   Same store sales growth (11)                                  (6.1%)         18.1%           9.0%         4.7%        (6.4%)
   Sales & distribution centers open at
     end of period                                                101            101            101          111          108
   Net cash provided by (used in)
     operating activities                                      14,669         (9,565)           522      (20,455)      19,588
   Net cash (used in) provided by
     investing activities                                      (9,243)       (17,597)        (1,623)       6,040        2,410
   Net cash (used in) provided by
     financing activities                                      (5,255)        27,169          1,087       12,561      (20,152)

Balance Sheet data (at period end):
   Working capital                                        $   141,901    $   162,523    $   135,345   $  134,459    $ 116,771
   Total assets                                               300,936        334,009        292,183      283,352      272,842
   Total long-term debt, less
     current maturities                                       200,403        220,742        191,961      193,061      176,376
   Total stockholders' equity                                  33,896         30,819         23,148       24,001       25,499

</TABLE>









<PAGE>26


                  Notes to Selected Consolidated Financial Data
                  ---------------------------------------------

(1)  Certain  reclassifications  have been made to prior year amounts to conform
     to the current  presentation.  One of the Company's  strategic  goals is to
     increase the sales volume of manufactured  building components (framed wall
     panels,  roof and floor trusses,  and pre-hung interior and exterior doors)
     and  to  continue  to  increase  the  sales  of   internally   manufactured
     components.  In  response  to  increases,  over  time,  in  the  volume  of
     internally   manufactured   building   components  sold,  the  Company  has
     determined that certain manufacturing costs previously included in Selling,
     General and Administrative expense and Depreciation, Goodwill and Trademark
     Amortization  expense  should be  classified  as Cost of Sales.  Therefore,
     elements of costs directly associated with manufacturing  processes such as
     manufacturing labor and related benefits, manufacturing supplies, equipment
     depreciation,   delivery  expenses  and  other  overhead  items  have  been
     reclassified  for the  current  and prior  periods  presented.  The amounts
     reclassified  to Cost of Sales were $36.5  million,  $30.6  million,  $21.5
     million,  $18.0 million,  and $13.4 million for 2000,  1999, 1998, 1997 and
     1996,   respectively.    In   addition   to   the   Manufacturing   Expense
     reclassification,  certain amounts have been reclassified  relating to EITF
     00-10 and EITF 00-14. These  reclassifications had no impact on income from
     operations, net income or net assets. See Notes 2 and 3 to the Consolidated
     Financial Statements for further description.

(2)  During the first  quarter of 1998,  the Company  implemented  the 1998 Plan
     which  resulted  in  the  closing  or  consolidation  of  eight  sales  and
     distribution and two manufacturing  facilities in February, the sale of two
     sales and  distribution  facilities  in March,  and further  reductions  in
     headquarters staffing. As a result of the 1998 Plan, the Company recorded a
     restructuring charge of $5.4 million in the first quarter and an additional
     charge of $0.5 million in the third quarter.  In 1997, the Company recorded
     a $0.6  million  credit as a result of  finalizing  the 1995  restructuring
     plan. In 1996,  the Company  recorded an additional  charge of $0.7 million
     relating to its 1995 restructuring plan.

(3)  Interest  expense  includes  cash  interest  expense  and  amortization  of
     deferred financing costs (see note 10 below).

(4)  As further explained in Note 8 to the Consolidated Financial Statements, on
     November  21,  2000 the  Company  commenced  a cash  tender  offer  for its
     outstanding  11-5/8% Senior  Subordinated  Notes due 2003, at a substantial
     discount  from face value.  The offer  expired on December  20, 2000 and on
     December 26, 2000, the Company redeemed $36.0 million of notes tendered. As
     a result of this transaction,  the Company recorded a pre-tax gain of $11.1
     million, net of costs associated with the transaction.  The net gain, after
     appropriate state and federal income taxes was $6.8 million.
<PAGE>27

(5)  For purposes of computing  this ratio,  earnings  consist of pre-tax income
     (loss)  before  income taxes  adjusted  for fixed  charges.  Fixed  charges
     consist of cash interest expense, amortization of deferred financing costs,
     and a portion of operating lease rental expense that is  representative  of
     the interest factor  attributable to interest  expense.  Such earnings were
     insufficient to cover fixed charges by $4.7 million,  $0.3 million and $0.8
     million  for the years  ended  December  30,  2000,  December  26, 1998 and
     December 27, 1997, respectively.

(6)  For  purposes  of  computing  this  ratio,  earnings  consist of EBITDA (as
     defined in note 8 below),  which is divided by cash  interest  expense  (as
     defined in note 10 below).

(7)  For purposes of computing this ratio,  earnings  consist of Adjusted EBITDA
     (as defined in note 9 below), which is divided by cash interest expense (as
     defined in note 10 below).

(8)  EBITDA  represents  income (loss)  before  income taxes,  equity in loss of
     affiliated company, interest expense, depreciation and amortization. EBITDA
     is not presented herein as an alternative  measure of operating results but
     rather  to  provide   additional   information   related  to  debt  service
     capability, and does not represent cash flow from operations, as defined by
     GAAP and may not be comparable  to similarly  titled  measures  reported by
     other companies.

(9)  Adjusted EBITDA  represents EBITDA (as defined in note 8 above) adjusted to
     exclude  restructuring  and  unusual  items  and is  used  in the  adjusted
     interest  coverage  ratio to reflect  debt  service  capability  before the
     effect of these restructuring and unusual items, and provides an additional
     measure of debt service capability for ongoing operations.

(10) Cash interest  expense  consists of interest  expense less  amortization of
     deferred  financing costs.  The following table details  interest  expense,
     cash interest  expense,  and interest paid for each of the five years ended
     December 30, 2000 (in  thousands).
<TABLE>
<CAPTION>


                                  2000         1999         1998         1997         1996
                                  ----         ----         ----         ----         ----
<S>                            <C>          <C>         <C>          <C>           <C>

Interest expense               $ 24,322     $ 23,302     $ 21,632     $ 21,417     $ 21,750
Less:
   Amortization of deferred
      financing costs             1,274        1,510        1,447        1,401        1,781
                                -------     --------      -------     --------      -------
Cash interest expense            23,048       21,792       20,185       20,016       19,969

Decrease (increase) in
   accrued interest                 155         (289)         700         (225)         403
                                -------     --------      -------     --------      -------

Interest paid                  $ 23,203     $ 21,503     $ 20,885     $ 19,791     $ 20,372
                                =======     ========      =======     ========      =======
</TABLE>
<PAGE>28

(11) Same  store  sales  growth  data  reflects  average  sales  for  sales  and
     distribution  facilities  and other  facilities  that were  operated by the
     Company throughout both the current and previous year. In addition to sales
     and distribution facilities,  component manufacturing plants also make some
     direct sales.  The following  table lists, by year, the number of locations
     that were included in this calculation:
<TABLE>
<CAPTION>

                                  Year        No. of Facilities
                                  ----        -----------------
                                <S>                <C>
                                  2000               101
                                  1999               101
                                  1998               101
                                  1997               107
                                  1996               101

</TABLE>



<PAGE>29

Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
                                 OF OPERATIONS.
                                 --------------


General
-------

     The following table sets forth, for the periods  indicated,  the percentage
relationship  to net sales of certain  expense and income  items.  The table and
subsequent  discussion  should  be read in  conjunction  with  the  consolidated
financial statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>

                                                         Years Ended
                                                         -----------

                                                  Dec 30, Dec. 25,  Dec. 26,
                                                   2000     1999     1998
                                                  ------   ------   ------
        <S>                                     <C>      <C>      <C>

          Net sales                               100.0%   100.0%   100.0%
          Gross profit                             21.7     20.7     21.4
          Selling, general and administrative
            expense                                19.5     17.1     18.2
          Depreciation, goodwill and trademark
            amortization                            0.6      0.5      0.5
          Provision for doubtful accounts           0.1      0.2      0.3
          Restructuring and unusual items           0.0      0.0      0.7
          Other operating income                   (0.3)    (0.5)    (0.7)
          Income from operations                    1.9      3.4      2.3
</TABLE>

     Certain  reclassifications  have been made to prior year amounts to conform
to the current presentation. All material intercompany balances and transactions
have  been  eliminated.  See also  Notes 2 and 3 to the  Consolidated  Financial
Statements regarding the reclassification of certain manufacturing  expenses and
other items.

     The  Company's  operations,  as  well as  those  of the  building  material
industry  generally,  have  reflected  substantial  fluctuations  from period to
period as a consequence of various  factors,  including  levels of  construction
activity, weather, prices of commodity wood products, general regional and local
economic conditions, interest rates and the availability of credit, all of which
are cyclical or seasonal in nature.  The Company  anticipates that  fluctuations
from  period  to period  will  continue  in the  future.  Because a  substantial
percentage of the Company's sales are  attributable  to building  professionals,
certain of these factors may have a more significant  impact on the Company than
on companies more heavily focused on consumers.

     The  Company's  first  quarter and,  occasionally,  its fourth  quarter are
adversely  affected by weather  patterns in the  Midwest  and  Northeast,  which
result in seasonal decreases in levels of construction  activity in these areas.
The extent of such decreases in activity is a function of the severity of winter
weather  conditions.  In the first  quarter of 2000,  the Midwest and  Northeast

<PAGE>30

experienced mild winter weather,  but significant  precipitation.  Additionally,
these  regions  also  experienced  a more  severe  winter  with  respect to cold
temperatures  and snow in the fourth  quarter of 2000 than in the previous  four
years.  Weather  conditions in 1999 were relatively  normal throughout the year.
During the first quarter of 1998,  the Company  experienced  mild winter weather
conditions  in the  Company's  Midwest  region,  which was  partially  offset by
increased precipitation in the Northeast and South.

     The following table contains selected  unaudited  quarterly  financial data
for the  years  ended  December  30,  2000  and  December  25,  1999.  Quarterly
earnings/(loss)  per share may not total to year-end  earnings/(loss)  per share
due to the  issuance of  additional  shares of Common Stock during the course of
the year.
<TABLE>
<CAPTION>


                                             QUARTERLY FINANCIAL DATA
                                                    (Unaudited)
                                                  Fiscal Quarters
                                                  ---------------
                               (in millions, except per share data and percentages)

                                                            Income (loss)                        Basic / Diluted
                              Net Sales as a                   before                          Net income (loss)
                               % of Annual        Gross     Extraordinary     Net Income        per share before
                Net Sales       Net Sales         Profit       Item               (Loss)       Extraordinary Item
                ---------       ---------         ------       ----               ------       ------------------
<S>             <C>             <C>             <C>          <C>                 <C>           <C>

2000
----
Quarter 1        $216.5           21.1%           $46.0       $(3.2)              $(3.2)       $(.39)/(.39)
Quarter 2         280.4           27.3             60.1         1.5                 1.5           .19/.18
Quarter 3         282.7           27.5             62.6         2.1                 2.1           .26/.25
Quarter 4         248.0           24.1             54.4        (4.4)                2.4         (.53)/(.53)


1999
----
Quarter 1        $191.7           17.6%           $40.6       $(3.3)              $(3.3)       $(.40)/(.40)
Quarter 2         289.4           26.6             59.0         3.6                 3.6          .44 / .43
Quarter 3         326.2           30.0             65.8         5.0                 5.0          .61 / .61
Quarter 4         280.1           25.8             59.2         2.2                 2.2          .27 / .26
</TABLE>

     Each fiscal quarter in the table above  represents a thirteen-week  period,
with the exception of Quarter 4, which was a fourteen-week period.



<PAGE>31

     In the fourth quarter 2000, the Company recorded an  extraordinary  gain on
the early  extinguishment  of $36.0 million of its 11-5/8%  Senior  Subordinated
Notes due in 2003. See Note 8 to the Consolidated  Financial Statements included
elsewhere herein for further description.

     In 1998,  the Company  recorded a charge of $5.9 million for  restructuring
and unusual items. For additional  information on the  restructuring and unusual
items  charge,  see Note 4 to the  Consolidated  Financial  Statements  included
elsewhere herein. Also, in the fourth quarter of 1998, two pieces of real estate
were sold for gains of $0.4 million.  Gains or losses on the sale of real estate
are recorded under other operating income.

     The Company  historically  has  generated  approximately  15% to 20% of its
annual  revenues  during  the  first  quarter  of each  year,  and  the  Company
historically  has recorded a significant net loss for this quarter.  As a result
of these seasonal factors, the Company's  inventories and receivables reach peak
levels  during the second and third  quarters and generally are lower during the
first  and  fourth  quarters,  depending  on sales  volume  and  lumber  prices.

                          ---------------------------

     This Item 7 contains  statements  which,  to the  extent  that they are not
recitations of historical fact,  constitute  Forward Looking Statements that are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform  Act of 1995 and are  inherently  subject  to  uncertainty.  A number  of
important  factors could cause the Company's  business and financial results and
financial condition to be materially  different from those stated in the Forward
Looking Statements. For a discussion of these matters, see the last paragraph of
Item 1 of this report.


2000 Compared with 1999
-----------------------

     Net Sales
     ---------

     Net sales for 2000 decreased  $59.8 million,  or 5.5%, to $1,027.6  million
from $1,087.4 million in 1999. Sales for all facilities operated throughout both
years ("same store sales") decreased 6.1%. During 2000, the Company  experienced
a 6.6%  decrease  in same  store  sales to its  primary  type of  customer,  the
professional home builder, and a 0.3% increase in same store sales to commercial
builders. Consumer sales declined 10.6% on a same store basis.

     Sales to building  professionals  as a percentage of total sales were 61.8%
in 2000 compared to 62.3% in 1999. Lumber and building  materials  accounted for
86.1% of total sales in 2000 compared with 87.8% in 1999.
<PAGE>32

     Total  housing  starts in the United  States  decreased  4.5% in 2000,  and
starts in the Company's  primary  geographical  market,  the Midwest,  decreased
approximately 7.8%. The Company's two other geographical  markets, the Northeast
and South,  experienced  decreases of 1.4% and 4.9%,  respectively.  Nationally,
single family housing starts, which generate the majority of the Company's sales
to building  professionals,  experienced  a decrease of 5.5% in 2000,  from 1.33
million starts in 1999 to 1.26 million starts in 2000. Sales at its Target Major
Markets decreased 9.5% in 2000.

     Sales for 2000 were  positively  impacted by investments in new initiatives
such as Tool Rental and Installed  Programs,  sales of which  increased 38.8% in
2000 over sales in 1999.  However,  these  increases were offset for the year by
the effects of lumber deflation and by  weather-related  issues in the first and
fourth quarters.  Dimensional lumber, panel products and, to an extent,  drywall
are  commodities  which cause the  Company's  costs to fluctuate  with  changing
market conditions,  generally tracked using the Random Lengths Framing Composite
Average  and the Random  Lengths  Panel Index for  dimensional  lumber and panel
products, respectively. Drywall prices generally fluctuate based on availability
and are tracked using producer  prices.  Increases in commodity  prices ("lumber
inflation")  generally  are passed on to the customer  with certain lag effects,
resulting  in higher  selling  prices,  or are fixed in the  futures  market for
dimensional  lumber and panel  products for a small  percentage  of  longer-term
sales contracts. In periods of decreasing commodity prices ("lumber deflation"),
selling prices decrease,  with certain lag effects.  The Company  estimates that
deflation in lumber and drywall  prices  negatively  impacted  2000 net sales by
approximately $74.3 million, when compared with lumber and drywall prices during
1999.

     Products  that  exhibited  the greatest  change in sales for the year ended
December 30, 2000 versus sales of such  products in 1999 were lumber and plywood
(down  16.0%),  drywall (down  19.0%),  treated wood (down 7.8%),  roofing (down
4.8%), and kitchen and bath (up 6.2%).

     For  the  year,  sales  of  internally   manufactured  building  components
increased to 56.7% of total  distributed  building  components from 50.9% in the
prior  year.  The  dollar  value of sales of  internally  manufactured  building
components   increased  10.4%  from  approximately  $87.4  million  in  1999  to
approximately  $96.5  million  in 2000.  As with  dimensional  lumber,  sales of
internally  manufactured  building  components  are  impacted  by the effects of
lumber deflation.

