<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

           [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1997
                                       or
             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from ___ to ___.
                        Commission file number 000-21621

                                  KEVCO, INC.
            (Exact name of registrant as specified in its charter)

               Texas                                             75-2666013
   (State or other jurisdiction of                            (I.R.S. Employer
    incorporation or organization)                           Identification No.)

             Kevco, Inc.
  1300 S. University Drive, Suite 200                              76107
          Fort Worth, Texas                                      (Zip Code)
(Address of principal executive offices)

      Registrant's telephone number, including area code:  (817) 332-2758

          Securities registered pursuant to Section 12(b) of the Act:
 
                                     NONE

          Securities registered pursuant to Section 12(g) of the Act:

                                                         Name of each exchange
       Title of Each Class                                on which registered
       -------------------                                -------------------
           Common Stock,                                The Nasdaq Stock Market
    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 informational statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

     The aggregate market value of voting stock of the Registrant held by non-
affiliates of the registrant was $52,793,228 on March 12, 1998, based on the
closing price of the registrant's common stock on such date of $18.50 per share,
as reported on The Nasdaq Stock Market.

     As of March 12, 1998, 6,831,159 shares of the registrant's Common Stock
were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's annual report to shareholders for the year ended
December 31, 1997 are incorporated by reference into Part II of this report, and
portions of the proxy statement for the annual meeting of shareholders of the
registrant to be held during 1998 are incorporated by reference into Part III of
this report.
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                                     PART I

ITEM 1.        BUSINESS.

GENERAL

     Kevco, Inc. ("Kevco" or the "Company," and includes, unless the context
otherwise requires, its direct and indirect subsidiaries) is a leading wholesale
distributor of building products to the manufactured housing and recreational
vehicle (RV) industries.  Except as otherwise indicated, information contained
herein relating to Kevco is as of December 31, 1997, without giving pro forma
effect to the acquisitions described below under the heading "Recent
Acquisitions."  Through its 47 distribution centers, the Company distributes
more than 75,000 different inventory items to approximately 530 manufactured
housing and RV and other manufacturing facilities throughout the United States.
Kevco is one of only a few companies capable of providing national distribution
of building products to the manufactured housing and RV industries.  In
addition, the Company also manufactures wood products, laminated wallboard,
thermoformed bathtubs and shower enclosures for the manufactured housing
industry.  From 1993 to 1997, the Company's net sales increased from $80.3
million to $394.2 million, a compound annual growth rate of approximately 48.9%.
Since its founding in 1964, the Company's growth has been fueled by internal
growth and acquisitions.  On November 6, 1996, the Company consummated its
initial public offering.

     The Company believes that it provides a cost-effective form of distribution
that offers value to both the Company's suppliers and producers of manufactured
homes and RVs.  Kevco believes that it provides significant benefits to its
suppliers by placing large orders at regular intervals, thereby enabling its
suppliers to achieve efficient and cost-effective production planning and
economies of scale.  In addition, Kevco markets and sells its suppliers'
products directly to the manufactured housing and RV industries.  As a result,
the Company believes it reduces its suppliers' inventory carrying, marketing and
distribution costs.  The Company also believes that it provides significant
benefits to its customers as a result of its ability to respond on a same day
shipment basis to a majority of its customers' orders, thus reducing the amount
of inventory they must maintain.  Furthermore, Kevco assists its customers in
inventory management, product support, training and implementing cost saving
measures, all of which are services that the Company believes most building
products manufacturers cannot provide in a cost-effective manner.  The Company
believes that the specialized product knowledge and high level of service
provided by Kevco personnel result in strong relationships between Kevco and its
suppliers and customers.

     The Company distributes a full line of plumbing fixtures and supplies as
well as a variety of other building products, including insulation, roof
shingles, patio doors, aluminum, vinyl and wood windows, wood and vinyl siding,
fireplaces, electrical components and hardware, fasteners, power tools and mill
supplies. The Company also manufactures wood products including roof trusses and
lumber cut to customer specifications, laminated wallboard products, plastic
injection molded products and thermoformed bathtubs, shower enclosures and tub
wall surrounds.  In 1997, approximately 32% of the Company's net sales were
derived from plumbing products, 34% from wood products and 34% from other
building products.


RECENT ACQUISITIONS

     On February 27, 1997, the Company consummated the acquisition of
substantially all of the assets, and assumed certain liabilities, of
Consolidated Forest Products, L.L.C. ("Consolidated Forest"), an Alabama limited
liability company (a manufacturer of wood products for the manufactured housing
industry) in exchange for approximately $13.0 million in cash and two promissory
notes in the aggregate original principal amount of approximately $0.7 million.
On February 28, 1997, the Company consummated the acquisition of all of the
outstanding stock of Bowen Supply, Inc. ("Bowen"), a Georgia corporation (a
wholesale distributor of building products to the manufactured housing and RV
industries) in exchange for approximately $18.0 million in cash and promissory
notes in the aggregate original principal amount of $1.5 million.

     On December 1, 1997, the Company consummated the acquisition of
approximately 95.5% of the then issued and outstanding shares of common stock of
Shelter Components Corporation ("Shelter") pursuant to a tender offer; the
Company acquired the remaining untendered shares through a subsequent merger for
a like price.  The total purchase 

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price of the Shelter acquisition was approximately $144.8 million. On June 27,
1997, Shelter consummated the acquisition of the net assets of Plastic
Solutions, Inc. ("PSI"), a manufacturer of plastic injection molded plastic
parts, for approximately $0.9 million in cash and $3.5 million in notes payable
to the sellers.

     On December 12, 1997, the Company consummated the acquisition of the
inventory and certain distribution rights of certain building products
distributed by the manufactured housing and recreational vehicle division of
Shepherd Products Company for a cash purchase price payable at closing of $6.0
million, with an additional $2.0 million payable over a five year period
following the acquisition and an additional $2.0 million payable over a period
of up to seven years upon the satisfaction of certain conditions.

INDUSTRY

     For the year ended December 31, 1997, approximately 88% of the Company's
net sales were to producers of manufactured homes.  A manufactured home is a
complete single-family residence that is built in a factory and transported to a
site.  Manufactured homes offer most of the amenities of, and are generally
built with the same materials as, site-built homes.

