WHITE CAP HOLDINGS INC, 424B1, 1997-10-23

WHITE CAP HOLDINGS INC
424B1, 1997-10-23
CONSTRUCTION & MINING (NO PETRO) MACHINERY & EQUIP

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<PAGE> 1
Filed Pursuant to Rule 424 (b) (1)
Registration No. 333-33767
PROSPECTUS
OCTOBER 22, 1997

4,000,000 SHARES

[WHITE CAP INDUSTRIES LOGO]

COMMON STOCK
------------------------

All of the shares of Common Stock, par value $0.01 per share ("Common
Stock"), of White Cap Industries, Inc. ("White Cap" or the "Company") offered
hereby are being offered (the "Offering") by the Company.

Prior to the Offering, there has been no public market for the Common
Stock. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market ("Nasdaq") under the trading symbol "WHCP".

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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

<TABLE>
<S> <C> <C> <C>
================================================================================================
UNDERWRITING
PRICE TO THE DISCOUNTS AND PROCEEDS TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------
Per Share................................. $18.00 $1.26 $16.74
- ------------------------------------------------------------------------------------------------
Total(3).................................. $72,000,000 $5,040,000 $66,960,000
================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933.
See "Underwriting."

(2) Before deducting estimated expenses payable by the Company of $1,250,000.

(3) The Company and certain stockholders of the Company have granted the
Underwriters a 30-day option to purchase up to an aggregate of 600,000
additional shares of Common Stock, solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, Proceeds to the Company and the
proceeds to such stockholders will be $82,800,000, $5,796,000, $72,735,300
and $4,268,700, respectively. See "Principal and Selling Stockholders" and
"Underwriting."

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

The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if issued to and accepted by them, subject
to certain prior conditions, including the right of the Underwriters to reject
any order in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about October 27, 1997.

DONALDSON, LUFKIN & JENRETTE BANCAMERICA ROBERTSON STEPHENS
SECURITIES CORPORATION
<PAGE> 2

[PHOTOS OF COMPANY'S PRODUCTS AND/OR FACILITIES]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements contained elsewhere in this Prospectus.
Certain capitalized terms used in this summary are defined elsewhere in this
Prospectus. References in this Prospectus to the Company shall, as the context
requires, refer to White Cap Industries, Inc. (formerly known as White Cap
Holdings, Inc.), together with its wholly-owned subsidiary, White Cap
Industries, Corp. (formerly known as White Cap Industries, Inc.) ("WCI"), and
their respective predecessors, and references to "pro forma" or "pro forma
basis" mean the application of the pro forma adjustments described under
"Unaudited Pro Forma Combined Financial Data." Except where otherwise indicated,
the information in this Prospectus(i) assumes that the over-allotment option
granted to the Underwriters is not exercised and (ii) has been adjusted to
reflect the conversion of all outstanding shares of the Company's Series A-1 and
Series A-2 to Common Stock and a 1.74-for-1 stock split of the Common Stock
which will be effected immediately prior to the consummation of the Offering.
All references to years, unless otherwise noted, refer to the Company's fiscal
year, which, prior to January 1, 1996 ended on December 31 of each year and
since such date ends on March 31 of each year.

THE COMPANY

White Cap is one of the leading business to business retailers to
professional contractors in the Western United States. The Company offers over
25,000 stock keeping units ("SKUs") of specialty tools and materials oriented to
professional contractors ("pro-oriented"). The Company markets its products
through 20 branch locations, its highly experienced outside sales force and
through the strategic distribution of its in-stock catalogs. The Company has
achieved substantial growth by acquiring leading contractor suppliers in new and
existing markets, expanding product offerings and opening new branch locations.
Since 1987, White Cap's net sales have increased at a compounded annual growth
rate of 23%, resulting from (i) acquisitions, (ii) same store sales growth,
which averaged 17% over the past four years, and (iii) new branch openings. The
Company's active customer base (customers that have purchased at least one item
on open credit during a given period) has grown from approximately 7,000 in 1994
to approximately 16,000 for the pro forma fiscal year ended March 31, 1997. For
the fiscal year ended March 31, 1997, the Company had pro forma net sales of
approximately $165 million.

The Company operates in a highly fragmented, multi-billion dollar industry.
Management believes that small, regional contractor suppliers, with sales of
less than $50 million, supply over two-thirds of the pro-contractor market. With
pro forma fiscal 1997 net sales of approximately $165 million, the Company
believes it is one of the largest suppliers to its market niche nationwide. The
Company targets medium- and large-sized professional contractors, including
professional concrete, framing, waterproofing, landscaping, grading, electrical,
mechanical and general contractors.