     Gross Profit
     ------------

     Gross profit decreased $1.5 million to $223.1 million or 21.7% of net sales
for 2000  compared  with  $224.6  million  or 20.7% of net sales  for 1999.  The
Company believes that the sales effect of lumber deflation  decreased the dollar
value of gross profit by  approximately  $15.2 million for the fiscal year ended
December 30, 2000.  Commodity wood products,  drywall and manufactured  building
components  accounted for  approximately  56.1% of sales for the year,  compared
with 58.9% for the 1999. The gross margin for these  products  improved to 19.0%
for 2000 versus 17.5% last year.
<PAGE>33

     The  increase  in gross  profit  as a  percentage  of sales  resulted  from
increased  sales and gross profit  margins  relating to internally  manufactured
products,  improved  buying  leverage,  and the expansion of the Company's other
initiatives. These substantially offset the effects of lumber deflation.

     As previously noted, sales of internally  manufactured  building components
improved during the fiscal year. The Company's  margins from sales of internally
manufactured  building components typically are higher than the margins on sales
of purchased components.

     Selling, General, and Administrative Expense
     --------------------------------------------

     In 2000, selling, general, and administrative expense ("SG&A") increased as
a percent of net sales to 19.5% compared with 17.1% of net sales in 1999.  Total
SG&A  expense  increased  $14.0  million or 7.5% from $185.9  million in 1999 to
$199.9  million  in  2000.  Much of  this  increase  is  attributable  to  costs
associated  with new  initiatives  such as Tool Rental and  Installed  Programs.
These programs increased  salaries,  wages and benefits;  delivery expense;  and
other fixed  charges.  In  addition,  higher fuel and natural gas prices  caused
delivery expense and utility costs to increase.

     Salaries,  wages and benefits increased  approximately $7.8 million or 6.1%
over the prior year. Higher unit sales volumes,  initiatives such as Tool Rental
and Installed  Programs,  and higher  administrative  compensation  and benefits
increased  regular  compensation and benefits by  approximately  $9.6 million or
7.8%.  Offsetting  these  increases  was a $1.4 million  decrease in  management
incentives.  In addition,  the culmination of changes in the  administration  of
vacation pay resulted in a $1.3 million  improvement  in SG&A expenses for 2000,
following a comparable $1.0 million improvement in 1999.

     Delivery expense for the year increased approximately $2.4 million or 17.4%
over the prior year. The increase was driven by various Company  initiatives and
by the  significant  increase  in fuel  prices  over last year.  With  regard to
initiatives, the expansion of Installed Programs, such as insulation, siding and
gutters, has caused the Company to incur additional delivery expense through the
trucks involved in these programs. As a result,  vehicle repair and maintenance,
lease  costs,  and  licensing  increased  approximately  $1.4  million or 14.1%.
Finally,  the effects of increased fuel costs nationwide in 2000, plus expansion
of the fleet resulted in additional fuel expense of approximately  $1.1 million,
a 25.4% increase over the prior year.

     Promotional  expenses,   including  travel  and  entertainment,   increased
approximately  $0.9 million or 12.0%.  Fixed expenses,  other than depreciation,
associated  with the operation of the Company's sales and  distribution  and its
headquarters facilities increased approximately $0.8 million or 10.8%.
<PAGE>34


     Depreciation, Goodwill and Trademark Amortization
     -------------------------------------------------

     Depreciation,   goodwill  and  trademark   amortization   costs   increased
approximately  $0.6 million or 11.0% in 2000,  compared with 1999. This increase
primarily is due to  depreciation  on delivery  vehicles,  equipment used in the
Tool Rental program and capital  improvements  made as a result of the Company's
Major Markets and re-merchandising programs, as well as its other initiatives.

     Provision for Doubtful Accounts
     -------------------------------

     The  Company  extends  credit,  generally  due on the 10th day of the month
following  the sale,  to  qualified  and  approved  contractors.  Provision  for
doubtful  accounts  decreased to approximately  $1.0 million or 0.1% of sales in
2000 from approximately $1.7 million or 0.2% of sales for 1999.

     Other Operating Income
     ----------------------

     Other operating  income  decreased  approximately  $1.6 million or 33.3% in
2000 as compared to 1999. The decrease primarily is the result of a reduction in
gains  reported  on the sale of excess  property  and  various  fixed  assets of
approximately  $1.5 million.  During 1999,  the Company sold five pieces of real
estate and  recorded  total gains on the sale of real  estate and various  fixed
assets of  approximately  $1.8 million.  This is compared with three real estate
sales and various  fixed asset  disposals  in 2000,  resulting in total gains of
approximately $0.3 million.

     Interest Expense
     ----------------

     Interest  expense  increased to $24.3 million in 2000 from $23.3 million in
1999.  This  increase  was the result of an increase  in the  overall  effective
borrowing rate of 72 basis points as floating  interest rates increased over the
course of fiscal  2000  compared  to 1999,  partially  offset by a $4.5  million
decrease in average outstanding debt.

     Income Tax Benefit before Extraordinary Item
     --------------------------------------------

     In 2000, the Company recorded a net income tax benefit before extraordinary
item of $0.7 million  versus an income tax expense of $5.7 million in 1999.  Net
operating loss  carryforwards  were used to substantially  offset current income
taxes payable in 1999.  An effective  federal and state income tax rate of 38.8%
was used to calculate income taxes for 2000,  compared with an effective rate of
38.7% for 1999. In addition to the effective  income tax rate,  state  franchise
taxes of $1.4  million  and $1.1  million  were  calculated  for 2000 and  1999,
respectively, and are included in the provision reported.
<PAGE>35

     The Company  continues to review future  earnings  projections to determine
that there is  sufficient  support  for its  deferred  tax assets and  valuation
allowance.  Management believes that it is more likely than not that the Company
will receive  full benefit of its net deferred tax asset and that the  valuation
allowance is properly stated.

     Net (loss) income before extraordinary item
     -------------------------------------------

     The Company recorded a net loss before  extraordinary  item in 2000 of $4.0
million  versus net income of $7.6 million in 1999, a decline of $11.5  million.
The loss  primarily  resulted  from a  reduction  of  gross  profit  dollars  of
approximately  $1.5  million;  increased  salaries,  wages and  benefits of $7.8
million;  increased  vehicle  maintenance,  lease  and  licensing  costs of $1.4
million;  a $1.1  million  increase in fuel costs;  a $1.0  million  increase in
interest  expense and a $1.7 million  decline in other income.  These  decreases
were  partially  offset  by a  $0.7  million  decrease  provision  for  doubtful
accounts.

     Extraordinary item
     ------------------

     As further explained in Note 8 to the Consolidated Financial Statements, on
November 21, 2000 the Company  commenced a cash tender offer for its outstanding
11-5/8% Senior Subordinated Notes due 2003, at a substantial  discount from face
value.  The offer  expired on December 20, 2000 and on December  26,  2000,  the
Company  redeemed  $36.0  million  of  notes  tendered.  As  a  result  of  this
transaction,  the Company recorded a pre-tax gain of $11.1 million, net of costs
associated  with the  transaction.  The net gain,  after  appropriate  state and
federal income taxes was $6.8 million.


1999 Compared with 1998
-----------------------

     Net Sales
     ---------

     Net sales for 1999 increased $175.2 million,  or 19.2%, to $1,087.4 million
from $912.2 million in 1998. Sales for all facilities  operated  throughout both
years ("same store sales") increased 18.1%. During 1999, the Company experienced
a 22.1%  increase  in same store  sales to its  primary  type of  customer,  the
professional  home  builder,  and a  30.8%  increase  in  same  store  sales  to
commercial builders. Consumer sales declined by 0.2% on a same store basis.

     Total  housing  starts in the United  States  increased  3.0% in 1999,  and
starts in the Company's  primary  geographical  market,  the Midwest,  increased
approximately 7.9%. The Company's two other geographical  markets, the Northeast
and South,  experienced  increases of 3.4% and 2.5%,  respectively.  Nationally,
single family housing starts, which generate the majority of the Company's sales
to building  professionals,  experienced an increase of 4.7% in 1999,  from 1.27
million starts in 1998 to 1.33 million starts in 1999.
<PAGE>36

     The Company estimates that inflation in lumber prices  positively  affected
1999 sales by  approximately  $44.3  million,  when  compared with lumber prices
during 1998.

     Gross Profit
     ------------

     Gross  profit  increased  $29.5  million  to  20.7% of net  sales  for 1999
compared with 21.4% of net sales for 1998.  The increase in gross profit dollars
is primarily  due to  increased  sales,  improved  product  costs and  increased
margins on internally  manufactured  products. In the third quarter of 1998, the
Company  recorded  a charge  of $0.8  million  as a  result  of an  exchange  of
clearance merchandise for barter credits. The decline in gross profit percentage
primarily was the result of the effects of rapid lumber  inflation that occurred
during the second and third  quarters  of 1999 as well as a  continued  shift in
sales mix to professional builders.

     The Company  estimates  that lumber  inflation in 1999,  when compared with
1998 price levels, increased gross profit dollars by approximately $7.1 million.
The percent of Company sales attributable to professional  builders increased to
89.9% for 1999 compared with 87.9% for 1998.

     Selling, General, and Administrative Expense
     --------------------------------------------

     In 1999, selling, general, and administrative expense ("SG&A") decreased as
a percent of net sales to 17.1%  compared with 18.2% of net sales in 1998.  Much
of this  improvement is  attributable  to expense  reductions as a result of the
Company's 1998 restructuring efforts and the completion of most of the Company's
re-merchandising  programs  during or prior to the end of the second  quarter of
1998. In addition,  operating leverage achieved as a result of significant sales
growth also contributed to the decline as a percent of sales.

     The Company experienced decreases from 1998 to 1999, as a percent of sales,
in  salaries  and wages,  travel,  general  office  expenses,  utilities,  rent,
marketing,  delivery and administrative  expenses which were partially offset by
increased maintenance, employee benefits and other insurance costs. Improvements
in the  administration  of vacation pay resulted in a $1.0  million,  or 0.1% of
sales, improvement in SG&A expenses for 1999.

     Depreciation, Goodwill and Trademark Amortization
     -------------------------------------------------

     Depreciation,  goodwill and trademark  amortization  costs  increased  $0.8
million  in  1999  compared  with  1998.  This  increase  primarily  is  due  to
depreciation on rental  equipment and capital  improvements  made as a result of
the Company's major market and re-merchandising programs.
<PAGE>37

     Provision for Doubtful Accounts
     -------------------------------

     Provision for doubtful accounts  decreased to $1.7 million or 0.2% of sales
from $2.9  million or 0.3% of sales for 1998.  While the Company did  experience
several large write-offs during 1998 and 1999, the results were in line with its
historical average of approximately 0.3% of sales.

     Restructuring and Unusual Items
     -------------------------------

     During the first  quarter of 1998 the  Company  implemented  the 1998 Plan,
which resulted in the closing or  consolidation  of eight sales and distribution
and  two  manufacturing  facilities  in  February,  the  sale of two  sales  and
distribution  facilities  in  March,  and  further  reductions  in  headquarters
staffing.  As a result of the 1998 Plan,  the Company  recorded a  restructuring
charge of $5.4 million in the first quarter of 1998 and an additional  charge of
$0.5 million in the third quarter of 1998.  The $5.9 million  cumulative  charge
included  $4.1  million  in  anticipated  losses  on the  disposition  of closed
facility assets and  liabilities,  $2.1 million in severance and post employment
benefits  related  to the  1998  plan,  offset  by a  benefit  of  $300,000  for
adjustments  to  prior  years'  restructuring  accruals.  The  $4.1  million  in
anticipated losses included the write-down of assets (excluding real estate), to
their net realizable  value of $3.4 million and $700,000 in real estate carrying
costs.  The $2.1  million in  severance  and post  employment  benefits  covered
approximately  250  employees  that were  released as a result of  reductions in
headquarters  staffing  and the closing or  consolidation  of the ten  operating
facilities.  The $300,000  benefit from prior years was a result of  accelerated
sales of  previously  closed  facilities  during the fourth  quarter of 1997 and
first quarter of 1998. The  acceleration  of these sales resulted in a change in
the estimate of facility carrying costs for the sold facilities. At December 26,
1998 the accrued liability for restructuring had been reduced to zero.

     Other Operating Income
     ----------------------

     Other operating  income decreased to $4.9 million in 1999 from $6.0 million
in 1998. The decrease primarily is the result of a decrease in gains reported on
the sale of real estate of closed facilities, excess vehicles and equipment, and
a decrease in one-time insurance recoveries.  During 1999, the Company sold five
pieces of real estate and  recorded  total gains on the sale of fixed  assets of
$1.8  million  compared  with nine pieces of real estate sold and total gains on
the sale of fixed assets of $2.1 million  during 1998. In addition,  during 1998
the Company recorded during 1998 approximately $1.0 million in gains as a result
of the difference between insured replacement cost and book value as a result of
fire and storm  damage  at  certain  of the  Company's  sales  and  distribution
facilities.
<PAGE>38

     Interest Expense
     ----------------

     Interest  expense  increased to $23.3 million in 1999 from $21.6 million in
1998.  This increase was the result of an increase in average  outstanding  debt
under the Company's  revolving line of credit of $26 million partially offset by
a decrease in the  overall  effective  borrowing  rate of 40 basis  points.  The
increase in average  outstanding  debt primarily was due to increases in working
capital and  increased  investment  in  property,  plant and  equipment  used to
support the Company's significant growth in sales volume during 1999.

     Provision for Income Taxes
     --------------------------

     In 1999 and 1998, the Company  recorded  income tax expense of $5.7 million
and $0.7 million,  respectively.  Net operating loss  carryforwards were used to
substantially offset current income taxes payable in 1999.

     Net Income
     ----------

     The Company  recorded net income of $7.6 million in 1999,  compared  with a
net loss of $1.0 million in 1998, an  improvement  of $8.6 million.  The primary
elements of this  improvement  include an increase  in gross  profit  dollars of
$29.5 million,  a $5.9 million  decrease in  restructuring  and unusual items, a
1.1% decrease in SG&A as a percentage  of net sales and a $1.2 million  decrease
in provision for doubtful accounts.  These improvements were partially offset by
a $0.8 million increase in depreciation,  goodwill and trademark amortization, a
$1.7 million increase in interest expense,  a $5.1 million increase in provision
for income taxes and a reduction in other income of $1.1 million.


<PAGE>39

Liquidity and Capital Resources
-------------------------------

     The  Company's  principal  sources of working  capital  and  liquidity  are
earnings and  borrowings  under its  revolving  credit  facility.  The Company's
primary need for capital resources is to finance accounts receivable,  inventory
and capital expenditures.

     In 2000, net cash provided by operating activities was $14.7 million.  This
compares with net cash used in operating activities of $9.6 million in 1999. The
net cash  provided by  operations  in 2000  primarily  is due to  reductions  in
receivables and inventory resulting from declining sales and "lumber deflation",
partially offset by decreased current liabilities.

     Accounts receivable at the end of 2000 were $76.7 million, a 30.4% decrease
over year end 1999, primarily as a result of an 11.5% decrease in fourth quarter
credit sales compared with 1999.  Inventory at the end of December 2000 was $2.8
million lower than at the end of 1999,  primarily as a result of declines in the
costs of lumber and  building  materials  throughout  the year due to  commodity
lumber  deflation.  The amount of the Company's  accounts payable on any balance
sheet date may vary from the average accounts payable  throughout the period due
to the timing of payments  and will tend to increase or decrease in  conjunction
with an increase or decrease in inventory.

     During 2000, the Company increased its capital expenditures to $9.7 million
compared  to $7.7  million,  net of the $.9 million in  manufacturing  equipment
converted to operating  leases in 1999.  Investing cash flows in both years were
partially offset by proceeds on the sale of fixed assets.