     Manufactured housing has historically served as one of the most affordable
alternatives for the home buyer.  According to the U.S. Department of Commerce,
in 1996 the average cost per square foot was $25.18 for a single-section
manufactured home and $29.56 for a multi-section manufactured home, as compared
to an average cost of $58.66 per square foot for a site-built home, each
excluding land costs.  In 1996, reported sales of new manufactured homes totaled
approximately $14.0 billion (at retail).  Approximately 353,000 manufactured
homes were reported as shipped in 1997 (which would represent approximately
30.6% of all new single family homes sold in 1997).  Reported shipments of new
manufactured homes experienced compound annual growth of approximately 8.6% for
the four years ended December 31, 1997.

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

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

     For the year ended December 31, 1997, approximately 7% of the Company's net
sales were to producers of RVs.  RVs are motorized and non-motorized vehicles
that provide comfortable, self-contained living facilities for short periods of
time, but are not generally designed for permanent living.  RV shipments to
retailers reportedly totaled approximately $12.4 billion (at retail) in 1996.
Although reported RV shipments declined approximately 6.0% in 1997, the RV
industry has experienced compound annual growth in reported shipments of
approximately 1.1% since 1993.  Historically, demand for RVs has been influenced
by a number of factors, including the availability and terms of financing to
dealers and retail purchasers, the abundance of motor vehicle fuels and fuel
prices, as well as general economic conditions.

BUSINESS STRATEGY

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

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     Provide Superior Customer Service.  The Company believes its success is
primarily attributable to its emphasis on customer service and that providing a
high level of customer service leads to long-term relationships with customers.
The Company's operating philosophy is based on a commitment to Total Quality
Management, which emphasizes at every level an awareness of, and accountability
for, customer needs and effective communication both internally and externally.
Consistent with this commitment, the Company strives to achieve maximum
responsiveness to customer orders and to assist its customers in controlling
costs, improving their materials resource planning and facilitating their just-
in-time inventory procurement needs.  The Company's sales representatives, who
have an average of approximately ten years of experience with the Company, play
an important role in training customers in the proper installation of products
and assisting in their inventory management.

     Leverage National Distribution Network.  Kevco will continue to use its
national distribution network as a platform for growth and profitability.  The
Company believes that its national distribution network has allowed it to
develop close relationships with leading product manufacturers and to become the
exclusive supplier of certain product lines to the manufactured housing and RV
industries.  In addition, the Company believes that its national presence
provides it with a significant competitive advantage due to its ability to
service effectively the building products needs of its customers' manufacturing
facilities, several of which are located in remote, rural areas.  This
capability has led to several national customer accounts.  As one of the leading
national distributors of building products in the United States to the
manufactured housing and RV industries, the Company has substantial purchasing
power and is able to realize economies of scale.

     Increase Customer Penetration and Product Offerings.  Kevco supplies over
90% of all manufactured housing plants in the United States with one or more
product lines.  This established customer base provides the Company with a
significant opportunity to supply a greater portion of its customers' building
products needs as the customers seek to reduce the number of their suppliers.
The Company also intends to add new product lines through internal growth and
acquisitions.  With its existing national distribution infrastructure, the
Company believes that additional product lines can be offered to customers
without significant additional cost.

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

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

SUPPLIER/CUSTOMER RELATIONSHIPS

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

     Inventory Management.  Kevco's customers generally attempt to minimize
inventories and to maximize the use of their facilities for the assembly of
manufactured homes and RVs.  For this reason, Kevco actively manages customers'
inventories of products supplied by Kevco.  Kevco sales representatives
generally visit customers' plants weekly to count inventories, review production
schedules, prepare purchase orders and schedule deliveries in order to achieve
the Company's goal of being a just-in-time supplier.  In addition, because of
their detailed awareness of existing building codes for manufactured homes and
RVs, Kevco's sales representatives are able to assist customers in planning for,
and maintaining product inventories in accordance with, building code changes.

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

     Cost Saving Measures.  The Company's sales force also works with the
Company's customers and suppliers in suggesting and implementing cost saving
measures.  Kevco actively works to find ways for producers of manufactured homes
or RVs to reduce the number of stock-keeping units ("SKUs") they use in
production in order to further reduce their inventories.  In its wood products
operations, Kevco builds steel forms to its customers' specifications to ensure
the dimensional tolerances of the roof trusses it manufactures, as strict
adherence to design specifications translates into reduced manufacturing costs
for Kevco's customers. Additionally, developing and following QS-9000 based
policies and procedures has provided substantial savings on the products
produced by PSI, and the engineering staff of PSI is prepared to assist
customers with part consolidation and redesign.

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

TOTAL QUALITY MANAGEMENT

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

PRODUCTS

     The Company believes it distributes one of the most comprehensive product
lines to the manufactured housing and RV industries.  Prior to the acquisition
of Shelter, Kevco distributed approximately 10,000 SKUs and Shelter distributed
approximately 62,000 SKUs.  Some of Kevco's and Shelter's SKUs overlap, and the
Company intends to rationalize and reduce total SKUs as Shelter is integrated
into the Company's operations.  The following is a brief description of the
products the Company distributes:

     Plumbing Products.  Kevco distributes a wide variety of plumbing fixtures
and supplies including tubs, toilets, faucets, ABS pipe, connectors, fittings,
drain waste vent systems and potable water systems.  Kevco supplies
substantially everything necessary to carry water into and out of a manufactured
home or RV.

     Building Products. Kevco distributes a wide variety of building products,
including vinyl, aluminum and wood windows, wood moulding, exterior wood and
vinyl siding, visqueen, gypsum board, parquet wood flooring, insulation, roof
shingles, patio doors, fireplaces, kitchen cabinetry and water heaters (under an
exclusive arrangement with State Industries).

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     Wood Products. Kevco, through Sunbelt, manufactures roof trusses and lumber
cut to customer specifications for use in manufactured homes.  Roof trusses are
rectangular or triangular structures that form the principal roof support for a
manufactured home.  Kevco also distributes plywood and mill direct lumber.

     Hardware, Fasteners, Power Tools and Mill Supplies.  Kevco distributes
screws, bolts and nuts of various sizes and dimensions, lock sets, cabinet door
pulls, hinges, door slides and drapery hardware, stationary power tools, table
saws, hoists and related equipment used in the manufactured home and RV
manufacturing cycle, including complete plant set-ups, plastic film, tape, glue,
caulking, chemicals and abrasives.

     Electrical Components.  Kevco distributes electrical components, including
wire, wiring devices, power generators, load-centers, circuit breakers, panels,
air conditioners, mill supplies and machinery.

     Thermoformed Products.  Kevco, through its Better Bath subsidiary,
manufactures and distributes bathtubs, shower enclosures and tub wall surrounds
for the manufactured housing and RV industry using the thermoforming process.