The Company sells a wide variety of pro-oriented products, including
construction materials, hand tools, fasteners, structural connectors, power
tools, light construction equipment, steel reinforcing bar (rebar), bulk and
collated gun nails and specialty cementatious products. In addition, at certain
branches the Company provides rental services on selected items such as brackets
and braces used in the construction of concrete "tilt-up" buildings, power tools
and miscellaneous light construction equipment. The Company's products are used
by professional contractors in new construction, maintenance and repair
projects.

The Company believes that it has developed a business model that differs
substantially from that of traditional contractor suppliers and large home
center retailers. The model is based on offering the Company's customers
superior customer service and convenient "one-stop" shopping at its branch
locations. Unlike traditional contractor suppliers, who typically fill orders
from warehouses not accessible to customers, the Company encourages customers to
shop at its branches where they can browse through the warehouse aisles and
adjacent outdoor yards. The Company's prototypical store format consists of
approximately 15,000 to 20,000 square feet of interior floor space with an
adjacent outdoor yard of approximately equal square footage. The Company's focus
on merchandising exposes customers to a wide range of product offerings and
promotes significant add-on sales. As a result, approximately 60% of the
Company's net sales are generated from "walk-in" and "will call" business.
Customers can also select items from the Company's in-stock catalogs,
distributed to approximately 40,000 professional contractors, listing over
11,000 of the best selling SKUs maintained in stock. Customers can order
products by phone, fax, at a sales branch or through the outside

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sales force. The Company's highly experienced sales force maintains frequent
customer contact, providing pro-oriented services on and off the job-site.
Through its high in-stock position and sophisticated inventory management
systems, the Company is able to fulfill approximately 95% of the items included
in each customer order and provide same-day or next-day delivery.

GROWTH STRATEGY

In order to capitalize on its unique business model and the fragmented
professional contractor supply industry, the Company has initiated an aggressive
growth strategy consisting of: (i) pursuing acquisitions of leading contractor
suppliers in new and existing markets; (ii) increasing market share within
existing markets; (iii) expanding product offerings; and (iv) opening new branch
locations. The key elements of the Company's growth strategy are as follows:

Strategic Acquisitions. The Company seeks to acquire leading
contractor suppliers in existing and new markets that will provide:
geographic diversification, product line expansion, an established customer
base of medium- and large-sized pro-contractors and a direct sales force.
The Company seeks to consolidate the operations of acquired companies and
eliminate duplicative overhead expense. White Cap has established a
successful track record for identifying and integrating acquisitions. Since
February 1997, the Company has completed three acquisitions, A-Y Supply,
Inc. ("A-Y Supply"), Stop Supply, Inc. ("Stop Supply") and Viking
Distributing Company, Inc. ("Viking Distributing"), thereby strengthening
its position as a market leader in the markets it serves and adding
approximately $63 million to pro forma fiscal 1997 net sales. The Company
believes that there are numerous attractive acquisition opportunities and
that the Company's established reputation as an industry leader, access to
capital, sophisticated management information systems and operating
expertise provide it with competitive advantages in making acquisitions.

Increased Market Share. The Company believes that its position as one
of the largest suppliers in its market niche, combined with its reputation
for providing superior customer service and a wide range of pro-oriented
product offerings, will enable the Company to increase its market share.
White Cap's direct sales force utilizes industry databases to continuously
prospect for new customers and new projects. The Company also works closely
with its suppliers and with licensed architects and engineers to ensure
that the specialty product lines it carries are specified on projects. This
effort focuses on targeting medium-and large-sized professional contractors
engaged in construction projects throughout the Western United States. The
Company believes its increased geographical presence will allow its
customers to consolidate their purchases with White Cap.

Expanded Product Offerings. The Company believes there are significant
opportunities to expand its product offerings by distributing profitable
specialty product lines sold by acquired companies but not previously
offered at White Cap locations. As a result of its three most recent
acquisitions, the Company anticipates that it will introduce at its
Southern California locations approximately 3,500 new SKUs. As an example,
the Company expects to expand A-Y Supply's rental business of brackets and
braces used in the construction of concrete "tilt-up" buildings, as well as
the sale of related products and accessories at certain of the Company's
other branches. The Company also intends to expand the product offerings at
its newly acquired branches by introducing approximately 2,500 new SKUs
which have proven successful at White Cap. The Company has introduced the
Simpson Strong-Tie line of structural connectors and fasteners to the A-Y
Supply branches and has expanded the offering of the Simpson Strong-Tie
products carried at the Viking Distributing branches. The Company
anticipates regularly adding new products to expand its existing offerings
and creating new product categories.