     The Company's capital expenditures consist primarily of the construction of
facilities  for new  and  existing  operations,  the  remodeling  of  sales  and
distribution facilities and component manufacturing facilities, and the purchase
of equipment and  management  information  systems.  The Company may also,  from
time-to-time,  make expenditures to establish or acquire operations to expand or
complement  its  existing  operations,  especially  in  its  major  markets  and
manufacturing.  Under the  Company's  amended  and  restated  credit  agreement,
expenditures   capitalized   for   financial   statement   purposes,   excluding
acquisitions and the portion of expenditures reimbursed by insurance proceeds as
a result of casualty  losses,  and including  amounts carried over from previous
years,  were  limited  to  $10.8  million  during  2000.  The  Company's  actual
expenditures in 2000, as defined by the amended and restated  credit  agreement,
were $9.7 million.  In addition to capital  expenditures,  the credit  agreement
allows the Company to spend up to $30 million,  subject to certain restrictions,
for  acquisitions.  The Company  expects to fund  capital  expenditures  through
borrowings and its internally generated cash flow.

     The  Company  made  one   acquisition   during  2000,   acquiring   TresArk
Enterprises,  Inc.  TresArk  Enterprises,  Inc.  is a producer  of  construction
management software designed for lumberyards and their professional  contractors
and was acquired for $0.8 million,  paid for in cash in 2000.  In addition,  the
<PAGE>40
Company built a state-of-the-art  component manufacturing facility in Mackville,
WI and expanded its facility in Decatur,  IL to accommodate the manufacturing of
wall panels during 2000.

     During  1999,   the  Company  began,   or   significantly   expanded,   the
manufacturing  of  wall  components   and/or  trusses  at  seven   manufacturing
facilities.  In January of 1999, the Company acquired the assets of a wall panel
manufacturer located in Cookeville, Tennessee; in March of 1999, it acquired the
assets of Porter  Building  Products,  a manufacturer of trusses and wall panels
located in Bear,  Delaware;  and in October of 1999,  it acquired  the assets of
Advanced Truss Systems,  a manufacturer  of trusses,  located in Kings Mountain,
North  Carolina.  In November of 1999,  the Company also  acquired the assets of
United Building Systems,  a manufacturer of wall panels in Lexington,  Kentucky.
The total purchase price of these acquisitions was $14.3 million, of which $13.8
million was paid in cash in 1999 and 2000, with the remainder payable in 2001 in
cash or stock at the option of the Company.

     At  December  30,  2000 the  Company  operated  101 sales and  distribution
centers and 27 component  manufacturing  facilities  compared with 101 sales and
distribution  facilities and 25 component  manufacturing  facilities at December
25, 1999. At December 30, 2000,  there were no material  commitments  for future
capital expenditures.

     As further explained in Note 8 to the Consolidated Financial Statements, on
November 21, 2000 the Company  commenced a cash tender offer for its outstanding
11-5/8% Senior Subordinated Notes due 2003, at a substantial  discount from face
value.  The offer  expired on December 20, 2000 and on December  26,  2000,  the
Company  redeemed  $36.0  million  of  notes  tendered.  As  a  result  of  this
transaction,  the Company recorded a pre-tax gain of $11.1 million, net of costs
associated  with the  transaction.  The net gain,  after  appropriate  state and
federal income taxes was $6.8 million.

     To provide the funds  necessary  to complete  the  Redemption,  the Company
entered into an amended and restated  credit  agreement  with its existing  bank
group on December 13, 2000.  The amended and restated  credit  agreement,  among
other things,  increased the total  commitment  to $251.7  million,  removed the
seasonal  reduction in borrowing  capacity  provided for in the previous  credit
agreement,  increased both the base rate and LIBOR based borrowing spreads,  and
extended the final maturity of the revolving  credit agreement to June 30, 2005.
A portion of the credit  facility  was  provided as a one-time  term loan in the
principal  amount of $51.7 million that requires  quarterly  principal  payments
beginning on March 31, 2001.  The term loan  contains  provisions  for mandatory
principal  prepayments in the event that the Company receives cash in connection
with certain transactions, as defined.

     A  commitment  fee of 0.38% is payable on the unused  amount of the amended
and restated revolving line of credit. Interest on amounts outstanding under the
amended and restated revolving line of credit bear interest at a spread of 0.75%
above the base rate of Fleet National Bank (9.50% at December 30, 2000) or 2.50%
above the applicable LIBOR rate (6.65% at December 30, 2000). Depending upon the

<PAGE>41

     Company's   rolling   four-quarter   interest  coverage  ratio  and  unused
availability,  as defined,  amounts  outstanding  will bear interest at a spread
above  the  base  rate  from  0.0% to 0.75% or from  2.00%  to 2.75%  above  the
applicable  LIBOR rate. At December 30, 2000, the Company had  designated  $26.1
million  and $65.0  million  as base rate and  LIBOR  borrowings,  respectively.
Amounts outstanding under the $51.7 million term loan portion bear interest at a
spread of 3.00%  above the  applicable  LIBOR  rate.  All  interest  is  payable
monthly.

     The  Company  has  entered  into  an  interest  rate  swap  agreement  that
effectively fixes the Company's borrowing cost at 5.75% plus the Company's LIBOR
borrowing spread on $40.0 million of the Company's  amended and restated line of
credit borrowings. The interest rate swap agreement expires in February 2002.

     Substantially  all of the  Company's  accounts  receivable,  inventory  and
general  intangibles  are pledged as  collateral  for the  amended and  restated
revolving line of credit. In addition,  substantially all of the Company's owned
real estate assets were provided as additional collateral in connection with the
term loan. Availability is limited to 85.0% of eligible accounts receivable plus
60.0% of eligible  inventory,  with these  percentages  subject to change at the
permitted discretion of the agent for the lenders.

     Previously, the Company was subject to a revolving line of credit agreement
that was entered  into on February  17, 1999 and which was to expire in June 30,
2003.  This revolving line of credit provided for,  subject to restrictions  and
modifications  discussed  below, up to $160.0 million of revolving  credit loans
based on eligible  accounts  receivable and inventory,  as defined.  Outstanding
borrowings  bore  interest  at  spreads  ranging  from  0.0% to 0.75%  above the
applicable  base rate  (8.50% at  December  25,  1999) or LIBOR  rate  (5.80% at
December 25,  1999),  based upon the  Company's  rolling  four-quarter  interest
coverage  ratio,  as defined.  At December 25, 1999,  the Company had designated
$15.7   million  and  $105.0   million  as  base  rate  and  LIBOR   borrowings,
respectively.

     During 1999, in order to continue to support its  significant  sales growth
and the related increase in working capital levels,  the previous revolving line
of  credit  agreement  was  amended  to (1)  clarify  the  definition  of unused
availability  to allow the full  amount of the  Company's  borrowing  base to be
included  in the  unused  availability  calculation  and (2)  provide a seasonal
increase in the total  commitment from $160.0 million to $200.0 million from May
15  through  November  15 of each  year.  As a result of these  amendments,  the
maximum applicable borrowings could be fully utilized.

     The Company's weighted-average interest rate on all outstanding borrowings,
excluding  amortization  of debt issue costs,  for the years ended  December 30,
2000, December 25, 1999 and December 26, 1998 was approximately 9.95%, 9.34% and
9.80%, respectively.


<PAGE>42

     The Company  maintained  excess  availability  under its  revolving  credit
facilities  throughout 2000. The Company's  receivables and inventory  typically
increase in the second and third quarters of the year due to higher sales in the
peak building season.  In these same periods,  the Company typically reaches its
peak  utilization  of its  revolving  credit  facility  because of the increased
inventory needed for the peak building season. At February 29, 2000, the Company
had  outstanding  borrowings of $147.3 million and unused  availability of $32.0
million under the amended and restated line of credit The Company  currently has
excess  availability  under its revolving  credit facility and anticipates  that
funds  provided by  operations  and under this facility will be adequate for the
Company's future needs.

     The Company's amended and restated credit agreement and the trust indenture
relating to the Company's  11-5/8%  Senior  Subordinated  Notes contain  certain
covenants and  restrictions.  Generally,  the agreement and the trust  indenture
restrict, among other things, capital expenditures, the incurrence of additional
debt,  asset sales,  dividends,  investments,  acquisitions and other restricted
payments.  The amended and restated credit  agreement  requires that the Company
maintain unused  availability under the revolving line of credit of at least $15
million  (subject to increase in certain  circumstances)  and  maintain  certain
levels of net worth,  as defined in the amended and restated  credit  agreement.
Furthermore,  the  agreement  considers a change in control,  as defined,  as an
event of  default.  In  addition,  upon a change in control of the  Company,  as
defined in the trust  indenture,  the Company must offer to purchase the 11-5/8%
Senior  Subordinated  Notes  at  101% of the  principal  thereof,  plus  accrued
interest.  At December 30, 2000 the Company was in compliance with all covenants
under the amended and restated credit agreement and the trust indenture.


Net Operating Loss Carryforwards
--------------------------------

     At December 30, 2000 the Company and its  subsidiaries  had federal  income
tax net operating loss carryforwards  ("NOL's") of approximately  $32.4 million.
The NOL's will expire in the years 2006 to 2018 if not previously utilized.  See
also Note 12 to the Consolidated Financial Statements included elsewhere herein.

     The Company  continues to review future  earnings  projections to determine
that there is  sufficient  support  for its  deferred  tax assets and  valuation
allowance.  Management believes that it is more likely than not that the Company
will receive  full benefit of its net deferred tax asset and that the  valuation
allowance is properly stated.


<PAGE>43

Recently Issued Accounting Pronouncements
-----------------------------------------

     On December 31, 2000,  the Company  adopted SFAS No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities," as amended ("SFAS 133"), which
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  This standard  requires that all  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts,  be
recognized  as assets or  liabilities  in the balance sheet and measured at fair
value. If a derivative is designated as a fair value hedge,  changes in the fair
value of the derivative and the hedged item will be recognized in earnings. If a
derivative is designated as a cash flow hedge,  changes in the fair value of the
derivative will be recorded in other comprehensive income and will be recognized
in the  statement of  operations  when the hedged item affects  earnings.  For a
derivative  that does not  qualify  as a hedge,  changes  in fair  value will be
recorded in earnings.

     As a result of adopting SFAS 133, the Company  recorded a pre-tax charge of
approximately  $0.1  million  as a  cumulative  transition  adjustment  to other
comprehensive  income for derivatives  designated in cash flow-type hedges prior
to adopting SFAS 133.

     In September 2000, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board issued EITF Issue No. 00-10, "Accounting for Shipping
and  Handling  Fees and  Costs" in  September  2000.  This issue  requires  that
revenues  relating to "shipping  and  handling" be classified as revenues in the
Consolidated  Statements of Operations for fiscal years beginning after December
15, 1999.  Previously,  the Company had recorded shipping and handling fees as a
reduction of Selling,  General and Administrative expenses ("SG&A"). The Company
recorded  approximately $2.3 million,  $2.2 million and $1.9 million of shipping
and handling  fees in 2000,  1999 and 1998,  respectively.  These fees have been
reclassified  to Net  Sales  for  all  periods  presented  in  the  Consolidated
Statements of Operations. Shipping and handling expenses such as vehicle repairs
and maintenance,  lease costs,  licensing and fuel generally are charged to SG&A
for  sales  and  distribution  centers  and to Cost of Sales  for  manufacturing
operations.

     In  May  2000,  EITF  Issue  No.  00-14,   "Accounting  for  Certain  Sales
Incentives"  was issued and requires that sales  incentives  offered by a vendor
that  can be used by a  customer  as a  result  of an  exchange  transaction  be
recognized  as a  component  of Cost of  Goods  Sold.  Previously,  the  Company
classified  expenses associated with its Wickes Advantage Program as a component
of SG&A.  The amount of these  expenses was  approximately  $1.0  million,  $0.8
million and $0.3 million for 2000,  1999 and 1998,  respectively.  Such expenses
have been  reclassified  to Cost of Goods Sold for all periods  presented in the
Consolidated Statements of Operations.




<PAGE>44



     Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
     --------------------------------------------------------------------

     The Company is subject to market risk primarily  associated with changes in
interest rates and commodity lumber prices.

Interest Rate Risk
------------------

     As discussed in Note 8 to the Consolidated Financial Statements, to provide
the funds  necessary to complete the  redemption  of a portion of the  Company's
11-5/8% Senior  Subordinated Notes due 2003, the Company entered into an amended
and restated  credit  agreement  with it's  existing  bank group on December 13,
2000. The amended and restated credit agreement,  among other things,  increased
the total  commitment  to $251.7  million,  removed the  seasonal  reduction  in
borrowing capacity provided for in the previous credit agreement, increased both
the base rate and LIBOR based borrowing spreads, and extended the final maturity
of the  revolving  credit  agreement  to June 30,  2005. A portion of the credit
facility was provided as a one-time term loan in the  principal  amount of $51.7
million that requires quarterly  principal payments beginning on March 31, 2001.
Interest on amounts outstanding under the amended and restated revolving line of
credit bear interest at a spread of 0.75% above the base rate of Fleet  National
Bank (9.50% at December 30, 2000) or 2.50% above the applicable LIBOR rate 6.65%
at  December  30,  2000).  Depending  upon the  Company's  rolling  four-quarter
interest coverage ratio and unused availability, as defined, amounts outstanding
will bear  interest  at a spread  above the base rate from 0.0% to 0.75% or from
2.00% to 2.75% above the  applicable  LIBOR  rate.  At December  30,  2000,  the
Company had  designated  $26.1  million and $65.0 million as base rate and LIBOR
borrowings,  respectively. Amounts outstanding under $51.7 million the term loan
portion bear interest at a spread of 3.00% above the applicable LIBOR rate.

     The  Company  has  entered  into  an  interest  rate  swap  agreement  that
effectively fixes the Company's borrowing cost at 5.75% plus the Company's LIBOR
borrowing spread on $40.0 million of the Company's  amended and restated line of
credit borrowings. The interest rate swap agreement expires in February 2002.

     Based on the  Company's  average  borrowings  under  its  revolving  credit
agreements  during  2000,  including  amounts  outstanding  under  the term loan
portion  and net of the impact of the  interest  rate swap  agreement  described
above,  a  hypothetical  25 basis point  movement in the base rate or LIBOR rate
would  result in an  approximate  $223,600  annualized  increase  or decrease in
interest expense.  (See Note 13 of Consolidated  Financial  Statements  included
elsewhere herein).

     The fair value of the Company's outstanding 11 5/8% Senior Subordinated
Notes was $38.3 million and $85.0 million at December 30, 2000 and December 25,
1999, respectively. As discussed in Note 8 to the Consolidated Financial
Statements, the Company redeemed approximately $36.0 million face amount of the
notes in December 2000. Assuming a hypothetical 100 basis point decrease in the



<PAGE>45

yield to maturity of the outstanding notes at December 30, 2000, the fair value
of the fixed rate debt would have increased by $0.7 million.

Commodity Price Risk
--------------------

     The  Company   enters  into  lumber   futures   contracts  to  hedge  price
fluctuations  related to anticipated future purchases of commodity lumber. While
lumber  futures  contracts  are entered  into on a risk  management  basis,  the
Company's  hedge positions could show a net gain or loss depending on prevailing
market  conditions.  At December  30,  2000,  the Company had 41 lumber  futures
contracts  outstanding  with  a  total  contract  value  of  $839,000  and a net
unrealized  loss of $106,000.  These contracts all mature in 2001. If the market
price of lumber were to increase or decrease,  the Company  anticipates that the
resulting gain or loss for these purchases would be offset by the lumber futures
contracts.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-----------------------------------------------------

     Financial  statements of the Company are set forth herein beginning on page
F-1.


Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
                             FINANCIAL DISCLOSURE.
                             ---------------------

     The Company filed a Form 8-K report on December 7, 1999  reporting a change
in the Company's independent accountants.