     Laminated Wallboards.  Kevco, through its Design Components subsidiary,
manufactures and distributes laminated wallboard products primarily for the
manufactured housing and RV industries and, to a lesser extent, manufactures
laminated wall shelving systems for the retail home improvement industry.

     Plastic Injection Molded Products.  Kevco, through its PSI subsidiary,
manufactures custom thermoplastic injection molded products for the automotive,
sporting goods, medical and manufactured housing industries.  PSI also designs
parts and builds injection molds for its customers.

SALES AND MARKETING

     Kevco's marketing programs center on fostering strong customer
relationships and providing superior customer service.  Kevco believes its
competitive advantage lies in its breadth of product offerings and the knowledge
and expertise of its sales representatives, as well as its just-in-time delivery
capabilities, regular calling program, dedication to Total Quality Management
and competitive pricing.

     The Company's national accounts are each supported by a senior account
executive.  As a company, Kevco provides technical support through its marketing
group and service support through its local business units, each unit being
supported by a sales manager and an operational manager.  Each customer within a
business unit's geographical reach is contacted weekly by the Company's local
sales team.  Because of the specific nature of the wood products business, these
sales forces generally work independently.  Each sales representative works
within an assigned sales territory associated with one of Kevco's distribution
centers or manufacturing facilities and is actively supported by a manager at
such distribution center or facility.
 
     Sales representatives, consisting of salespersons and sales managers, are
all Company employees and are generally compensated on a salary and incentive-
based compensation arrangement.  The incentive portion of a salesperson's
compensation is based on a percentage of the profits of the sales region "profit
center" in which that salesperson operates.  The incentive portion of the sales
manager's compensation is determined by a variety of factors, which include the
profit center's sales and returns as well as a discretionary element.

     Kevco maintains active customer relationships with approximately 530
manufactured home production plants and RV production plants in 45 states.  The
Company's two largest customers, Champion Enterprises, Inc. and Fleetwood
Enterprises, Inc., accounted for approximately 14% each of Kevco's net sales in
1997.  Although the Company has ongoing supply relationships with these
customers, it does not have a formal supply contract with these customers or
most of its other customers.  The Company's business could be adversely affected
if these customers, or other major customers, substantially reduced or
discontinued purchases from the Company.  Further, the Company can give no
assurance that its sales to such customers will continue at historical levels.
The Company believes that it has good relationships with each of its
manufactured home and RV customers.

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DISTRIBUTION

     Kevco distributes products through 47 distribution centers strategically
located near its customers' manufacturing plants in order to provide prompt
delivery and responsive customer service.  In most cases, the Company's desired
service area is within a 250-mile radius of each distribution center.  The
Company generally uses a decentralized management structure that emphasizes
individual distribution center profit-and-loss responsibility.  A distribution
center is typically comprised of warehouse and receiving space, secure outdoor
holding space and office space.  Local sales efforts are coordinated and
supported at the distribution centers.  The remaining distribution center
activities relate to receiving, storing and delivering products.

     Substantially all of Kevco's distribution centers (other than those
recently acquired in connection with the acquisition of Shelter which will be
consolidated into Kevco's management information systems during 1998) are
equipped with real-time management information systems that allow the
distribution centers to control and monitor inventory levels, perform invoicing
and order entry, and establish delivery schedules and routes.  Corporate
management also uses the Company's information system to monitor sales,
inventory and profitability by distribution center.  By utilizing its
computerized inventory management system, the Company is able to accurately
predict inventory turns and minimize inventory levels.  Each morning, management
is supplied with detailed accounts receivable aging and inventory status reports
from each distribution center.  The Company is currently implementing an
improved management information system with a particular focus on inventory
management, which will allow managers to create customized, Windows-based
reports and to obtain faster access to detailed inventory data.  The Company
anticipates that the upgrade will be completed within the next two years.

     Inventories are kept on the perpetual method, with daily physical counts of
at least five items in each warehouse.  A complete physical inventory count is
performed twice a year.  For book and tax purposes, the Company records
purchased inventories under the FIFO method.

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

PURCHASING AND SUPPLIERS

     Kevco obtains its products from more than 2,000 different manufacturers.
As a distributor, Kevco plays a valued role in linking product manufacturers
with customers and provides the level of customer service and just-in-time
delivery its customers require.  Kevco's position in the marketplace and
financial condition have enabled it to take advantage of volume discounts,
product promotions and other buying opportunities from suppliers, which allow
the Company to market a wide variety of products to its customers at attractive
prices.

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

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

     Kevco continuously seeks to expand the variety of products it sells.  While
the loss of a major supplier could have a material adverse effect on the
Company's business, the Company believes alternative suppliers for similar

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products in each of its product lines are available.  In addition, raw material
used by the Company for its manufactured products are generally available from a
number of sources and loss of any one source would not have a material adverse
effect on the Company.  The Company believes its relations with its suppliers
are good.

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

MANUFACTURING

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

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

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

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

     The Company manufactures laminated wallboard products through Design
Components, a wholly-owned subsidiary, primarily for the manufactured housing
and RV industries and, to a lesser extent, manufactures laminated wall shelving
systems for the retail home improvement industry.  Decorative paper or vinyl
wall coverings are laminated onto 4' x 8' sheets of gypsum, MDF or lauan and are
shipped directly to the customers from one of Kevco's five manufacturing
facilities located in Indiana, Georgia, Tennessee and Texas (2 plants).

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

     The Company, through its injection molding subsidiary, designs, builds and
molds high tolerance functional component parts.  The process uses custom built
molds and thermoplastic molding machines to liquefy, inject and form parts for
its customers.  This process can accommodate small and large parts and hold
tolerances up to .002 of an inch.  PSI has 27 molding machines ranging in size
from 35 ton to 700 ton of clamp pressure.

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

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WARRANTY AND RETURNS

     Kevco's customers generally rely on the warranties issued by the
manufacturer of the products sold by the Company.  Kevco generally provides a
one year limited warranty on the products it sells, which warranty covers the
product and service calls.  The Company's warranty on the product itself is
generally not utilized because the product manufacturer provides a more
comprehensive warranty.  The Company's warranty expense in 1997 was negligible.
Kevco also has an informal, unwritten return policy under which, for one year
following sale, Kevco will generally accept the nonwarranty return of unused
products, after inspection by Kevco personnel, for a restocking charge.