4
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Offering...................... 4,000,000 shares
Common Stock to be outstanding
after the Offering.......... 10,290,760 shares(a)
Use of Proceeds............... To repay (together with borrowings under the Credit
Agreement) outstanding indebtedness, redeem Senior
Redeemable Preferred Stock and pay accrued dividends on such
stock and on the Company's Convertible Preferred Stock. See
"Use of Proceeds."
Nasdaq Trading Symbol......... WHCP
</TABLE>

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

(a) Excludes (i) 517,819 shares issuable upon the exercise of unvested options
currently held by certain employees of the Company and (ii) 104,400 shares
of Common Stock issuable upon conversion of Series B Preferred Stock held by
the former owners of Viking Distributing which are subject to a repurchase
right by the Company if certain performance targets are not achieved for the
Northern California operations of the Company. Includes: (i) currently
exercisable warrants to acquire 1,176,184 shares of Common Stock held by
certain stockholders; (ii) 37,037 shares issuable to the former shareholders
of A-Y Supply upon conversion of a subordinated convertible promissory note,
which number is determined by dividing $500,000 by 75% of the initial public
offering price per share; (iii) 18,518 shares issuable to the former owners
of Stop Supply upon exercise of a warrant, which number is determined by
dividing $250,000 by 75% of the initial public offering price per share;
(iv) 129,454 shares issuable upon the exercise of vested options currently
held by certain employees of the Company; and (v) 91,534 shares of
restricted stock awarded to management which are not yet vested. See
"Management -- 1997 Incentive and Stock Option Plan" and "Principal and
Selling Stockholders."

The Company was incorporated in Delaware in November 1996 and acquired all
of the outstanding stock of WCI on February 28, 1997. The Company's principal
executive offices are located at 3120 Airway Avenue, Costa Mesa, California,
92626, telephone (714) 850-0900.

5
<PAGE> 6

SUMMARY FINANCIAL INFORMATION, OPERATING DATA AND UNAUDITED
PRO FORMA FINANCIAL INFORMATION

The summary consolidated results of operations data set forth below for the
years ended December 31, 1994 and 1995 and March 31, 1997 and the three months
ended March 31, 1996 are derived from the Company's consolidated financial
statements included elsewhere in this Prospectus; the summary consolidated
balance sheet data as of June 30, 1997 and the summary consolidated results of
operations data for the three months ended June 30, 1996 and 1997 are derived
from the Company's interim consolidated financial statements included elsewhere
in the Prospectus; the summary consolidated balance sheet data as of June 30,
1996 is derived from the Company's interim consolidated financial statements not
included herein. The summary unaudited pro forma data for the fiscal year ended
March 31, 1997 and for the three months ended June 30, 1997 is derived from the
Unaudited Pro Forma Combined Financial Data included elsewhere in this
Prospectus. The Unaudited Pro Forma Combined Financial Data do not purport to
represent what the Company's results of operations actually would have been if
the transactions referred therein had been consummated on the date or for the
periods indicated, or what such results will be for any future date or for any
future period. The Company's business is seasonal and interim results are not
necessarily indicative of the results obtainable by the Company for a full
fiscal year or any other interim period. The data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Historical Financial and Operating Data," "Unaudited Pro
Forma Combined Financial Data" and the financial statements of the Company, of
Viking Distributing and of A-Y Supply and related notes thereto (collectively,
the "Financial Statements") included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE THREE
YEAR ENDED MONTHS FISCAL YEAR ENDED MONTHS THREE MONTHS ENDED JUNE
DECEMBER 31, ENDED MARCH 31, 1997 ENDED 30, 1997
----------------- MARCH 31, ------------------------ JUNE 30, ------------------------
1994 1995 1996 ACTUAL PRO FORMA 1996 ACTUAL PRO FORMA
------- ------- --------- ---------- ----------- -------------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(a):
Net sales................ $69,508 $77,840 $19,511 $ 101,770 $ 164,873 $ 23,509 $ 37,311 $ 46,831
Gross profit............. 20,088 23,879 5,884 32,030 52,121 7,517 11,463 14,558
Income from operations... 2,170 3,362 214 4,655 9,250 1,282 2,040 2,598
Income tax provision
(benefit)(b)........... 30 40 -- (414) 3,396 9 318 966
Net income (loss)........ 1,318 1,937 (228) 2,796 4,886 849 403 1,389
Pro forma net income..... 1,405(c) n/a n/a n/a
Pro forma net income per
common equivalent
share.................. $ 0.19 $ 0.43 $ 0.03 $ 0.12
========== =========== ========== ===========
Pro forma weighted
average common
equivalent shares
outstanding............ 7,260,981 11,260,981(d) 7,368,075 11,368,075(d)
========== =========== ========== ===========
SELECTED OPERATING DATA:
Branch locations......... 10 12 12 17 20 12 20 20
Percentage change in
comparable store
sales.................. 35.6% 6.1% 9.9% 15.3% 17.5% 13.6% 18.6% 16.2%
Number of SKUs sold
during period.......... 10,787 11,223 9,346 15,765 26,265 9,521 10,830 20,448
Active customers......... 7,023 8,735 6,892(e) 12,288 15,898 7,076(e) 8,640(e) 10,841(e)
</TABLE>