<PAGE>46

                                    PART III
                                    --------

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
-------------------------------------------------------------

     Information  required by this Item is  incorporated  herein by reference to
the Sections entitled "Election of Directors" and "Management" in the definitive
proxy statement to be filed in connection  with the Company's  Annual Meeting of
Stockholders tentatively scheduled to be held on May 23, 2001.


Item 11.  EXECUTIVE COMPENSATION.
---------------------------------

     Information  required by this Item is  incorporated  herein by reference to
the Sections entitled  "Executive  Compensation",  "Board of Directors' Meetings
and  Compensation"  (the last two  paragraphs),  "Report of the Compensation and
Benefits   Committee"  and  "Comparison  of  Cumulative  Total  Return"  in  the
definitive  proxy statement to be filed in connection with the Company's  Annual
Meeting of Stockholders tentatively scheduled to be held on May 23, 2001.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

     Information  required by this Item is  incorporated  herein by reference to
the Section  entitled  "Principal  Security  Holders and  Security  Ownership of
Management" in the definitive proxy statement to be filed in connection with the
Company's Annual Meeting of Stockholders tentatively scheduled to be held on May
23, 2001.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
---------------------------------------------------------

     Information  required by this Item is  incorporated  herein by reference to
the Section entitled  "Certain  Relationships  and Related  Transactions" in the
definitive  proxy statement to be filed in connection with the Company's  Annual
Meeting of Stockholders tentatively scheduled to be held on May 23, 2001.



<PAGE>47



                                     PART IV
                                     -------

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
--------------------------------------------------------------------------
<TABLE>
<CAPTION>

(a)  List of Documents Filed as a Part of this Report:
------------------------------------------------------

(1)  Financial Statements:                                                  Page No.
 ------------------------                                                   --------
<S>                                                                        <C>

Independent Auditors' Report                                                 F-1
Report of Independent Accountants                                            F-2
Consolidated balance sheets as of December 30, 2000
     and December 25, 1999                                                   F-3
Consolidated statements of operations for the years ended
     December 30, 2000, December 25, 1999 and December 26, 1998              F-4
Consolidated statements of changes in common stockholders'
     equity for the years ended December 30, 2000, December 25,
     1999 and December 26, 1998                                              F-5
Consolidated statements of cash flows for the years ended
     December 30, 2000, December 25, 1999 and December 26, 1998              F-6
Notes to consolidated financial statements                                   F-7

(2)  Financial Statement Schedules:
-----------------------------------

Report of Independent Accountants                                            S-1
Schedule II.  Valuation and Qualifying Accounts                              S-2
</TABLE>

(3)  Exhibits
-------------

See Exhibit Index included elsewhere herein.

(b)  Reports on Form 8-K
------------------------
     The  Company  filed a  current  report  on Form 8-K on  December  14,  2000
reporting that it had entered into an amended and restated credit facility.

     The  Company  filed a  current  report  on Form  8-K on  February  6,  2001
reporting  the  results of a tender  offer for its 11-5/8%  Senior  Subordinated
Notes due 2003.

     The  Company  filed a  current  report  on Form  8-K on  February  9,  2001
referencing the failure of Riverside Group, Inc. to make required payment on its
11% Secured Notes due December 31, 2000 for which approximately 2,000,000 shares
of Wickes Inc. stock were held as collateral.


<PAGE>48

                                   SIGNATURES
                                   ----------

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       WICKES INC.

Date:  March 29, 2001            By:   /s/ J. Steven Wilson
                                       --------------------
                                       J. Steven Wilson
                                       Chairman and Chief Executive Officer

         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
         Signature                 Title                                       Date
         ---------                 -----                                       ----

<S>                         <C>                                         <C>

/s/ J. Steven Wilson          Chairman and Chief Executive Officer        March 29, 2001
--------------------          (Principal Executive and Financial Officer)
J. Steven Wilson              Director


/s/ Harry T. Carneal          Director                                    March 29, 2001
--------------------
Harry T. Carneal

/s/ Albert Ernest, Jr         Director                                    March 29, 2001
---------------------
Albert Ernest, Jr

/s/ William H. Luers          Director                                    March 29, 2001
--------------------
William H. Luers

/s/ Robert E. Mulcahy III     Director                                    March 29, 2001
-------------------------
Robert E. Mulcahy III

/s/ Frederick H. Schultz      Director                                    March 29, 2001
------------------------
Frederick H. Schultz

/s/ Robert T. Shaw            Director                                    March 29, 2001
------------------
Robert T. Shaw

/s/ Claudia B. Slacik         Director                                    March 29, 2001
---------------------
Claudia B. Slacik

/s/ Russell J. Bonaguidi      Vice President - Controller                 March 29, 2001
------------------------     (Principal Accounting Officer)
Russell J. Bonaguidi
</TABLE>


<PAGE>F-1

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

To the Board of Directors and Stockholders of
Wickes Inc.
Vernon Hills, IL


We have audited the accompanying  consolidated balance sheets of Wickes Inc. and
subsidiaries  as of December  30,  2000 and  December  25,1999,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. Our audits also included the financial statement
schedules for the years ended  December 30, 2000 and December 25, 1999 listed in
the Index at Item 14. These  financial  statements  and the financial  statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial  statements  and  financial  statement
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Wickes Inc. and subsidiaries as of
December 30, 2000 and December 25, 1999, and the results of their operations and
their  cash  flows  for the  years  then  ended in  conformity  with  accounting
principles  generally  accepted in the United  States of America.  Also,  in our
opinion, such financial statement schedules,  when considered in relation to the
basic  financial  statements  taken as a whole,  present  fairly in all material
respects the information set forth therein.

/s/ Deloitte & Touche LLP


Chicago, IL
February 28, 2001


<PAGE>F-2

                        REPORT OF INDEPENDENT ACCOUNTANTS
                        ---------------------------------


To the Stockholders and
Board of Directors of Wickes Inc.

In our opinion, the accompanying consolidated statements of operations,  changes
in stockholders' equity and cash flows present fairly, in all material respects,
the results of Wickes Inc. and its subsidiaries' operations and their cash flows
for the year ended December 26, 1998, in conformity with  accounting  principles
generally accepted in the United States of America.  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 of these  statements in accordance  with auditing  standards
generally  accepted in the United  States of America  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 audit provides a reasonable basis for our opinion.

As discussed in Note 16 to the 2000 consolidated  financial  statements (Note 16
in the  1998  consolidated  financial  statements),  Wickes  Inc.  has  restated
previously issued consolidated financial statements to change its accounting for
a barter transaction.

                                                  /s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 23, 1999 except for Note 16 in the 2000 financial  statements  (Note 16
in the 1998 financial statements), as to which the date is August 31, 1999.


<PAGE>F-3
<TABLE>
<CAPTION>
                                           WICKES INC. AND SUBSIDIARIES

                                           CONSOLIDATED BALANCE SHEETS

                                     December 30, 2000 and December 25, 1999
                                         (in thousands except share data)



                                                                                   2000                    1999
                                                                                   ----                    ----
                ASSETS
<S>                                                                            <C>                    <C>

Current assets:
   Cash                                                                      $       243             $        72
   Accounts receivable, less allowance for doubtful
     accounts of $2,791 in 2000 and $4,105 in 1999                                76,659                 110,103
   Notes receivable from affiliate                                                   201                     481
   Inventory                                                                     117,910                 120,705
   Deferred tax asset                                                              6,692                   7,184
   Prepaid expenses                                                                3,405                   2,663
                                                                                --------                --------

       Total current assets                                                      205,110                 241,208
                                                                                --------                --------

   Notes receivable from affiliate                                                   282                       -
   Property, plant and equipment, net                                             54,384                  50,599
   Trademark (net of accumulated amortization of
     $10,940 in 2000 and $10,718 in 1999)                                          6,079                   6,301
   Deferred tax asset                                                             12,990                  14,695
   Rental equipment (net of accumulated depreciation
     of $1,582 in 2000 and $1,010 in 1999)                                         2,296                   1,981
   Other assets (net of accumulated amortization of
     $12,440 in 2000 and $11,463 in 1999)                                         19,795                  19,225
                                                                                --------                --------

       Total assets                                                          $   300,936             $   334,009
                                                                                ========                ========

                LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt                                      $     6,339                      --
   Accounts payable                                                               35,294                  53,190
   Accrued liabilities                                                            21,576                  25,495
                                                                                --------                --------

       Total current liabilities                                                  63,209                  78,685
                                                                                --------                --------

Long-term debt                                                                   200,403                 220,742
Other long-term liabilities                                                        3,428                   3,763

Commitments and contingencies (Note 9)

Stockholders' equity:
   Common stock  $0.01 par (8,271,313 and 8,224,888
     shares issued and outstanding in 2000 and 1999,respectively)                     83                      82
   Additional paid-in capital                                                     87,092                  86,870
   Accumulated deficit                                                           (53,279)                (56,133)
                                                                                --------                ---------

       Total stockholders' equity                                                 33,896                  30,819
                                                                                --------                --------

       Total liabilities and stockholders' equity                            $   300,936             $   334,009
                                                                                ========                ========
</TABLE>

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


<PAGE>F-4
<TABLE>
<CAPTION>



                          WICKES INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

 For the Years Ended December 30, 2000, December 25, 1999, and December 26, 1998
                      (in thousands, except per share data)


                                                       2000                1999                     1998
                                                       ----                ----                     ----
<S>                                               <C>                   <C>                     <C>

Net sales                                         $ 1,027,604           $ 1,087,402            $   912,190
Cost of sales                                         804,512               862,798                717,071
                                                  -----------           -----------            -----------
     Gross profit                                     223,092               224,604                195,119
                                                  -----------           -----------            -----------

Selling, general and administrative expenses          199,889               185,884                166,420
Depreciation, goodwill and trademark amortization       5,877                 5,295                  4,513
Provision for doubtful accounts                           983                 1,724                  2,915
Restructuring and unusual items                          --                      --                  5,932
Other operating income                                 (3,292)               (4,932)                (6,017)
                                                  -----------            -----------           -----------
                                                      203,457                187,971               173,763
                                                  -----------            -----------           -----------

     Income from operations                            19,635                 36,633                21,356

Interest expense                                       24,322                 23,302                21,632
                                                  -----------            -----------           -----------

     (Loss) income before income taxes                 (4,687)                13,331                  (276)

(Benefit) provision for income taxes:                    (735)                 5,743                   689
                                                  -----------            -----------           -----------

     (Loss) income before extraordinary items          (3,952)                 7,588                  (965)

Extraordinary gain on early extinguishment
  of debt, net of taxes of $4,313                       6,806                     --                    --
                                                  -----------            -----------           -----------

     Net income (loss)                            $     2,854            $     7,588           $      (965)
                                                  ===========            ===========           ===========


(Loss) income before extraordinary gain per
  common share - basic                            $     (0.48)           $      0.92           $     (0.12)
                                                  ===========            ===========           ===========

(Loss) income before extraordinary gain per
  common share - diluted                          $     (0.48)           $      0.91           $     (0.12)
                                                  ===========            ===========           ===========


Net income per common share - basic               $      0.35            $      0.92           $     (0.12)
                                                  ===========            ===========           ===========

Net income per common share - diluted             $      0.34            $      0.91           $     (0.12)
                                                  ===========            ===========           ===========

Weighted average common shares - for basic          8,249,774              8,216,265             8,197,542
                                                  ===========            ===========           ===========
Weighted average common shares - for diluted        8,466,383              8,330,571             8,197,542
                                                  ===========            ===========           ===========

</TABLE>

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






<PAGE>F-5
<TABLE>
<CAPTION>


                                          WICKES INC. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  For the Years Ended December 26,1998,December 25, 1999 and December 30, 2000

                                     (in thousands, except for share data)



                                                                   Additional                            Total
                                            Common Stock            Paid-in        Accumulated       Stockholders'
                                       Shares         Amount        Capital          Deficit           Equity
                                       ------         ------        -------          -------           ------
<S>                                   <C>            <C>          <C>               <C>              <C>

Balance at December 27, 1997            8,176,205     $  82        $ 86,675        $ (62,756)         $ 24,001

Net loss                                                  -               -             (965)             (965)
Issuance of common stock                   31,063         -             112                -               112
                                      -----------    -------       --------      -----------          --------

Balance at December 26, 1998            8,207,268        82          86,787          (63,721)           23,148

Net income                                                -               -            7,588             7,588
Issuance of common stock                   17,620         -              83                -                83
                                      -----------    -------      ---------      -----------         ---------

Balance at December 25, 1999            8,224,888        82          86,870          (56,133)           30,819

Net income                                                                             2,854             2,854
Issuance of Common stock                   46,425         1             222                -               223
                                      -----------    ------     -----------      -----------           -------

Balance at December 30, 2000            8,271,313     $  83        $ 87,092        $ (53,279)         $ 33,896
                                        =========      ====         =======          ========           ======





</TABLE>


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


<PAGE>F-6

<TABLE>
<CAPTION>


                                            WICKES INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                  For the Years Ended December 30, 2000, December 25, 1999, and December 26, 1998
                                                   (in thousands)

                                                                           2000              1999             1998
                                                                       --------          --------         --------
<S>                                                                    <C>               <C>              <C>

Cash flows from operating activities:
   Net income (loss)                                                   $  2,854          $  7,588         $   (965)
   Adjustments to reconcile net income (loss) to
     net cash from operating activities:
   Extraordinary gain                                                    (6,806)               --               --
   Depreciation expense                                                   6,507             5,852            4,785
   Amortization of trademark                                                222               222              222
   Amortization of goodwill                                                 621               399              246
   Amortization of deferred financing costs                               1,274             1,510            1,447
   Provision for doubtful accounts                                          983             1,724            2,915
   Gain on sale of assets                                                  (146)           (1,458)          (1,834)
   Deferred tax (benefit) provision                                      (2,116)            4,460             (330)
   Changes in assets and liabilities:
     Decrease / (increase) in accounts receivable                        32,461           (16,904)         (14,053)
     Decrease / (increase) in inventory                                   2,795           (15,831)          (1,010)
     (Decrease) / increase in accounts payable and accrued liabilities  (22,150)            3,539           10,814
     Increase in prepaids and other assets                               (1,830)             (666)          (1,715)
                                                                       --------          --------         --------

NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES                    14,669            (9,565)             522
                                                                       --------          --------         --------


Cash flows from investing activities:
   Purchases of property, plant and equipment                            (9,734)           (8,624)          (5,854)
   Payments for acquisitions                                               (800)          (12,999)              --
   Proceeds from sales of property, plant and equipment                   1,291             4,026            4,231
                                                                       --------          --------         --------

NET CASH USED IN INVESTING ACTIVITIES                                    (9,243)          (17,597)          (1,623)
                                                                       --------          --------         --------

Cash flows from financing activities:
   (Increase) / decrease in notes receivable                                 (2)              614            2,105
   Debt issuance cost                                                    (2,595)           (2,294)              --
   Net borrowing / (repayments) under revolving line of credit           22,044            28,782           (1,084)
   Reductions of notes payable                                          (24,925)              (16)             (46)
   Net proceeds from issuance of common stock                               223                83              112
                                                                       --------          --------         --------

NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES                    (5,255)           27,169            1,087
                                                                       ---------         --------         --------

NET (DECREASE) / INCREASE IN CASH                                           171                 7              (14)
Cash at beginning of year                                                    72                65               79
                                                                       ---------         --------         --------

CASH AT END OF YEAR                                                   $     243          $     72         $     65
                                                                      =========          ========         ========

Supplemental schedule of cash flow information:

   Interest paid                                                      $  23,203          $ 21,503         $ 20,885
   Income taxes paid                                                      1,457             1,524              987

Supplemental schedule of non-cash investing and financing activities: The
  Company purchased assets in conjunction with acquisitions made during the
  period. In connection with these acquisitions, liabilities were assumed as
  follows:
   Assets acquired                                                    $     800          $ 14,850         $     --
   Liabilities assumed                                                $      --          $    529         $     --
   Purchase price payable                                             $      --          $  1,322         $     --


</TABLE>

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


<PAGE>F-7



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

1.   Description of Business
----------------------------

Wickes Inc. (formerly Wickes Lumber Company), through its sales and distribution
facilities,  markets  lumber and building  materials  and  provides  specialized
services  primarily to  professional  contractors,  repair and  remodelers,  and
do-it-yourself home owners,  principally in the Midwest,  Northeast and Southern
United States.  Wickes Inc.'s  wholly-owned  subsidiaries  are: Lumber Trademark
Company  ("LTC"),  a holding  company  for the  "Flying  W"  trademark;  and GLC
Division, Inc. ("GLC"), which subleases certain real estate to Wickes Inc.