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

COMPETITION

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

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

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

EMPLOYEES

     As of December 31, 1997, the Company employed 2,107 persons.  The Company
is a party to (i) a collective bargaining agreement, which covered, as of
December 31, 1997, 11 employees at one of the Company's facilities in Elkhart,
Indiana and (ii) a two-year collective bargaining agreement effective February
1, 1997, which covers certain employees at a plastics operation plant in Texas.
The Company has not experienced any work stoppages as a result of labor disputes
and the Company considers its employee relations to be good.

REGULATION

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

                                       9
<PAGE>
 
EXECUTIVE OFFICERS

Name                     Age Position
----                     --- --------
                        
Jerry E. Kimmel......... 60  Chairman of the Board, President and 
                             Chief Executive Officer

Clyde A. Reed, Jr....... 62  Executive Vice President, Chief Operating Officer 
                             and Director

Ellis L. McKinley, Jr... 46  Vice President, Chief Financial Officer, Treasurer 
                             and Director

Richard S. Tucker....... 53  Secretary and Director

C. Lee Denham........... 49  President, Sunbelt

Gregory G. Kimmel....... 29  Senior Vice President, Corporate Development and 
                             Director

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

     Clyde A. Reed, Jr. joined the Company in 1965 and has served as Executive
Vice President since 1986 and Chief Operating Officer since 1991.  From 1978 to
1986, Mr. Reed served as Vice President of the Company.  Mr. Reed has served as
a director of the Company since November 1996.

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

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

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

     Gregory G. Kimmel joined the Company in 1994 and has served as Vice
President since January 1996, as Vice President, Corporate Development since
August 1997, Senior Vice President, Corporate Development since January 1998 and
as a director of the Company since May 1997.  Mr. Kimmel received his B.S. in
Education from McMurry University in 1994.  Gregory G. Kimmel is the son of
Jerry E. Kimmel, the Chairman, President and Chief Executive Officer of the
Company.

                                       10
<PAGE>
 
                 FACTORS THAT COULD AFFECT FUTURE PERFORMANCE

     This report contains forward-looking statements that involve risks and
uncertainties. Actual results could differ from those discussed in the forward-
looking statements as a result of certain factors, including those set forth
below and elsewhere in this report.


SUBSTANTIAL LEVERAGE

     The Company has a substantial amount of indebtedness.  As of December 31,
1997, the Company had approximately $194.2 million of consolidated indebtedness
and a ratio of debt to total capitalization of 82.7%.  The degree to which the
Company is leveraged could have important consequences to the Company including
the following:  (i) funds available to the Company for its operations and
general corporate purposes or for capital expenditures will be reduced as a
result of the dedication of a substantial portion of the Company's consolidated
cash flow from operations to the payment of the principal and interest on its
indebtedness, (ii) the Company may be more highly leveraged than certain of its
competitors, which may place it at a competitive disadvantage, (iii) the
agreements governing the Company's and its subsidiaries' long-term indebtedness
and bank loans contain restrictive financial and operating covenants, and an
event of default (not cured or waived) under financial and operating covenants
contained in the Company's or its subsidiaries' debt instruments could occur and
have a material adverse effect on the Company, (iv) certain of the borrowings
under debt agreements of the Company's subsidiaries have floating rates of
interest, which causes the Company and its subsidiaries to be vulnerable to
increases in interest rates and (v) the Company's substantial degree of leverage
could make it more vulnerable to a downturn in general economic conditions.

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

COMPETITION

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


CYCLICAL NATURE AND SEASONALITY OF THE MANUFACTURED HOUSING AND RV MARKETS

     Approximately 87% of the Company's net sales for the year ended December
31, 1997, were to producers of manufactured homes and RVs. The manufactured
housing market historically has been cyclical and is influenced by many of the
same national and regional economic and demographic factors that affect the
broader housing market, including consumer confidence, interest rates,
availability and terms of financing, regional population and employment trends,
availability and cost of alternative housing and general economic conditions,
including

                                       11
<PAGE>
 
recessions.  The RV market has also historically been cyclical and is also
influenced by factors such as interest rates, availability and terms of
financing and general economic conditions, as well as gasoline prices.  The
Company may be adversely affected by these factors.  The Company's operating
results for the past few years do not reflect the seasonality that historically
has been seen in the manufactured housing and RV industries.


GROWTH THROUGH ACQUISITIONS

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

RISKS RELATED TO THE INTEGRATION OF KEVCO AND SHELTER

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

DEPENDENCE ON KEY PERSONNEL

     The success of the Company is dependent upon the continued services of the
Company's senior management, particularly its Chairman of the Board, President
and Chief Executive Officer, Jerry E. Kimmel.  The loss of the services of Mr.
Kimmel could have a material adverse effect on the Company and its business.  In
addition, the Company's success and continued growth will depend upon its
ability to attract and retain experienced, quality management personnel.


ITEM 2.        PROPERTIES

FACILITIES

     The following table sets forth certain information with respect to the
Company's distribution and manufacturing facilities, which are leased unless
otherwise indicated.  The Company also leases its executive offices of
approximately 12,000 square feet in Fort Worth, Texas, offices of 1,300 square
feet in Atlanta, Georgia and the location that formed the executive offices of
Shelter, of approximately 19,000 square feet, in Elkhart, Indiana.
Substantially all of the Company's assets, including its owned facilities and
its leasehold interests, are encumbered by liens granted under security
agreements in favor of the Company's lenders under the Company's senior credit
facilities.

                                       12
<PAGE>
 
                                     APPROXIMATE
LOCATION                             SQUARE FEET                 FUNCTION
--------                             -----------                 --------
Alabama
 Bear Creek*........................    50,000                  Distribution
 Bear Creek*........................    90,000                  Distribution
 Haleyville*........................    86,000                  Distribution
 Haleyville.........................   146,000                  Manufacturing
 Haleyville.........................    44,000                  Manufacturing
 Phil Campbell......................    30,000                  Manufacturing
 Spruce Pine*.......................    54,000                  Manufacturing
Arizona
 Phoenix............................    70,000                  Distribution
 Phoenix............................    59,000                  Distribution
 Glendale*..........................    45,000                  Manufacturing
California
 Riverside..........................    35,000                  Distribution
 San Bernardino.....................    42,000                  Distribution
 Woodland...........................    18,000                  Distribution
Colorado
 Fort Morgan........................    13,000                  Distribution
Florida
 Lakeland...........................    36,000                  Distribution
 Ocala*.............................    50,000                  Distribution
Georgia
 Americus...........................     6,000                  Distribution
 Ashburn*...........................   100,000                  Manufacturing
 Cordele*...........................    60,000                  Distribution
 Douglas............................    72,000                  Distribution
 Tifton*............................    22,000                  Manufacturing
 Valdosta...........................    73,000                  Distribution
Idaho
 Caldwell...........................    24,000                  Distribution
Indiana
 Elkhart............................    61,000                  Distribution
 Elkhart............................    90,000                  Distribution
 Elkhart............................    35,000                  Distribution
 Elkhart............................    57,000                  Distribution
 Elkhart*...........................    91,000                  Distribution
 Elkhart............................    15,000                  Distribution
 Elkhart*...........................    65,000                  Distribution
 Elkhart*...........................    70,000                  Distribution
 Elkhart*...........................    22,000                  Distribution
 Elkhart............................     8,000                  Distribution

                                       13
<PAGE>
 
 Elkhart*...........................    74,000                  Manufacturing
 Elkhart*...........................    20,000                  Manufacturing
 Plymouth...........................     5,000                  Distribution
 South Bend.........................    43,000                  Manufacturing
 Warsaw.............................    10,000                  Distribution
Kansas
 Newton.............................    38,000                  Distribution
 Newton*............................    85,000                  Distribution
Michigan
 Edwardsburg*.......................    70,000                  Manufacturing
 Edwardsburg........................     7,000                  Manufacturing
Minnesota
 Redwood Falls*.....................    24,000                  Distribution
 Worthington........................    15,000                  Distribution
New Mexico
 Albuquerque........................    16,000                  Distribution
 Albuquerque........................    15,000                  Distribution
North Carolina
 Albemarle..........................    62,000                  Distribution
 Concord*...........................    65,000                  Distribution
 Richfield*.........................    44,000                  Distribution
Oregon
 Milwaukee..........................    38,000                  Distribution
 Tigard.............................    23,000                  Distribution
Pennsylvania
 Lancaster..........................   119,000                  Distribution
 Leola..............................    11,000                  Distribution
 Leola..............................    26,000                  Distribution
Tennessee
 Baxter.............................    55,000                  Manufacturing
 Cookeville.........................    30,000                  Distribution
 Madisonville.......................    38,000                  Manufacturing
 Morristown.........................    42,000                  Distribution
Texas
 Fort Worth.........................   110,000                  Distribution
 Hillsboro*.........................    48,000                  Distribution
 Mansfield*.........................    25,000                  Manufacturing
 Temple.............................    44,000                  Manufacturing
 Waco...............................    90,000                  Distribution
 Waco...............................   135,000                  Manufacturing
 Waxahachie*........................   192,000                  Manufacturing

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

                                       14
<PAGE>
 
ITEM 3.        LEGAL PROCEEDINGS.

LITIGATION

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


ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     The Company did not submit any matter to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

                                       15
<PAGE>
 
                                    PART II

ITEM 5.        MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER
               MATTERS.


     The Company's Common Stock has been traded on The Nasdaq Stock Market under
the symbol "KVCO" since November 1, 1996.  The high and low sales prices for the
Common Stock for the balance of the fourth quarter of 1996 following the
Company's initial public offering and for the year ended December 31, 1997 is
set forth below.

                                                        High    Low
                                                        ----    ---
   Fiscal year ended December 31, 1996

     4/th/  Quarter (beginning November 1, 1996)        $14.75  $12.00

   Fiscal year ended December 31, 1997

     1/st/ Quarter                                      $18.75  $13.75

     2/nd/ Quarter                                      $15.50  $12.25

     3/rd/ Quarter                                      $14.38  $10.13

     4/th/ Quarter                                      $17.88  $11.88

     On March 12, 1998, the last reported sale price of the Common Stock on The
Nasdaq Stock Market was $18.50 and as of such date there were approximately 41
shareholders of record of the Common Stock and approximately 725 beneficial
owners.  The Company's transfer agent is ChaseMellon Shareholder Services,
L.L.C.

     Prior to the consummation of the Company's initial public offering, the
Company's business was operated through an S corporation under Subchapter S of
the Internal Revenue Code and the Company made distributions to its shareholders
in amounts equal to at least the shareholders' tax liabilities attributable to
the Company's earnings.  The Company's indenture dated as of December 1, 1997
related to the issuance of $105 million of 10 3/8% senior subordinated notes due
2007 ("Indenture") and the Company's credit agreement generally prohibit the
payment of dividends by the Company on its common stock.  Additionally, the
Indenture restricts the payment of dividends by restricted subsidiaries to the
Company.  The Company does not anticipate paying cash dividends on its common
stock in the foreseeable future and intends to retain its earnings to support
operations and finance expansion.


ITEM 6.        SELECTED FINANCIAL DATA.


     The selected financial information required by this item is included in the
Company's 1997 Annual Report to Shareholders (the "1997 Annual Report") under
the heading "Selected Consolidated Financial Data."  Such information is
incorporated herein by reference.


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


     The information required by this item is included in the 1997 Annual Report
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations."  Such information is incorporated herein by
reference.

                                       16
<PAGE>
 
ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


     The financial statements and supplementary data required by this item are
included in the Company's 1997 Annual Report and are incorporated herein by
reference, as indicated in the following Index to Financial Statements.

INDEX TO FINANCIAL STATEMENTS AND                                         
---------------------------------                             1997        
FINANCIAL STATEMENT SCHEDULES                          ANNUAL REPORT PAGE 
-----------------------------                          ------------------ 

Report of Independent Accountants
        (Coopers & Lybrand L.L.P.)....................        41
Consolidated Balance Sheets at                              
        December 31, 1997 and 1996....................        27
Consolidated Statements of Income for the Years             
        Ended December 31, 1997, 1996 and 1995........        28
Consolidated Statements of Stockholders' Equity for         
        the Years Ended December 31, 1997, 1996             
        and 1995......................................        29
Consolidated Statements of Cash Flows for the               
        Years Ended December 31, 1997, 1996 and             
        1995..........................................        30
Notes to Consolidated Financial Statements                    31

     All schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements and notes thereto.


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

     There were no changes in or disagreements with accountants on accounting
and financial disclosure during the years ended December 31, 1997 and 1996.

                                       17
<PAGE>
 
                                   PART III


ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information concerning the directors of the Company is set forth in the
proxy statement to be delivered to shareholders in connection with the Company's
annual meeting of shareholders to be held in May 1998 (the "Proxy Statement")
under the heading "Election of Directors," which information is incorporated
herein by reference.  The name, age and position of each executive officer of
the Company is set forth under the heading "Executive Officers" in Item 1 of
this report, which information is incorporated herein by reference.