2.   Accounting Policies
------------------------

Principles of Consolidation
---------------------------

The  consolidated  financial  statements  present  the  results  of  operations,
financial  position,  and cash  flows of Wickes  Inc.  and all its  wholly-owned
subsidiaries  (the  "Company").   All  significant   intercompany  balances  and
transactions have been eliminated in consolidation.

Fiscal Year
-----------

The  Company's  fiscal year ends on the last  Saturday in December.  All periods
presented  represent  52-week  years with the  exception of 2000 being a 53-week
year.

Revenue Recognition
-------------------

The Company recognizes revenues at the time products are shipped or services are
provided.  For contracts  that have material or service  elements  provided over
extended  periods of time,  revenue  generally is  recognized,  as materials are
delivered,  services have been performed and  manufactured  building  components
have been  delivered or  installed.  Prepayments  for  materials or services are
deferred  until  such  materials  have  been  delivered  or  services  have been
provided.

Cash and Cash Equivalents
-------------------------

The Company  considers  all highly  liquid  investments  with a maturity date of
three months or less to be cash equivalents.


<PAGE>F-8



Accounts Receivable
-------------------

The Company extends credit primarily to qualified  professional  contractors and
professional repair and remodelers, generally on a non-collateralized basis. The
allowance  for  doubtful  accounts is based on  management's  assessment  of the
amount  which may become  uncollectable  in the future  and is  estimated  using
specific  review of problem  accounts,  overall  portfolio  quality  and current
economic  conditions  that  may  effect  the  borrower's  ability  to  pay,  and
historical experience.

Inventory
---------

Inventory  consists  principally  of finished  goods.  The Company  utilizes the
first-in,  first-out  (FIFO) cost flow  assumption  for  valuing its  inventory.
Inventory  is valued at the  lower of cost or  market,  but not in excess of net
realizable value.

Property, Plant and Equipment
-----------------------------

Property,  plant and equipment are stated at cost and are depreciated  under the
straight-line  method.  Estimated  useful  lives  range  from 15 to 39 years for
buildings and  improvements.  Leasehold  improvements  are depreciated  over the
lesser of the  estimated  useful life of the asset or the lease term.  Machinery
and equipment lives range from 3 to 10 years.  Expenditures  for maintenance and
repairs  are  charged  to  operations   as  incurred.   Gains  and  losses  from
dispositions  of property,  plant,  and  equipment are included in the Company's
statement of operations as other operating income.

Rental Equipment
----------------

Rental  equipment  consists of hand tools and power  equipment  held for rental.
This equipment is depreciated under the straight-line method over a 5 to 10 year
life.

Other Assets
------------

Other assets consist  primarily of deferred  financing  costs and goodwill which
are being amortized on the  straight-line  method,  goodwill over 10 to 35 years
and  deferred  financing  costs  over the  expected  terms of the  related  debt
agreements.

Amortization  expense for  deferred  financing  costs is  reflected  as interest
expense on the Company's Consolidated Statements of Operations.

Trademark
---------

The Company's "Flying W" trademark is being amortized over a 40-year period.

<PAGE>F-9

Postretirement Benefits Other Than Pensions
-------------------------------------------

The Company  provides  certain health and life  insurance  benefits for eligible
retirees  and their  dependents.  The  Company  accounts  for the costs of these
postretirement  benefits over the employees'  working careers in accordance with
Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 106,  "Employers'
Accounting for Postretirement Benefits Other Than Pensions."

Postemployment Benefits
-----------------------

The Company provides certain other  postemployment  benefits to qualified former
or  inactive   employees.   The  Company   accounts   for  the  costs  of  these
postemployment benefits in the period when it is probable that a benefit will be
provided  in  accordance   with  SFAS  No.  112,   "Employers'   Accounting  for
Postemployment Benefits."

Income Taxes
------------

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income  Taxes." Tax  provisions  and  credits  are  recorded at
statutory  rates for taxable items  included in the  consolidated  statements of
operations  regardless  of the period for which such items are  reported for tax
purposes. Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities. Deferred tax
assets are reduced by a  valuation  allowance  when the Company  cannot make the
determination  that it is more likely than not that some  portion of the related
tax asset will be realized.

Earnings Per Common Share
-------------------------

Earnings  per  common  share is  calculated  in  accordance  with SFAS No.  128,
"Earnings Per Share." Weighted average shares outstanding have been adjusted for
dilution using the treasury stock method.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  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 the estimates reported.



<PAGE>F-10

Impairment of Long-Lived Assets
-------------------------------

The  Company  evaluates  assets  held for use and  assets to be  disposed  of in
accordance  with SFAS No. 121,  "Accounting  for the  Impairment  of  Long-Lived
Assets and for  Long-Lived  Assets to be Disposed Of." This  statement  requires
that long-lived assets and certain identifiable  intangibles held and used by an
entity be reviewed for impairment  whenever  events or changes in  circumstances
indicate  that the  carrying  amount  of an asset  may not be  recoverable.  The
Company  historically  has  reviewed  excess  property  held for sale,  and when
appropriate, recorded these assets at the lower of their carrying amount or fair
value (see Note 6).

Stock-Based Compensation
------------------------

SFAS No. 123, "Accounting for Stock-Based  Compensation,"  encourages,  but does
not require,  companies to recognize  compensation  expense for grants of stock,
stock options, and other equity instruments to employees based on the fair value
of such  instruments.  The pronouncement  requires  companies that choose not to
adopt the fair value method of  accounting  to disclose the pro forma net income
and  earnings per share under the fair value  method.  As permitted by SFAS 123,
the  Company  elected to  continue  the  intrinsic  value  method of  accounting
prescribed  by APB Opinion 25. As required,  the Company has  disclosed  the pro
forma net income  and pro forma  earnings  per share as if the fair value  based
accounting  methods had been used to account for stock-based  compensation  cost
(see Note 10).

Segment Reporting
-----------------

SFAS Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information"  requires that a public business  enterprise  report  financial and
descriptive  information  about its reportable  operating  segments.  Generally,
financial  information  is  required to be reported on the basis that it is used
internally  for  evaluating  segment  performance  and  deciding how to allocate
resources to segments.  Based on this criteria,  the Company has determined that
it operates in one business  segment,  that being the supply and distribution of
lumber and  building  materials  to building  professionals  and  do-it-yourself
customers, primarily in the Midwest, Northeast, and South. Thus, all information
required by SFAS No. 131 is included in the Company's financial  statements.  No
single customer  represented more than 10% of the Company's total sales in 2000,
1999, and 1998.

Recently Issued Accounting Pronouncements
-----------------------------------------

On  December  31,  2000,  the Company  adopted  SFAS No.  133,  "Accounting  for
Derivative  Instruments and Hedging  Activities," as amended ("SFAS 133"), which
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  This standard  requires that all  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts,  be
recognized  as assets or  liabilities  in the balance sheet and measured at fair

<PAGE>F-11

value. If a derivative is designated as a fair value hedge,  changes in the fair
value of the derivative and the hedged item will be recognized in earnings. If a
derivative is designated as a cash flow hedge,  changes in the fair value of the
derivative will be recorded in other comprehensive income and will be recognized
in the  statement of  operations  when the hedged item affects  earnings.  For a
derivative  that does not  qualify  as a hedge,  changes  in fair  value will be
recorded in earnings.

As a result of  adopting  SFAS 133,  the  Company  recorded a pre-tax  charge of
approximately  $0.1  million  as a  cumulative  transition  adjustment  to other
comprehensive  income for derivatives  designated in cash flow-type hedges prior
to adopting SFAS 133.

In September  2000,  the Emerging  Issues Task Force  ("EITF") of the  Financial
Accounting Standards Board issued EITF Issue No. 00-10, "Accounting for Shipping
and  Handling  Fees and  Costs" in  September  2000.  This issue  requires  that
revenues  relating to "shipping  and  handling" be classified as revenues in the
Consolidated  Statements of Operations for fiscal years beginning after December
15, 1999.  Previously,  the Company had recorded shipping and handling fees as a
reduction of Selling,  General and Administrative expenses ("SG&A"). The Company
recorded  approximately $2.3 million,  $2.2 million and $1.9 million of shipping
and handling  fees in 2000,  1999 and 1998,  respectively.  These fees have been
reclassified  to Net  Sales  for  all  periods  presented  in  the  Consolidated
Statements of Operations. Shipping and handling expenses such as vehicle repairs
and maintenance,  lease costs,  licensing and fuel generally are charged to SG&A
for  sales  and  distribution  centers  and to Cost of Sales  for  manufacturing
operations.

In May 2000, EITF Issue No. 00-14, "Accounting for Certain Sales Incentives" was
issued and requires that sales  incentives  offered by a vendor that can be used
by a  customer  as a  result  of an  exchange  transaction  be  recognized  as a
component of Cost of Goods Sold.  Previously,  the Company  classified  expenses
associated with its Wickes Advantage  Program as a component of SG&A. The amount
of these expenses was approximately $1.0 million,  $0.8 million and $0.3 million
for 2000, 1999 and 1998,  respectively.  Such expenses have been reclassified to
Cost of Goods Sold for all periods  presented in the Consolidated  Statements of
Operations.

Reclassifications and Eliminations
----------------------------------

Certain reclassifications have been made to prior year amounts to conform to the
current  presentation.  All material intercompany balances and transactions have
been  eliminated.  See also Note 3  regarding  the  reclassification  of certain
manufacturing expenses.


3.  Reclassification of Manufacturing Expenses
----------------------------------------------

       One of the Company's strategic goals is to increase the sales volume of
manufactured building components (framed wall panels, roof and floor trusses,
and pre-hung interior and exterior doors) and to continue to increase the sales
of internally manufactured components. In response to increases, over time, in
<PAGE>F-12

the volume of internally manufactured building components sold, the Company has
determined that certain manufacturing costs previously included in Selling,
General and Administrative expense and Depreciation, Goodwill and Trademark
Amortization expense should be classified as Cost of Sales.

     Therefore, elements of costs directly associated with manufacturing
processes such as manufacturing labor and related benefits, manufacturing
supplies, equipment depreciation, delivery expenses and other overhead items
have been reclassified for the current and prior periods presented. This
reclassification had no impact on income from operations, net income or net
assets. The table presented below summarizes the impact of this reclassification
(increase / (decrease) in thousands):
<TABLE>
<CAPTION>

                                                   2000       1999       1998
                                               --------   --------   --------
<S>                                            <C>        <C>        <C>

Net sales                                      $   --     $   --     $   --
Cost of sales                                    36,472     30,586     21,515
                                               --------   --------   --------

    Gross profit                                (36,472)   (30,586)   (21,515)
                                               --------   --------   --------

Selling, general and administrative  expenses   (35,002)   (29,408)   (20,775)
Depreciation, goodwill and
trademark amortization                           (1,470)    (1,178)      (740)
                                               --------   --------   --------

                                                (36,472)   (30,586)   (21,515)
                                               --------   --------   --------
    Income from operations                     $   --     $   --     $   --
                                               ========   ========   ========

</TABLE>


4.  Restructuring and Unusual Charge
------------------------------------

During the first quarter of 1998, the Company  implemented a restructuring  plan
(the "1998 Plan") which resulted in the closing or  consolidation of eight sales
and distribution and two manufacturing  facilities in February,  the sale of two
sales  and  distribution   facilities  in  March,  and  further   reductions  in
headquarters  staffing.  As a result of the 1998 Plan,  the  Company  recorded a
restructuring  charge  of $5.9  million.  At  December  26,  1998,  the  accrued
liability for restructuring had been reduced to zero.

For further information regarding the sale of closed center real estate see Note
6.


5.  Acquisitions
----------------

The Company made one acquisition  during 2000,  acquiring  TresArk  Enterprises,
Inc. TresArk Enterprises, Inc. is a producer of construction management software
designed for lumberyards and their professional contractors and was acquired for
$800,000, paid for in cash in 2000.
<PAGE>F-13

During 1999, the Company made four acquisitions,  all component facilities.  The
total purchase  price of these  acquisitions  was $14.3 million,  of which $13.8
million was paid in cash in 1999 and 2000, with the remainder payable in 2001 in
cash or stock at the  option  of the  Company.  In  January  1999,  the  Company
acquired  the  assets  of a  wall  panel  manufacturer  located  in  Cookeville,
Tennessee.  In March 1999,  the Company  acquired the assets of Porter  Building
Products, a manufacturer of trusses and wall panels,  located in Bear, Delaware.
In October 1999, the Company acquired the assets of Advanced Truss Systems, Inc.
of Kings Mountain,  North Carolina.  Advanced Truss Systems is a manufacturer of
engineered  wood  trusses,  servicing  the greater  Charlotte,  North  Carolina,
market.  In November  1999, the Company  acquired the assets of United  Building
Systems, Inc. of Lexington,  Kentucky. United Building Systems is a manufacturer
of wall panels and roof and floor trusses, in the Lexington, Kentucky, market.

During 1998, the Company acquired the operating assets of Eagle Industries Inc.,
a component manufacturer, for a total cost of $1.8 million paid in cash.

The costs of these  acquisitions  have been  allocated  on the basis of the fair
value of the assets  acquired  and the  liabilities  assumed.  The excess of the
purchase  price  over the fair  value of the net  assets  acquired  resulted  in
goodwill,  which is being amortized on a straight-line  basis.  All acquisitions
have been accounted for as purchases.  Operations of the companies acquired have
been included in the accompanying  consolidated  financial statements from their
respective acquisition dates.

The results of all acquisitions were not material to the Company's  consolidated
operations.



<PAGE>F-14



6.  Property, Plant, and Equipment
----------------------------------

Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>

                                                   December 30,  December 25,
                                                       2000         1999
                                                       ----         ----
                                                         (in thousands)
<S>                                                <C>         <C>

          Land and improvements                    $ 14,356      $ 13,607
          Buildings                                  32,997        29,634
          Machinery and equipment                    39,410        36,905
          Leasehold improvements                      3,680         3,118
          Construction in progress                    2,246         1,301
                                                   --------      --------

          Gross property, plant, and equipment       92,689        84,565
          Less:  accumulated depreciation           (39,822)      (36,443)
                                                   --------      --------

          Property, plant, and equipment
            in use, net                              52,867        48,122
          Assets held for sale, net                   1,517         2,477
                                                   --------      --------

          Property, plant, and equipment, net      $ 54,384      $ 50,599
                                                   ========      ========
          </TABLE>

Sales of Real Estate
--------------------

In 2000,  the Company sold three pieces of real estate for a net gain  $204,000.
One  property,  which  had been  held for sale  since  1998 had been  previously
written down by $119,000 from its original net book value and sold at a net loss
of $72,000.  The other two  properties,  both held for sale since prior to 1996,
had not been previously written down and each were sold for net gains.

In 1999,  the  Company  sold five  pieces of real  estate for a net gain of $1.4
million.  One property,  which had been held for sale since the first quarter of
1990,  had been  previously  written down by $200,000 from its original net book
value and sold at a net loss of $23,000. The other four properties, one held for
sale since 1992 and the others since 1998, had not been previously  written down
and each were sold for net gains.