ITEM 11.       EXECUTIVE COMPENSATION

     The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Management Compensation," which information is
incorporated herein by reference.


ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Principal
Shareholders and Management Ownership," which information is incorporated herein
by reference.


ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information concerning relationships and related transactions is
set forth in the Proxy Statement under the heading "Certain Transactions" or
under the heading "Compensation Committee Interlocks and Insider Participation,"
which information is incorporated herein by reference.

                                       18
<PAGE>
 
                                    PART IV


ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


     (a)  The following documents are filed as part of this Annual Report on
          Form 10-K:

          (1)  Financial Statements:

               The financial statements filed as a part of this report are
               listed in the "Index to Financial Statements and Financial
               Statement Schedules" at Item 8.

          (2)  Financial Statement Schedules:

               The financial statement schedules filed as a part of this report
               are listed in the "Index to Financial Statements and Financial
               Statement Schedules" at Item 8.

          (3)  Exhibits:

               The exhibits filed as a part of this report are listed under
               "Exhibits" at subsection (c) of this Item 14.

     (b)  Reports of Form 8-K:

          The Company filed a Current Report on Form 8-K dated November 6, 1997,
          announcing plans to issue senior subordinated notes due 2007.

          On December 16, 1997, the Company filed a Current Report on Form 8-K
          dated December 1, 1997, reporting the acquisition of approximately
          95.5% of the common stock of Shelter Components Corporation through
          the consummation of a cash tender offer for a purchase price of $17.50
          per share of common stock of Shelter.  Financial statements of the
          Company and Shelter and the pro forma financial data for the year
          ended December 31, 1996, the twelve months ended September 30, 1997
          and the nine months ended September 30, 1997 were included in this
          filing.
 
 
EXHIBIT
NUMBER  DESCRIPTION OF EXHIBITS
------- ----------------------------------------------
2.1   - Merger Agreement, dated June 6, 1995 by and among Kevco, Inc. and
        Service Supply Systems, Inc., joined by a wholly-owned subsidiary of
        Kevco, Inc.(1)

2.2   - Form of Plan and Agreement of Merger between Kevco Texas, Inc. and Kevco
        Delaware, Inc.(1)

2.3   - Form of Bill of Sale and General Assignment from Kevco Delaware, Inc.,
        as Assignor, to Sunbelt Wood Components, Inc., as Assignee.(1)

2.4   - Form of Assumption Agreement between Kevco Delaware, Inc. and Sunbelt
        Wood Components, Inc.(1)

2.5   - Asset Purchase Agreement by and among Consolidated Forest Products,
        Inc., Consolidated Forest Products, L.L.C. and the members of
        Consolidated Forest Products, L.L.C.(2)

2.6   - Stock Purchase Agreement by and among Kevco Delaware, Inc. and the
        shareholders of Bowen Supply, Inc.(2)

2.7   - Agreement and Plan of Merger, dated as of October 21, 1997, between
        Kevco, Inc., SCC Acquisition Corp. and Shelter Components
        Corporation.(6)

                                       19
<PAGE>
 
3.1   - Articles of Incorporation of Kevco, Inc., as amended.(1)

3.2   - Bylaws of Kevco, Inc.(1)

3.3   - Certificate of Incorporation of Kevco Delaware, Inc.(9)

3.4   - Bylaws of Kevco Delaware, Inc.(9)

3.5   - Certificate of Incorporation of Sunbelt Wood Components, Inc.(9)

3.6   - Bylaws of Sunbelt Wood Components, Inc.(9)

3.7   - Articles of Incorporation of Bowen Supply, Inc. and amendments.(9)

3.8   - Bylaws of Bowen Supply, Inc.(9)

3.9   - Articles of Incorporation of Encore Industries, Inc.(9)

3.10  - Bylaws of Encore Industries, Inc.(9)

3.11  - Certificate of Limited Partnership of Shelter Distribution, L.P.(9)

3.12  - Limited Partnership Agreement of Shelter Distribution, L.P.(9)

3.13  - Articles of Restatement of the Articles of Incorporation of Shelter
        Newco, Inc. n/k/a Shelter Components Corporation.(9)

3.14  - Bylaws of Shelter Components Corporation.(9)

3.15  - Articles of Incorporation of BPR Holdings, Inc.(9)

3.16  - Bylaws of BPR Holdings, Inc.(9)

3.17  - Restated Articles of Incorporation of SC Acquisition Corp. n/k/a Shelter
        Components of Indiana, Inc. and amendment.(9)

3.18  - Bylaws of SC Acquisition Corp. n/k/a Shelter Components of Indiana,
        Inc.(9)

3.19  - Articles of Incorporation of MP Acquisition Corp. n/k/a Design
        Components, Inc. and amendments.(9)

3.20  - Bylaws of Design Components, Inc.(9)

3.21  - Articles of Incorporation of Duo-Form of Michigan, Inc. and
        amendments.(9)

3.22  - Bylaws of Duo-Form of Michigan, Inc.(9)

3.23  - Restated Charter of Danube Carpet Mills, Inc. n/k/a DCM, Inc. and
        amendments.(9)

3.24  - Bylaws of Danube Carpet Mills, Inc. n/k/a DCM, Inc.(9)

4.1   - Form of certificate evidencing ownership of the Common Stock of Kevco,
        Inc.(1)

10.1  - Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995
        Stock Option Plan of Kevco, Inc.) and Supplementary Letter.(1)

10.2  - 1996 Stock Option Plan of Kevco, Inc., as amended, and Supplementary
        Letter.(1)

10.3  - Form of Amended and Restated Employment Agreement between Gerald E.
        Kimmel and Kevco, Inc., joined therein by Kevco Delaware, Inc. and
        Sunbelt Wood Components, Inc.(1)

10.4  - Employment Agreement between C. Lee Denham and Kevco, Inc. dated June
        30, 1995.(1)

10.5  - Lease between K & E Land & Leasing and Kevco, Inc. dated December 1,
        1977.(1)

10.6  - Amendment No. 1 to Lease, by and between K & E Land & Leasing and 
        Kevco, Inc. dated March   , 1982.(1) 

10.7  - Amendment No. 2 to Lease, by and between K & E Land & Leasing and Kevco,
        Inc. dated May 30, 1983.(1)

10.8  - Amendment No. 3 to Lease, by and between K & E Land & Leasing and Kevco,
        Inc. dated February 1, 1993.(1)

10.9  - Lease dated April 1, 1980 between City of Newton, Kansas and K & E Land
        & Leasing.(1)

                                       20
<PAGE>
 
10.10 - Sublease and Lease Guarantee Agreement dated April 1, 1980 between K & E
        Land & Leasing and Kevco, Inc.(1)

10.11 - Amendment No. 1 to Sublease and Lease Guaranty Agreement by and between
        K & E Land & Leasing and Kevco, Inc. dated May 30, 1983.(1)

10.12 - Lease Agreement dated October 12, 1987 between 1741 Conant Partnership &
        Kevco Inc.(1)

10.13 - Equipment Lease Agreement dated January 1, 1991 between K & E Land &
        Leasing and Kevco, Inc.(1)

10.14 - Amendment No. 1 to Equipment Lease Agreement between K & E Land &
        Leasing and Kevco, Inc. dated February 12, 1993.(1)

10.15 - Amendment No. 2 to Equipment Lease Agreement between K & E Land &
        Leasing and Kevco, Inc. dated October 26, 1993.(1)

10.16 - Amendment No. 3 to Equipment Lease Agreement between K & E Land &
        Leasing and Kevco, Inc. dated May 23, 1994.(1)

10.17 - Deferred Compensation Agreement between Kevco, Inc. and Clyde A. Reed,
        Jr. dated May 24, 1977.(1)

10.18 - Amendment No. 1 to Deferred Compensation Agreement dated May  , 1980.(1)

10.19 - Amendment No. 2 to Deferred Compensation Agreement dated March 10,
        1992.(1)

10.20 - Amended and Restated Health and Accident Plan of Kevco, Inc.(1)

10.21 - Investment and Tax Advice Plan of Kevco, Inc.(1)

10.22 - Credit Agreement among Kevco, Inc., certain Lenders and NationsBank of
        Texas, N.A., as Administrative Lender dated June 30, 1995.(1)

10.23 - First Amendment to Credit Agreement, dated as of September 1, 1995,
        among Kevco, Inc., the banks listed on the signature pages thereof, and
        NationsBank of Texas, N.A.(1)

10.24 - Second Amendment to Credit Agreement, dated as of November 29, 1995,
        among Kevco, Inc., the banks listed on the signature pages thereof, and
        NationsBank of Texas, N.A.(1)

10.25 - Revolving Credit Note of Kevco, Inc. to NationsBank of Texas, N.A. dated
        September 1, 1995 in the amount of $14,285,714.28.(1)

10.26 - Term Loan Note of Kevco, Inc. to NationsBank of Texas, N.A. dated
        September 1, 1995 in the amount of $10,714,285.72.(1)

10.27 - Revolving Credit Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated
        February 2, 1996 in the amount of $5,714,285.72.(1)

10.28 - Term Loan Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated February
        2, 1996 in the amount of $4,285,714.28.(1)

10.29 - PaineWebber Standardized 401(K) Profit-Sharing Adoption Agreement (No.
        005) (To be used with Basic Plan Document No. 03 Only) for Kevco, Inc.
        dated May 24, 1996 and PaineWebber Defined Contribution Plan.(1)

10.30 - Promissory Note of Gerald E. Kimmel to Kevco, Inc. dated October 26,
        1993 in the amount of $5,000,000.(1)

10.31 - Amendment No. 4 to Lease dated December 1, 1977 by and between K&E Land
        & Leasing and Kevco, Inc. dated October 26, 1993.(1)

10.32 - Assignment and Acceptance dated February 2, 1996 between The Daiwa Bank,
        Limited and The Sumitomo Bank, Ltd., Chicago Branch.(1)

10.33 - Form of Tax Indemnification and Distribution Agreement.(1)

10.34 - Form of Promissory Note made by Kevco Texas, Inc. in the amount of
        $3,733,000 (the Prior S Corporation Earnings Note).(1)

10.35 - Form of Promissory Note made by Kevco Texas, Inc. (the Future S
        Corporation Earnings Note).(1)

                                       21
<PAGE>
 
10.36 - Form of Assignment of $5,000,000 Note made by Kevco, Inc. (n/k/a Kevco
        Delaware, Inc.).(1)

10.37 - Form of Adoption Agreement by Kevco, Inc. and Kevco Texas, Inc. (re:
        1995 Stock Option Plan and 1996 Stock Option Plan).(1)

10.38 - Amendment No. 1 dated September 21, 1988, to Lease Agreement by 1741
        Conant Partnership as lessor and Kevco, Inc. (n/k/a Kevco Delaware,
        Inc.).(1)

10.39 - Letter Agreement dated June 22, 1982, between Kevco, Inc. (n/k/a Kevco
        Delaware, Inc.) and K&E Land & Leasing. (re: lease rentals).(1)

10.40 - Letter Agreement dated October 1, 1996 by Kevco, Inc., K&E Land &
        Leasing, and 1741 Conant Partnership (re: lease rental).(1)

10.41 - Form of Parent Pledge Agreement.(1)

10.42 - Consent and Waiver, dated as of October 21, 1996, by and among
        NationsBank of Texas, N.A., The Sumitomo Bank, Ltd. and Kevco Texas,
        Inc.(1)

10.43 - Amended and Restated Credit Agreement, dated as of February 27, 1997, by
        and among Kevco Delaware, Inc., certain lenders and NationsBank of
        Texas, N.A.(4)

10.44 - Amendment No. 1 to Amended and Restated 1995 Stock Option Plan of Kevco,
        Inc. (10)

10.45 - Senior Commitment Letter dated October 27, 1997 from NationsBank of
        Texas, N.A. and NationsBanc Montgomery Securities, Inc.(6)

10.46 - First Amendment to Amended and Restated Credit Agreement dated as of
        November 25, 1997 between Kevco Delaware, Inc., certain lenders and
        NationsBank of Texas, N.A.(7)

10.47 - Second Amended and Restated Credit Agreement dated December 1, 1997
        between Kevco, Inc., certain lenders and NationsBank of Texas,
        N.A.(7)(8)

10.48 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
        NationsBank of Texas, N.A. in the original principal amount of
        $11,666,666.66.(7)

10.49 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
        National City Bank of Kentucky in the original principal amount of
        $8,166,666.67.(7)

10.50 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
        Guaranty Federal Bank, F.S.B. in the original principal amount of
        $7,000,000.00.(7)

10.51 - Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and The
        Sumitomo Bank, Limited in the original principal amount of
        $8,166,666.67.(7)