In 1998,  the  Company  sold nine  pieces of real  estate for a net gain of $1.6
million.  Eight of the  properties  sold had been held for sale  since the first
quarter of 1998 and had not been previously written down from their original net
book value.  The ninth  property,  which had been held for sale since 1989,  had
been  previously  written down by $709,000  from its original net book value and
sold at a net loss of $59,000.
<PAGE>F-15

The Company  reviews  assets held for sale in  accordance  with SFAS No. 121. At
December 30, 2000,  the Company held three  properties  for resale that had been
written down to their  estimated  fair market values prior to 1998.  The Company
did not record any impairment to the cost of assets held for sale in 2000,  1999
or 1998.  Certain of these  properties are leased to others until such time that
appropriate disposition can be affected.


7.   Accrued Liabilities
------------------------


Accrued liabilities consist of the following:
<TABLE>
<CAPTION>

                                         December 30,  December 25,
                                            2000         1999
                                            ----        ----
                                             (in thousands)
        <S>                               <C>        <C>


          Accrued payroll                 $ 9,038     $11,401
          Accrued liability insurance       5,183       5,844
          Other                             7,355       8,250
                                          -------     -------
          Total accrued liabilities       $21,576     $25,495
                                          =======     =======

</TABLE>

8.   Long-Term Debt
-------------------

Long-term debt obligations are summarized as follows:
<TABLE>
<CAPTION>

                                         December 30,  December 25,
                                             2000         1999
                                             ----         ----
                                               (in thousands)
<S>                                        <C>        <C>


          Senior subordinated notes        $ 63,956     $100,000
          Revolving credit facility:
             Revolving notes                 91,136      120,742
             Term notes                      51,650         --
                                           --------     --------
          Total long-term debt              206,742      220,742
          Less current maturities             6,339           --
                                           --------     --------
          Total long-term debt less
             current maturities            $200,403     $220,742
                                           ========     ========
</TABLE>

Senior Subordinated Notes
-------------------------

On October 22, 1993,  the Company  issued  $100.0  million  principal  amount of
10-year   unsecured   senior   subordinated   notes,   due   December  15,  2003
(collectively,  the "Notes"). Interest on the Notes is 11-5/8%, which is payable
semi-annually.  Covenants  under the  related  indenture  restrict,  among other
things, the payment of dividends, the prepayment of certain debt, the incurrence
of additional debt if certain  financial ratios are not met, the sale of certain
assets  unless  the  proceeds  are  applied  to the Notes  and other  restricted
payments.  In addition,  the Notes require that, upon a change in control of the
Company, as defined, the Company must offer to purchase the Notes at 101% of the
principal thereof, plus accrued interest.
<PAGE>F-16

On November 21, 2000 the Company commenced a cash tender offer for the Notes, at
a substantial  discount from face value.  The offer expired on December 20, 2000
and on December 26, 2000,  the Company  redeemed $36.0 million of notes tendered
(the  "Redemption").  As a result of this  transaction,  the Company  recorded a
pre-tax gain of $11.1 million, net of costs associated with the transaction. The
net gain, after appropriate state and federal income taxes was $6.8 million.

Revolving Line of Credit / Term Debt
------------------------------------

To provide the funds necessary to complete the Redemption,  on December 13, 2000
the Company amended and restated its credit  agreement  entered into on February
17,  1998.  The amended  and  restated  credit  agreement,  among other  things,
increased the total commitment to $251.7 million, removed the seasonal reduction
in borrowing  capacity provided for in the previous credit agreement,  increased
both the base rate and LIBOR based  borrowing  spreads,  and  extended the final
maturity of the  revolving  credit  agreement to June 30, 2005. A portion of the
credit facility was provided as a one-time term loan in the principal  amount of
$51.7 million that requires quarterly  principal payments beginning on March 31,
2001.

A  commitment  fee of 0.38% is payable on the unused  amount of the  amended and
restated  revolving line of credit.  Interest on amounts  outstanding  under the
amended and restated revolving line of credit bear interest at a spread of 0.75%
above the base rate of Fleet National Bank (9.50% at December 30, 2000) or 2.50%
above the applicable LIBOR rate (6.65% at December 30, 2000). Depending upon the
Company's rolling four-quarter  interest coverage ratio and unused availability,
as defined,  amounts  outstanding  will bear interest at a spread above the base
rate from 0.0% to 0.75% or from 2.00% to 2.75% above the applicable  LIBOR rate.
At December 30, 2000, the Company had designated $26.1 million and $65.0 million
as base rate and LIBOR borrowings,  respectively.  Amounts outstanding under the
$51.7  million term loan  portion  bear  interest at a spread of 3.00% above the
applicable LIBOR rate. All interest is payable monthly.

The Company has entered into an interest rate swap  agreement  that  effectively
fixes the Company's  borrowing cost at 5.75% plus the Company's  LIBOR borrowing
spread on $40.0  million of the  Company's  amended and restated  line of credit
borrowings.  The interest rate swap agreement expires in February 2002 (see Note
13).

Substantially all of the Company's  accounts  receivable,  inventory and general
intangibles  are pledged as  collateral  for the amended and restated  revolving
line of credit.  In  addition,  substantially  all of the  Company's  owned real
estate assets were provided as additional collateral in connection with the term
loan.  Availability  is limited to 85.0% of eligible  accounts  receivable  plus
60.0% of eligible  inventory,  with these  percentages  subject to change at the
permitted  discretion  of the agent for the  lenders.  At December  30, 2000 the
Company had unused availability of $34.4 million.
<PAGE>F-17

Covenants under the amended and restated credit agreement  require,  among other
things,  that the Company maintain unused  availability under the revolving line
of  credit  of  at  least  $15.0   million   (subject  to  increase  in  certain
circumstances)  and  maintain  certain  levels of net  worth,  as defined in the
agreement.  In addition,  the agreement restricts,  among other things,  capital
expenditures,  the  incurrence  of  additional  debt,  asset  sales,  dividends,
investments,  and  acquisitions.  Furthermore,  the amended and restated  credit
agreement  considers a change in control, as defined, as an event of default. At
December 30, 2000, the Company was in compliance with all such covenants.

Prior to the December 13, 2000 amendment, the Company was subject to a revolving
line of credit  agreement  that was entered  into on February 17, 1999 and which
was to expire in June 30, 2003.  This  revolving  line of credit  provided  for,
subject to restrictions and modifications discussed below, up to $160 million of
revolving credit loans based on eligible accounts  receivable and inventory,  as
defined.  Outstanding  borrowings  bore interest at spreads ranging from 0.0% to
0.75% above the applicable  base rate (8.50% at December 25, 1999) or LIBOR rate
(5.80% at December 25,  1999),  based upon the  Company's  rolling  four-quarter
interest  coverage  ratio,  as defined.  At December 25,  1999,  the Company had
designated  $15.7 million and $105.0 million as base rate and LIBOR borrowings ,
respectively.

During 1999, this revolving line of credit  agreement was amended to (1) clarify
the definition of unused  availability to allow the full amount of the Company's
borrowing  base to be included in the unused  availability  calculation  and (2)
increase the total  commitment from $160.0 million to $200.0 million from May 15
through November 15 of each year.

Prior to February 17, 1999,  the Company had a revolving  line of credit,  which
was to expire on March 31, 2000,  that  provided for  borrowings of up to $130.0
million, based on eligible accounts receivable and inventory.

The  Company's  weighted-average  interest rate on all  outstanding  borrowings,
excluding  amortization  of debt issue costs,  for the years ended  December 30,
2000, December 25, 1999 and December 26, 1998 was approximately 9.95%, 9.34% and
9.80%, respectively.

Aggregate Maturities
--------------------

The  remaining  outstanding  principal  balance  of the  Notes,  totaling  $64.0
million,  matures on December 15, 2003. The amended and restated credit facility
has an expiration  date of June 30, 2005. The term loan portion of the revolving
credit facility includes required quarterly principal payments as follows:  $2.1
million from March 31, 2001 through  December 31, 2001;  $2.3 million from March
31, 2002 through  December  31,  2002;  $3.0 million from March 31, 2003 through
December 31, 2004; $4.7 on March 31, 2005; with the remaining  principal balance

<PAGE>F-18

due June 30,2005.  In addition,  the term loan contains provisions for mandatory
principal  prepayments in the event that the Company receives cash in connection
with certain transactions, as defined.


9.   Commitments and Contingencies
----------------------------------

At  December  30,  2000,  the  Company  had  accrued  approximately  $96,000 for
remediation of certain environmental and product liability matters,  principally
underground storage tank removal.

Many of the sales and distribution facilities presently and formerly operated by
the Company contained  underground petroleum storage tanks. All such tanks known
to the Company located on facilities  owned or operated by the Company have been
filled or removed in accordance with applicable  environmental laws in effect at
the time.  As a result of reviews made in  connection  with the sale or possible
sale of certain  facilities,  the Company has found petroleum  contamination  of
soil and ground  water on several of these  sites and has taken,  and expects to
take,  remedial actions with respect thereto.  In addition,  it is possible that
similar contamination may exist on properties no longer owned or operated by the
Company, the remediation of which the Company could under certain  circumstances
be held  responsible.  Since 1988, the Company has incurred  approximately  $2.0
million of costs,  net of insurance and regulatory  recoveries,  with respect to
the filling or removing of underground  storage tanks and related  investigatory
and remedial actions.  Insignificant amounts of contamination have been found on
excess properties sold over the past five years. The Company has accrued $18,000
for estimated clean-up costs at 7 of its locations.

The Company  previously had been  identified as having used two landfills  which
are now  Superfund  clean  up  sites.  Both of  these  items  were  settled  for
immaterial amounts.

The Company is one of many  defendants in two class action suits filed in August
of 1996 by  approximately  200 claimants for unspecified  damages as a result of
health  problems  claimed to have been caused by  inhalation  of silica  dust, a
byproduct of concrete and mortar mix, allegedly generated by a cement plant with
which the Company has no  connection  other than as a customer.  The Company has
entered into a cost-sharing  agreement  with its insurers,  and any liability is
not expected to be material.

The Company is one of many  defendants  in  approximately  300 actions,  each of
which seeks  unspecified  damages,  in various  Michigan  state  courts  against
manufacturers and building  material  retailers by individuals who claim to have
suffered injuries from products containing  asbestos.  Each of the plaintiffs in
these  actions  is  represented  by  one  of  two  law  firms.  The  Company  is
aggressively  defending  these  actions and does not believe that these  actions
will have a material adverse effect on the Company.  Since 1993, the Company has
settled 30 similar actions for insignificant  amounts,  and another 246 of these
actions have been dismissed. None of these suits have made it to trial.
<PAGE>F-19

Losses in excess of the $96,000  reserved as of December 30, 2000 are  possible,
but an estimate of these amounts cannot be made.

The Company is a defendant in a lawsuit  arising from a 1998 accident  involving
an employee  truck driver that  resulted in personal  injuries to a third party.
Plaintiffs  seek  compensatory  damages  in  an  unspecified  amount.  Recently,
plaintiffs have amended their complaint to include a claim for punitive  damages
in an  unspecified  amount,  for  which  insurance  coverage  may or may  not be
available.  While the Company  does not believe that any  proceedings  regarding
this  matter  will have a material  adverse  effect on the  Company's  financial
position, annual results of operations or liquidity,  there can be no assurances
of this result.

The Company is involved in various other legal  proceedings  that are incidental
to the conduct of its business.  Certain of these proceedings  involve potential
damages for which the Company's insurance coverage may be unavailable. While the
Company  does not  believe  that any of these  proceedings  will have a material
adverse effect on the Company's financial position, annual results of operations
or liquidity, there can be no assurance of this.

Leases
------

The Company has entered into operating leases for corporate office space, retail
space,  equipment and other items. These leases provide for minimum rents. These
leases  generally  include options to renew for additional  periods.  Total rent
expense under all operating leases was $17.4 million,  $14.3 million,  and $12.5
million for the years ended  December 30, 2000,  December 25, 1999, and December
26, 1998, respectively.


<PAGE>F-20




Future minimum commitments for noncancelable operating leases are as follows:
<TABLE>
<CAPTION>


            Year                                 Amount
            ----                                 ------
                                             (in thousands)
          <S>                                   <C>
            2001                                $ 15,591
            2002                                  14,221
            2003                                  11,966
            2004                                   9,162
            2005                                   4,217
            Thereafter                            29,473
                                                 --------
              Subtotal                            84,630
            Less sublease income                  (6,892)
                                                 --------
              Total                             $ 77,738
                                                 ========
</TABLE>


10.  Stockholders' Equity
-------------------------

Preferred Stock
---------------

As of  December  30,  2000,  the  Company  had  authorized  3,000,000  shares of
preferred stock, none of which were issued or outstanding.

Common Stock
------------

The Company  currently  has one class of common stock:  Common Stock,  par value
$.01 per share.  At December 30, 2000,  there were  20,000,000  shares of Common
Stock authorized and 8,271,313 shares issued and  outstanding.  In addition,  at
December 30,  2000,  855,936  shares of Common Stock were  reserved for issuance
under the Company's  1993 Long-Term  Incentive Plan and 1993 Director  Incentive
Plan.

Stock Compensation Plans
------------------------

As of December  30, 2000,  the Company has two  stock-based  compensation  plans
(both fixed option plans),  which are described below.  Under the 1993 Long-Term
Incentive  plan as amended on November 30, 1994,  the Company may grant  options
and other  awards to its  employees  for up to 835,000  shares of common  stock.
Under the 1993 Director  Incentive plan, the Company may grant options and other
awards to directors for up to 75,000 shares. The exercise price of grants equals
or exceeds the market  price at the date of grant.  The  options  have a maximum
term of 10 years. For non-officers,  the options generally become exercisable in
equal installments over a three-year period from the date of grant. For officers
the vesting periods can vary by grant.

<PAGE>F-21


Since  the  Company  applies  APB  Opinion  25 and  related  interpretations  in
accounting  for  its  plans,  no  compensation   cost  has  been  recognized  in
conjunction  with  these  plans.   Had  compensation   cost  for  the  Company's
stock-based  compensation  plans been  determined  consistent with SFAS 123, the
Company's  net income and  earnings per share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>

                                                                  2000             1999               1998
                                                                  ----             ----               ----
<S>                               <C>                         <C>                <C>              <C>

Income (loss) before
 extraordinary gain                 As reported                 $(3,952)           $7,558            $(965)
                                    Pro forma                   $(4,158)           $7,357          $(1,082)

Net income (loss)                   As reported                  $2,854            $7,558            $(965)
                                    Pro forma                    $2,648            $7,357          $(1,082)

Income (loss) before
  extraordinary gain per
  share - basic                     As reported                   $(.48)             $.92            $(.12)
                                    Pro forma                     $(.50)             $.90            $(.12)

Income (loss) before
  extraordinary gain per
  share - diluted                   As reported                   $(.48)             $.91            $(.12)
                                    Pro forma                     $(.50)             $.88            $(.12)

Net income (loss) per
  share - basic                     As reported                    $.35              $.92            $(.12)
                                    Pro forma                      $.32              $.90            $(.12)

Net income (loss) per
  share - diluted                   As reported                    $.34              $.91            $(.12)
                                    Pro forma                      $.31              $.88            $(.12)
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for grants in 2000,  1999,  and 1998,  respectively:  dividend
yield of 0% for all years;  expected  volatility of 60%, 49%, and 48%; risk-free
interest rates of 6.7%, 5.1% and 5.6%; and an expected life of 5.6 years for all
years.

A summary of the status of the Company's fixed stock option plans as of December
30, 2000,  December 25, 1999 and December 26, 1998 and changes  during the years
ended on those dates is presented as follows:
<PAGE>F-22

<TABLE>
<CAPTION>



                                       2000                        1999                         1998
                                       ----                        ----                         ----
                                    Weighted                    Weighted                     Weighted
                                     Average                     Average                      Average
                                     Exercise                    Exercise                     Exercise
Fixed Options                  Shares         Price         Shares         Price        Shares         Price
-------------                  ------         ------        ------         -----        ------         -----
<S>                          <C>              <C>        <C>              <C>        <C>              <C>

Outstanding beginning
     of year                   788,072        $ 7.22        734,263       $ 7.67       668,283         $ 10.09
Granted                         83,500        $ 6.90        121,475       $ 4.85       238,750         $  3.45
Exercised                      (39,433)       $ 3.68         (3,617)      $ 3.91       (11,014)        $  4.55
Forfeited, cancelled
     or expired                (55,342)       $ 9.04        (64,049)      $ 8.17      (161,756)        $  9.71
                               --------                     --------                 ---------
Outstanding end
    of year                    776,797        $ 7.23        788,072      $  7.22       734,263         $  7.67

Options exercisable
    at year end                443,404        $ 8.86        384,720       $10.23       256,627         $ 11.39

Options available for
    future grant at
    year end                    79,139                      107,297                    164,723
</TABLE>

Weighted-average fair value of options granted during the year where:
<TABLE>
<CAPTION>

                                                         2000      1999      1998
                                                       ------     -----     -----
        <S>                                            <C>       <C>       <C>

          Exercise price equals market price           $ 4.02     $2.51     $1.62
          Exercise price exceeds market price            n/a        n/a       n/a
          Exercise price is less than market price       n/a        n/a       n/a
</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 30, 2000:
<TABLE>
<CAPTION>

                                    Options Outstanding                           Options Exercisable
                         -----------------------------------------                -------------------
                                             Weighted-
                                              Average           Weighted-                           Weighted-
     Range of              Number            Remaining           Average            Number           Average
     Exercise           Outstanding         Contractual         Exercise         Exercisable         Exercise
      Prices            at 12/30/00            Life              Price           at 12/30/00          Price
      ------            -----------            ----              -----           -----------          -----
<S>                     <C>               <C>                   <C>              <C>                <C>

$  3.06 - $  5.00         480,457           6.9 years           $  4.27             241,564         $  4.13
$  5.13 - $  7.00         112,417           8.1 years           $  6.47              17,917         $  5.30
$ 10.95 - $ 23.25         183,923           3.7 years           $ 15.42             183,923         $ 15.42

</TABLE>
<PAGE>F-23


Earnings Per Share
------------------

The Company  calculates  earnings per share in accordance with SFAS No. 128. The
following is the  reconciliation  of the  numerators and  denominators  used for
basic and diluted earnings per share:
<TABLE>
<CAPTION>

                                                                 2000               1999              1998
                                                                 ----               ----              ----
Numerators:
<S>                                                           <C>                <C>                 <C>

     Income (loss) before extraordinary
       gain - for basic and diluted EPS                       $(3,952,000)         $7,588,000        $(965,000)
                                                              ============         ==========        ==========

     Net income (loss) - for basic and
        diluted EPS                                            $2,854,000          $7,588,000        $(965,000)
                                                               ==========          ==========        ==========

Denominators:
     Weighted average common
        shares - for basic EPS                                  8,249,774           8,216,265         8,197,542
        Common shares from options                                 98,885              82,191                 -
        Other common stock equivalents                            117,724              32,115                 -
                                                              -----------         -----------   ---------------
     Weighted average common
        shares - for diluted EPS                                8,466,383           8,330,571         8,197,542
                                                                =========           =========         =========
</TABLE>

In years  where net losses are  incurred,  the  dilutive  effects of options and
other common stock  equivalents  are not used in the calculation of diluted EPS,
as they  would be  anti-dilutive.  In  addition,  options to  purchase  278,000,
227,000 and 348,000  weighted-average  shares of common stock during 2000,  1999
and 1998 were not  included in the  calculation  of diluted EPS as the  options'
exercise prices were greater than the average market price.


11.  Employee Benefit Plans
---------------------------

401(k) Plan
-----------

The Company sponsors a defined  contribution 401(k) plan covering  substantially
all of its full-time  employees.  Additionally,  the Company  provides  matching
contributions up to a maximum of 2.5% of participating  employees'  salaries and
wages.  Total  expenses  under the plan for the years ended  December  30, 2000,
December 25, 1999,  and  December 26, 1998 were $2.1  million,  $1.8 million and
$1.5 million, respectively.

Postretirement Benefits Other Than Pensions
-------------------------------------------

The  Company  provides  life and health  care  benefits  to  retired  employees.
Generally,  employees  who have attained an age of 60, have rendered 10 years of
service and are currently  enrolled in the medical benefit plan are eligible for
postretirement  benefits.  The  Company  accrues the  estimated  cost of retiree
benefit payments during the employee's active service period.
<PAGE>F-24

The following tables  reconcile the  postretirement  benefit,  the plan's funded
status  and  actuarial  assumptions,  as  required  by  Statement  of  Financial
Accounting  Standard No. 132,  "Employers'  Disclosures about Pensions and Other
Postretirement Benefits."
<TABLE>
<CAPTION>



                                                     December 30,  December 25,
                                                          2000       1999
                                                          ----       ----
                                                           (in thousands)
<S>                                                      <C>        <C>

Change in accumulated postretirement benefit obligation:
    Benefit obligation at beginning of year              $ 2,142    $ 2,749
    Service cost                                             263        244
    Interest cost                                            157        151
    Participant contributions                                 --         --
    Claims paid                                             (317)      (241)
    Actuarial losses (gains)                                   2       (761)
    Plan amendments                                           --         --
                                                         -------    -------
    Benefit obligation at year-end                       $ 2,247    $ 2,142
                                                         =======    =======

Change in plan assets:
    Fair value of plan assets                                n/a        n/a

Reconciliation of funded status:
    Funded status                                        $(2,247)   $(2,142)
    Unrecognized transition obilgation                        --         --
    Unrecognized prior service cost                          (30)       (39)
    Unrecognized actuarial gain                             (794)      (876)
                                                         -------    -------
    Net amount recognized as other
        long-term liabilities                            $(3,071)   $(3,057)
                                                         =======    =======

Weighted-average assumptions as of year-end:
    Discount rate                                           7.50%      8.00%
    Expected return on assets                                n/a        n/a
    Medical cost trend                                      6.00%      6.00%
</TABLE>


<PAGE>F-25
<TABLE>
<CAPTION>




                                                   December 30,          December 25,          December 26,
                                                       2000                  1999                  1998
                                                       ----                  ----                  ----
                                                                        (in thousands)
<S>                                                   <C>                     <C>                  <C>
     Components of net periodic benefit cost:
         Service cost                                 $   264               $   244              $   233
         Interest cost                                    157                   151                  171
         Expected return on plan assets                   n/a                   n/a                  n/a
         Amortization of transition obligation              -                     -                    -
         Amortization of prior service cost               (10)                  (10)                 (10)
         Amortization of actuarial gain                   (80)                  (39)                   -
                                                       ------                -------              -------
     Net periodic benefit cost                         $  331                $  346               $  394
                                                       ======                =======              =======
</TABLE>

<TABLE>
<CAPTION>

                                                   December 30,          December 25,          December 26,
                                                        2000                  1999                   1998
                                                        ----                  ----                   ----
                                                                        (in thousands)
<S>                                                  <C>                   <C>                     <C>
     Weighted average assumptions used in
     computing net periodic benefit cost:
         Discount rate                                 8.00%                 6.75%                   7.25%
         Expected return on plan assets                 n/a                   n/a                     n/a
         Medical cost trend                            6.00%                 6.00%                   6.00%
</TABLE>
<TABLE>
<CAPTION>

                                                                      1% Increase          1% Decrease
                                                                      -----------          -----------
<S>                                                                       <C>                   <C>
         Health care cost trend sensitivity:
         Effect on total service cost and
               interest cost components                                  $  22               $   (20)
         Effect on postretirement benefit obligation                        57                   (54)
</TABLE>

Postemployment Benefits
-----------------------

The Company  provides  certain  postemployment  benefits to qualified  former or
inactive  employees who are not retirees.  The Company had accrued  $152,000 and
$161,000 at  December  30,  2000 and  December  25,  1999,  respectively.  These
benefits  include  salary  continuance,   severance,   and  healthcare.   Salary
continuance and severance pay are based on normal straight-line compensation and
calculated  based on years of service.  Additional  severance  pay is granted to
eligible  employees  who are 40 years of age or older and have been  employed by
the Company  five or more  years.  The Company  accrues  the  estimated  cost of
benefits provided to former or inactive  employees who have not yet retired over
the  employees'  service  period  or as an  expense  at the  date  of the  event
triggering the benefit.

<PAGE>F-26

12.  Income Taxes
-----------------

The Company and its subsidiaries file a consolidated  federal income tax return.
As of  December  30,  2000,  the Company has net  operating  loss  carryforwards
available  to offset  future  taxable  income  of  approximately  $32.4  million
expiring in the years 2006 through 2018.

The income tax  provision  consists of both  current and deferred  amounts.  The
components of the income tax provision are as follows:
<TABLE>
<CAPTION>


                                         December 30,  December 25,  December 26,
                                              2000       1999           1998
                                              ----       ----           ----
                                                       (in thousands)
<S>                                        <C>         <C>           <C>
          Taxes currently payable:
             State income tax              $ 1,372      $1,122       $ 1,019
             Federal income tax                  9         161          --
          Deferred (benefit) expense        (2,116)      4,460          (330)
                                           -------      ------       -------
          Income tax (benefit) expense        (735)      5,743           689
          Extraordinary expense              4,313        --            --
                                           -------      ------       -------
          Total income tax expense         $ 3,578      $5,743       $   689
                                           =======      ======       =======

</TABLE>

An  effective  federal and state  income tax rate of 38.8%,  38.7% and 39.1% was
used to  calculate  income  taxes for  2000,  1999 and  1998,  respectively.  In
addition  to the  effective  income  tax  rate,  state  franchise  taxes of $1.4
million,  $1.1 million and $1.1 million are included in the  provision  reported
for  2000,  1999  and  1998,   respectively.   The  following  table  summarizes
significant  differences  between the  provision for income taxes and the amount
computed by applying the  statutory  federal  income tax rates to income  before
taxes:
<TABLE>
<CAPTION>

                                         December 30,  December 25,  December 26,
                                              2000       1999           1998
                                              ----       ----           ----
                                                   ( in thousands)
<S>                                       <C>        <C>           <C>

             Tax/(benefit) computed at
                U.S. statutory tax rate     $2,251      $ 4,666      $ (96)
             State and local taxes           1,020        1,159        662
             Alternative minimum tax
                Differential                     9          161       --
             Other                             298         (243)       123

                                            ------      -------      -----
             Total tax provision            $3,578      $ 5,743      $ 689
                                            ======      =======      =====
          </TABLE>

<PAGE>F-27

Tax provision and credits are recorded at statutory  rates for the taxable items
included in the consolidated  statements of operations  regardless of the period
for which  such items are  reported  for tax  purposes.  Deferred  income  taxes
reflect the net effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income  tax  purposes.  The  valuation  allowance  primarily  relates  to losses
incurred  on certain  investments  which the Company  believes  may not be fully
deductible for tax purposes.  Management has determined,  based on the Company's
positive  earnings in 1999 and 2000, and its expectations  for the future,  that
taxable  income of the Company will more likely than not be  sufficient to fully
recognize its remaining net deferred tax assets.  The components of the deferred
tax assets and  liabilities  at December  30, 2000 and  December 25, 1999 are as
follows:
<TABLE>
<CAPTION>

                                          December 30,  December 25,
                                             2000          1999
                                             ----          ----
                                              ( in thousands )

   <S>                                        <C>            <C>

     Deferred income tax assets:
     Trade accounts receivable                 $  1,139      $  1,591
     Inventories                                  3,066         2,016
     Accrued personnel cost                       1,316         1,671
     Other accrued liabilities                    3,673         4,515
     Net operating loss                          13,247        13,917
     Other                                        3,622         3,483
                                               --------      --------
     Gross deferred income tax assets            26,063        27,193
     Less: valuation allowance                   (1,132)       (1,132)
                                               --------      --------
     Total deferred income tax assets            24,931        26,061
                                               --------      --------

     Deferred income tax liabilities:
     Property, plant and equipment                1,537         1,244
     Goodwill and trademark                       3,083         2,938
     Other accrued liabilities                      629          --
                                               --------      --------
     Total deferred income tax liabilities        5,249         4,182
                                               --------      --------

     Net deferred tax assets                   $ 19,682      $ 21,879
                                               ========      ========


</TABLE>




<PAGE>F-28

13.  Financial Instruments
--------------------------

The fair value of the Company's  cash and cash  equivalents,  accounts and notes
receivable (including related party amounts) and accounts payable,  approximates
the carrying value due to the short maturity of these instruments.

Long-Term Debt
--------------

The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities.
<TABLE>
<CAPTION>

                                       Fair       Carrying
                                      Value         Value
                                      -----         -------
                                          (in thousands)
<S>                                  <C>          <C>

     2000 Financial Liabilities:
     Long-term Debt-
     Revolving Credit Facility:
         Revolving Note              $ 91,136     $ 91,136
         Term Note                     51,650       51,650
     Senior Subordinated Notes         38,374       63,956

     1999 Financial Liabilities:
     Long-term Debt-
     Revolving Line of Credit        $120,742     $120,742
     Senior Subordinated Notes         85,000      100,000

</TABLE>

Derivative Financial Instruments
--------------------------------

The  Company  uses  derivative  financial  instruments  in the normal  course of
business as a tool to manage its exposure to interest rates and commodity lumber
prices. The Company does not hold or issue derivative financial  instruments for
trading  purposes.  Gains and losses relating to hedging contracts are generally
deferred and recorded in income or as an adjustment to the carrying value of the
related asset or liability at the time the transaction is complete.  Payments or
receipts of interest under interest rate swap  arrangements are accounted for as
an  adjustment  to  interest  expense.  The fair value of  derivative  financial
instruments is determined based upon dealer quotes.

Lumber Futures Contracts
------------------------

The Company  enters into lumber  futures  contracts to hedge price  fluctuations
related to  anticipated  future  purchases  of  commodity  lumber.  While lumber
futures  contracts are entered into on a risk  management  basis,  the Company's
hedge  positions  could show a net gain or loss  depending on prevailing  market
conditions.  At December 30, 2000, the Company had 41 lumber  futures  contracts
outstanding with a total contract value of $839,000 and a net unrealized loss of
$106,000. These contracts all mature in 2001.
<PAGE>F-29

Interest Rate Swap
------------------

At December 26, 1998,  the Company had in place an interest rate swap  agreement
which  effectively  fixed  the  interest  rate at  8.11% on $40  million  of the
Company's borrowings under its then floating rate revolving line of credit. This
interest rate swap was operative  while the 30-day LIBOR borrowing rate remained
below 6.7%. The agreement also included a floor LIBOR rate at 4.6%.

On February 17, 1999,  the Company  replaced this  interest rate swap  agreement
with a new agreement  that  effectively  fixes the Company's  borrowing  cost at
5.75%  plus the  Company's  borrowing  spread in effect  from  time-to-time  (as
discussed in Note 8 above) on $40 million of the Company's LIBOR rate borrowings
under the amended and restated  revolving line of credit. The interest rate swap
agreement expires in February 2002.


14.  Related Party Transactions
-------------------------------

The Company is approximately 35% owned by Riverside Group, Inc. and 13% owned by
Imagine Investments, Inc.

In March 2000, the Company entered into an agreement with  Buildscape,  Inc., an
entity controlled by Riverside Group, Inc. and Imagine  Investments,  Inc., each
of which may be deemed an affiliate of the Company.  Pursuant to this agreement,
the Company and Buildscape, Inc. are jointly conducting an Internet distribution
program.  Buildscape(R) is an Internet service designed for builders that allows
the  Company's  customers to buy products  and  materials  from Wickes and other
suppliers.  It provides  real-time online access to the  professional  builders'
specific Wickes price list,  bill of materials and trade account.  Wickes' sales
through the Buildscape site were not material in 2000.

On December 10, 1999 the Company entered into a joint  marketing  agreement with
ImproveNet, Inc. and Buildscape, Inc. supporting an ImproveNet consumer-oriented
building and remodeling  Internet site. At December 30, 2000 Buildscape owed the
Company $100,000 related to this transaction.