10.52 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and
        NationsBank of Texas, N.A. in the original principal amount of
        $13,333,333.34.(7)

10.53 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and
        National City Bank Kentucky in the original principal amount of
        $9,333,333.33.(7)

10.54 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and
        Guaranty Federal Bank, F.S.B. in the original principal amount of
        $8,000,000.00.(7)

10.55 - Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc. and
        The Sumitomo Bank, Limited in the original principal amount of
        $9,333,333.33.(7)

10.56 - Facility B Term Loan Note dated December 1, 1997 between Kevco, Inc. and
        NationsBank of Texas, N.A. in the original principal amount of
        $50,000,000.00.(7)

10.57 - Security Agreement dated December 1, 1997 between Kevco, Inc. and
        NationsBank of Texas, N.A. as Administrative Agent.(7)

10.58 - Registration Rights Agreement dated December 1, 1997 by and among Kevco,
        Inc., as Issuer, the Subsidiaries of Kevco, Inc. identified therein as
        Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities
        Corporation and NationsBanc Montgomery Securities, Inc., as Initial
        Purchasers.(9)

                                       22
<PAGE>
 
10.59 - Indenture dated December 1, 1997 among Kevco, Inc., SCC Acquisition
        Corp., Kevco Delaware, Inc., Sunbelt Wood Components, Inc., Consolidated
        Forest Products, Inc., Bowen Supply, Inc. and Encore Industries, Inc.,
        as Subsidiary Guarantors and United States Trust Company of New York, as
        Trustee.(9)

10.60 - Supplemental Indenture between Shelter Components Corporation, a
        Subsidiary of Kevco, Inc., and United States Trust Company of New York,
        as Trustee.(9)

10.61 - Supplemental Indenture dated as of December 1, 1997 between Shelter
        Distribution, L.P., a Subsidiary of Kevco, Inc., and United States Trust
        Company of New York, as Trustee.(9)

10.62 - Supplemental Indenture dated as of December 1, 1997 between DCM, Inc., a
        Subsidiary of Kevco, Inc., and United States Trust Company of New York,
        as Trustee.(9)

10.63 - Supplemental Indenture dated as of December 1, 1997 between Duo-Form of
        Michigan, Inc., a Subsidiary of Kevco, Inc., and United States Trust
        Company of New York, as Trustee.(9)

10.64 - Supplemental Indenture dated as of December 1, 1997 between Design
        Components, Inc., a Subsidiary of Kevco, Inc., and United States Trust
        Company of New York, as Trustee.(9)

10.65 - Supplemental Indenture dated as of December 1, 1997 between Shelter
        Components of Indiana, Inc., a Subsidiary of Kevco, Inc., and United
        States Trust Company of New York, as Trustee.(9)

10.66 - Supplemental Indenture dated as of December 1, 1997 between BPR
        Holdings, Inc., a Subsidiary of Kevco, Inc., and United States Trust
        Company of New York, as Trustee.(9)

10.67 - First Amendment to Credit Agreement dated February 12, 1998 between
        Kevco, Inc., certain lenders and NationsBank of Texas, N.A.(10)

13.1  - Portions of 1997 Annual Report to Shareholders that are incorporated by
        reference into this Annual Report on Form 10-K.(10)

18.1  - Letter on change in accounting principle.(5)

21.1  - Subsidiaries.(10)

23.1  - Consent of Coopers & Lybrand L.L.P.(10)

24.1  - Power of Attorney.(contained on the signature page of this Annual Report
        on Form 10-K)

27.1  - Financial Data Schedule.(10)

--------
(1)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (No. 333-11173) and incorporated herein by reference.
(2)  Previously filed as an exhibit to the Company's Current Report on Form 8-K
     dated February 27, 1997, and incorporated herein by reference.
(3)  Previously filed as an exhibit to the Company's registration statement on
     Form S-8 (No. 333-19959), and incorporated herein by reference.
(4)  Previously filed as an exhibit to the Company's Quarterly Report on Form 
     10-Q, for the quarter ended March 31, 1997 and incorporated herein by
     reference.
(5)  Previously filed as an exhibit to the Company's Quarterly Report on Form 
     10-Q, for the quarter ended June 30, 1997 and incorporated herein by
     reference.
(6)  Previously filed as an exhibit to the Company's Tender Offer Statement on
     Schedule 14D-1, filed October 28, 1997, and incorporated herein by
     reference.
(7)  Previously filed as an exhibit to the Company's Tender Offer Statement on
     Schedule 14D-1/A, filed December 12, 1997, and incorporated herein by
     reference.
(8)  Schedules and similar attachments to this exhibit have not been previously
     file herewith, but the nature of their contents is described in the body of
     this exhibit. The Company agrees to furnish a copy of any such omitted
     schedules and attachments to the Securities and Exchange Commission upon
     request.
(9)  Previously filed as an exhibit to the Company's registration statement on
     Form S-4 (No. 333-43691), and incorporated herein by reference.
(10) Filed herewith.

                                       23
<PAGE>
 
                               POWER OF ATTORNEY

     Each person whose signature appears below hereby constitutes and appoints
jointly and severally, Jerry E. Kimmel, Richard S. Tucker and Ellis L. McKinley,
Jr., and each one of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission.

                              S I G N A T U R E S

     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.

                             KEVCO, INC.


Date:    March 17, 1998      By: /s/ Jerry E. Kimmel            
                                 -----------------------------------------------
                                 Jerry E. Kimmel,
                                 Chairman, President and Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on March 17, 1998.


     Signature                      Title
     ---------                      -----

     /s/ Jerry E. Kimmel          Chairman of the Board, President
------------------------------    and Chief Executive Officer  
     Jerry E. Kimmel              (Principal Executive Officer) 
                                        

     /s/ Clyde A. Reed, Jr.       Executive Vice President,
------------------------------    Chief Operating Officer and Director 
     Clyde A. Reed, Jr.           


     /s/ Ellis L. McKinley, Jr.   Vice President, Chief Financial Officer,
------------------------------    Treasurer and Director (Principal Financial
     Ellis L. McKinley, Jr.       Officer and Principal Accounting Officer)


     /s/ Gregory G. Kimmel        Senior Vice President, Corporate Development
------------------------------    and Director
     Gregory G. Kimmel        


     /s/ Richard S. Tucker        Secretary and Director
------------------------------
     Richard S. Tucker


     /s/ Martin C. Bowen          Director
------------------------------
     Martin C. Bowen


     /s/ Richard Nevins           Director
------------------------------
     Richard Nevins

                                       24