In  February  1998,  as  part  of  the  determination  made  by the  Company  to
discontinue or sell non-core  programs,  the Company sold certain  operations to
Riverside  Group,  Inc. In exchange  for these  assets,  the Company  received a
three-year  $870,000  unsecured  promissory note and 10% of future net income of
these  operations  (subject to a maximum of $429,000  plus  interest).  In March
2000,  the Company  extended  the terms of its note  receivable  from  Riverside
Group, Inc. Under the revised terms, all previously accrued interest was paid to
the Company by  Riverside  Group,  Inc.  on March 31,  2000.  Interest  accruing
thereafter is paid on a quarterly basis. In addition, repayment of the remaining
principal balance was deferred for one year, with quarterly  principal  payments

<PAGE>F-30

commencing  on April 1, 2001.  As of December 30, 2000 the  remaining  principle
balance was approximately $469,000,  with accrued interest of $14,000.  Interest
earned  for the  years  ended  2000,  1999 and 1998 was  approximately  $54,000,
$71,000 and $84,000, respectively.

In 2000, the Company paid approximately $333,000 in reimbursements  primarily to
affiliates of the Company's chairman,  for costs related to services provided to
the Company during the year by certain  employees of the affiliated  company and
use of a  corporate  aircraft.  Total  payments  in 1999 and  1998  for  similar
services were approximately $660,000 and $730,000, respectively.

A former director and executive officer of the Company was, during most of 1998,
a  shareholder  of the law firm that was  general  counsel to the  Company.  The
Company  paid this firm  $741,000  for legal  services  provided  to the Company
during 1998.


15. Other Operating Income
--------------------------

Other  operating  income  on the  Company's  Statement  of  Operations  includes
primarily the sale or disposal of property, plant and equipment, service charges
assessed customers on past due accounts  receivables and casualty  gains/losses.
The sale of  property,  plant  and  equipment  includes  the sale of 3, 5, and 9
pieces of real estate in 2000, 1999 and 1998,  respectively.  In 1998,  casualty
gains of $1.0  million  were  recorded  as a result of the  differences  between
insured replacement cost and net book value resulting from fire and storm damage
at certain of the Company's  sales and  distribution  facilities.  The following
table summarizes the major components of other operating income by year.
<TABLE>
<CAPTION>


                                                     Other Operating Income
                                                           Gain/(Loss)
                                                 2000         1999        1998
                                                 ----         ----        ----
                                                        (in thousands)
<S>                                          <C>          <C>          <C>

     Sale of property, plant and equipment     $   345      $ 1,821      $2,111
     Accounts receivable service charges         2,409        2,460       2,331
     Casualties                                   (559)        (556)        670
     Other                                       1,096        1,208         905
                                               -------      -------      ------
     Total                                     $ 3,292      $ 4,932      $6,017
                                               =======      =======      ======

</TABLE>

16.  Barter Transaction
-----------------------

At any given time  approximately  1% to 2% of the Company's total inventory will
be classified as delete or obsolete merchandise.  Delete or obsolete merchandise
consists  of  inventory  that,  while  in  good  sellable  condition,   will  be
discontinued  for one of several  business  reasons.  This inventory,  which may
consist of items from any of the Company's product lines,  historically has been
marked down in value by approximately 20% to 30% of its original cost.
<PAGE>F-31

In  September  of 1998,  the  Company  entered  into a  transaction  in which it
exchanged  delete/obsolete  merchandise,  with an  impaired  book  value of $1.2
million,  for barter  credits at a stated value of $1.6 million.  As part of the
barter  transaction  the Company had agreed to sell the  merchandise for the new
owner,  on a clearance  basis,  and remit the proceeds,  up to $350,000,  to the
owner.  The Company entered into the  transaction to free valuable  showroom and
storage  space  for new  merchandise.  The  value of this  merchandise  had been
previously  reduced from its original cost of approximately $1.6 million to $1.2
million,  based on the Company's  most recent sales  information.  Initially the
exchange was considered to be a non-monetary  exchange, as outlined under APB 29
and EITF 93-11, and no further  impairment was recorded at that time. The barter
credits were recorded as a prepaid expense with a value of $1.2 million.

Subsequent  to the second  quarter of 1999,  the Company  restated its September
1998  financial  statements to account for the barter  transaction as a monetary
transaction,  upon  receiving  written  confirmation  from a second  "Big  Five"
accounting  firm and  after  careful  review  and  concurrence  of its  Board of
Directors Audit Committee.  A non-cash charge of $844,000 was recorded to reduce
the value of the inventory exchanged, and the resulting book value of the barter
credits,  from  approximately  $1.2  million  to  $350,000.  As a result of this
change,  the Company will also record  increased future earnings for each dollar
of barter credits used in excess of $350,000.

The following table  reconciles the amounts  previously  reported to the amounts
currently being reported in the condensed consolidated  statements of operations
for the year ended  December 26, 1998  (amounts in  thousands,  except per share
data).
<TABLE>
<CAPTION>

                                                                Restatement
                                             Previously         for Barter
                                              Reported          Transaction       As Restated
<S>                                         <C>                <C>                <C>

Income (loss) before income taxes             $    568           $  (844)           $   (276)
Provision for income taxes                       1,019              (330)                689
                                              --------           --------           ---------
Net loss                                      $   (451)          $  (514)           $   (965)
                                              =========          =======            =========
Basic and diluted loss
  per common share                            $  (0.06)          $ (0.06)           $  (0.12)

</TABLE>


17.  Selected Quarterly Financial Data (unaudited)
--------------------------------------------------

The following table contains selected unaudited quarterly financial data for the
years ended December 30, 2000 and December 25, 1999.  Quarterly  earnings/(loss)
per common share may not total to year end  earnings/(loss) per share due to the
issuance of additional shares of Common Stock during the course of the year.

<PAGE>F-32

<TABLE>
<CAPTION>
                                             QUARTERLY FINANCIAL DATA
                                                   (Unaudited)
                                                 Fiscal Quarters
                               (in millions, except per share data and percentages)


                                                            Income (loss)                        Basic / Diluted
                              Net Sales as a                   before                          Net income (loss)
                               % of Annual        Gross     Extraordinary     Net Income        per share before
                Net Sales       Net Sales         Profit       Item               (Loss)       Extraordinary Item
                ---------       ---------         ------       ----               ------       ------------------
<S>             <C>             <C>              <C>         <C>                 <C>           <C>
2000
----
Quarter 1        $216.5           21.1%           $46.0       $(3.2)              $(3.2)       $(.39)/(.39)
Quarter 2         280.4           27.3             60.1         1.5                 1.5           .19/.18
Quarter 3         282.7           27.5             62.6         2.1                 2.1           .26/.25
Quarter 4         248.0           24.1             54.4        (4.4)                2.4         (.53)/(.53)

1999
----
Quarter 1        $191.7           17.6%           $40.6       $(3.3)              $(3.3)       $(.40)/(.40)
Quarter 2         289.4           26.6             59.0         3.6                 3.6          .44 / .43
Quarter 3         326.2           30.0             65.8         5.0                 5.0          .61 / .61
Quarter 4         280.1           25.8             59.2         2.2                 2.2          .27 / .26

</TABLE>

     Each fiscal quarter in the table above  represents a thirteen-week  period,
with the exception of Quarter 4, which was a fourteen-week period.

<PAGE>S-1








                        REPORT OF INDEPENDENT ACCOUNTANTS
                        ---------------------------------





To the Stockholders and
Board of Directors of Wickes Inc.

Our report on the 1998  consolidated  financial  statements  of Wickes  Inc.  is
included as page F-2 of this Form 10-K.  In  connection  with our audits of such
financial  statements,  we have also  audited  the related  financial  statement
schedule  listed in Item 14 of this Form 10-K for the year  ended  December  26,
1998. In our opinion, the information  pertaining to the year ended December 26,
1998 in this  financial  statement  schedule  presents  fairly,  in all material
respects,  the information  set forth therein when read in conjunction  with the
related consolidated financial statements.



                                                  /s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 23, 1999








<PAGE>S-2


<TABLE>
<CAPTION>


                          WICKES INC. AND SUBSIDIARIES

                 Schedule II - Valuation and Qualifying Accounts

          For the Years Ended December 30, 2000, December 25, 1999, and
                                December 26, 1998
                             (dollars in thousands)



          Col. A                    Col. B                  Col. C                       Col. D              Col. E
------------------------------- --------------  ------------------------------          --------             ------
                                                            Additions
                                                            ---------
                                                     (1)             (2)                                     Balance
                                  Balance at      Charged to      Charged to                                    at
                                  Beginning        Costs and        Other                                     End of
       Description                of Period        Expenses       Accounts(a)         Deductions(b)           Period
       -----------                ---------        --------       -----------         -------------           ------

<S>                               <C>               <C>              <C>                 <C>                <C>

2000:
Allowance for doubtful
    accounts                        $4,105            $  983            ($7)              $2,290              $2,791

1999:
Allowance for doubtful
    accounts                        $4,393            $1,724           ($40)              $1,972              $4,105

1998:
Allowance for doubtful
    accounts                        $3,765            $2,915          ($103)              $2,184              $4,393


</TABLE>

(a)  Net recoveries  from  previously  closed stores  credited to  restructuring
     reserve in 1998, and other operating income in 1999 and 2000.

(b)  Reserved accounts written-off.


<PAGE>





                                  Exhibit Index
                                  -------------


Exhibit
Number                Description
------                -----------

3.1(a)*        Amended  and  Restated   Certificate  of   Incorporation  of  the
               Registrant  (incorporated  by  reference  to  Exhibit  3.1 to the
               Registrant's Registration Statement on Form S-1 (the "Form S-1"),
               Commission File No. 2-67334).

   (b)*        First  Amendment to Second  Amended and Restated  Certificate  of
               Incorporation  (incorporated  by reference to Exhibit 3.01 to the
               Registrant's  Quarterly  Report on Form 10-Q for the period ended
               June 1994).

   (c)*        Second  Amendment to Second  Amended and Restated  Certificate of
               Incorporation  (incorporated  by  reference to Exhibit 3.1 to the
               Registrant's  Quarterly  Report on Form 10-Q for the period ended
               June 1997).


3.2*           By-laws of the Registrant,  as amended and restated (incorporated
               by reference to Exhibit 3.2 to the Registrant's  Annual Report on
               Form 10-K (the "1993 Form 10-K") for the year ended  December 25,
               1993).


4.1(a)*        Credit  Agreement dated February 17, 1999,  among the Registrant,
               as  Borrower,   each  of  the  financial  institutions  signatory
               thereto,  BankBoston Business Credit as Administrative  Agent and
               Issuing Bank,  BancBoston  Robertson Stephens Inc. as Syndication
               Agent, and Nationsbank, N.A. as Documentation Agent (incorporated
               by reference to Exhibit 4.1 of the Registrant's  Annual Report on
               Form 10-K for the year ended December 26, 1998).

4.1(b)*        First Amendment dated July 8, 1999  (incorporated by reference to
               Exhibit  4.1 to the  Registrant's  Report  on Form  10-Q  for the
               period ended June 26, 1999).

4.1(c)*        Second  Amendment  dated  September  14,  1999  (incorporated  by
               reference to Exhibit 4.1 to the Registrant's  Quarterly Report on
               Form 10-Q for the period ended September 25, 1999).

4.1(d)**       Amended and Restated  Credit  Agreement  dated  December 13, 2000
               among the  Registrant,  Fleet Retail  Financial  Inc, and Bank of
               America, N.A. as agents and the lendors set forth therein.
<PAGE>

4.2*           Indenture dated as of October 15, 1993 between the Registrant and
               Marine Midland Bank, N.A.  (incorporated  by reference to Exhibit
               4.2 to the 1993 Form 10-K).

10.1*          Agreement,  dated July 21, 1993,  between Collins & Aikman Group,
               Inc.  and the  Registrant  (incorporated  by reference to Exhibit
               10.12 to the Form S-1).

10.2(a)*       Amended  and  Restated  1993  Long-Term  Incentive  Plan  of  the
               Registrant  (incorporated  by  reference  to Exhibit  10.8 to the
               Registrant's  Annual  Report  on Form  10-K  for the  year  ended
               December 1994 (the "1994 Form 10-K")).

    (b)*       Amendment No. 1 (incorporated  by reference to Exhibit 10.8(b) to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 1996).

    (c)*       Form of Option  Agreement  (incorporated  by reference to Exhibit
               10.22 to the Form S-1).

    (d)*       Form of Option  Agreement  (incorporated  by reference to Exhibit
               10.8 to the 1994 Form 10-K).

    (e)*       Form  of  Long-Term  Stock  Option  Agreement   (incorporated  by
               reference to Exhibit 10.8 to the 1994 Form 10-K).

    (f)*       Form of Long-Term  Performance  Bonus Agreement  (incorporated by
               reference to Exhibit 10.8 to the 1994 Form 10-K).

    (g)*       Amendment No. 2 (incorporated by reference to Exhibit 10.4 to the
               1997 Form 10-K).

    (h)*       Form of Option  Agreement  (incorporated  by reference to Exhibit
               10.4 to the 1997 Form 10-K).


10.3(a)*       Amended and Restated 1993 Director  Incentive  Plan of Registrant
               (incorporated  by reference to Exhibit 10.03 to the  Registrant's
               Quarterly  Report on Form  10-Q for the  period  ended  March 26,
               1994).

    (b)*       Form of Option  Agreement  (incorporated  by reference to Exhibit
               10.24 to the Form S-1).
<PAGE>



10.4*          Special Severance and Stay Incentive Bonus Plan  (incorporated by
               reference to Exhibit 10.7 to the  Registrant's  Annual  Report on
               Form  10-K for the year  ended  December  1997  (the  "1997  Form
               10-K")).




10.5(a)*       Agreement  dated  November  4, 1997  between the  Registrant  and
               Riverside Group, Inc.  (incorporated by reference to Exhibit 10.1
               to the Registrant's  Quarterly Report on Form 10-Q for the period
               ended September 1997).

    (b)*       Amendment and Closing  Agreement to Agreement  dated  November 4,
               1997  between  the   Registrant   and   Riverside   Group,   Inc.
               (incorporated  by  reference  to  Exhibit  10.9 to the 1997  Form
               10-K).

10.6*          Agreement  between the Registrant and Buildscape, Inc.

21.1**         List of Subsidiaries of the Registrant.


23.1**         Consent of PricewaterhouseCoopers LLP.

23.2**         Consent of Deloitte & Touche LLP.


*    Incorporated by reference.

**   Filed herewith.

There have been omitted certain instruments with respect to long-term debt not
in excess of 10% of the consolidated total assets of the Company. The Company
agrees to furnish copies of any such instruments to the Commission upon request.





<PAGE>



                                                                    Exhibit 21.1

                       LIST OF SUBSIDIARIES OF REGISTRANT

Name                                                      State of Incorporation
----                                                      ----------------------

Lumber Trademark Company                                  Illinois

GLC Division, Inc.                                        Delaware



<PAGE>




                                                                    Exhibit 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS
                       ----------------------------------



We consent to the  incorporation by reference in the registration  statements of
Wickes Inc.  on Form S-8 (File Nos.  33-85380,  33-88010  and  33-90240)  of our
report  dated  February  23,  1999  (except  for Note 16 in the  2000  financial
statements and Note 16 in the 1998 financial  statements as to which the date is
August 31, 1999),  on our audit of the  consolidated  financial  statements  and
financial  statement schedule of Wickes Inc. and Subsidiaries as of December 26,
1998 and for the year then ended,  which  report is included in this 2000 Annual
Report on Form 10-K.


                                                   /s/PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 28, 2001

<PAGE>





                                                                    Exhibit 23.2



INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration  Statement Nos.
33-85380,  33-88010, 33-90240 on Form S-8 of Wickes Inc. and Subsidiaries of our
report dated February 28, 2001,  appearing in this Annual Report on Form 10-K of
Wickes Inc. and subsidiaries for the year ended December 30, 2000.

/s/ DELOITTE & TOUCHE LLP
Chicago, IL
March 28, 2001