<TABLE>
<CAPTION>
At June 30, 1997
-----------------------
AS
ACTUAL ADJUSTED(f)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................... $24,727 $30,496
Total assets............................................................................. 90,642 93,377
Long-term debt, net...................................................................... 60,382 7,393
Total stockholders' equity (deficit)..................................................... (2,766) 57,525(g)
</TABLE>

- ------------
(a) The Company changed its fiscal year end to March 31, effective March 31,
1996.

(b) Reflects S Corporation status until February 28, 1997, when the Company
converted to C Corporation status and recorded a tax benefit of
approximately $500,000 to establish net deferred tax assets. However, the
March 31, 1997 pro forma income tax expense provision is presented as if the
Company was a C Corporation for the entire fiscal year.

(d) Includes 621,353 shares deemed issued in connection with the
Recapitalization (as defined). See Note 2 to the Company's consolidated
financial statements.

(e) Represents customers that have purchased at least one item on open credit
during the specified three month period.

(f) Adjusted to give effect to the Offering and the application of the net
proceeds thereof and contemplated borrowings under the Credit Agreement (as
defined).

(g) As adjusted includes the recording of interest expense of $167,000 related
to the conversion of the $500,000 of subordinated debt due the former owners
of A-Y Supply at 75% of the offering price, prepayment penalties of
approximately $7.8 million, approximately $800,000 in compensation expense
related to the acceleration of an employee bonus, and the write off of
deferred financing costs of approximately $1.2 million, net of income tax
benefits of approximately $4.1 million.

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<PAGE> 7

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
before making an investment in the Common Stock offered hereby.

RISKS RELATED TO COMPANY'S ACQUISITION STRATEGY

In furtherance of the Company's growth strategy, the Company acquired A-Y
Supply in February 1997, Stop Supply in May 1997 and Viking Distributing in June
1997. White Cap is still in the process of completing the integration of these
acquisitions into the Company. The Company's historical operating results prior
to the acquisitions and pro forma results after giving effect to the
acquisitions are not necessarily indicative of the Company's future prospects.
There can be no assurance that these three acquisitions or any future
acquisitions will be successfully integrated into the Company and will achieve
the operating results that management expects.

There can be no assurance that the Company's management and financial
controls, personnel, computer systems and other corporate support systems will
be adequate to manage the increase in the size and scope of the Company's
operations as a result of the Company's recent acquisitions. An important part
of the Company's plans is to integrate these acquisitions into the Company's
operations and business model. There can be no assurance that the Company will
be able to integrate these acquisitions or successfully convert them to the
Company's business model in a timely manner, without delays and without
substantially higher than budgeted costs resulting from the following issues,
among others: data conversion, training, data communications, computer hardware
obsolescence, reconfiguration of facilities, building permits and independent
third party contractors. Once integrated and converted, these acquisitions may
not achieve sales, profitability and asset productivity commensurate with the
Company's original stores. In addition, acquisitions involve a number of special
risks, including adverse short-term effects on the Company's reported operating
results, the diversion of management's attention, the dependence on retention,
hiring and training of key personnel, risks associated with unanticipated
problems or legal liabilities and the amortization of acquired intangible
assets, some or all of which could have a material adverse effect on the
Company's operations and financial performance.

The Company currently finances acquisitions, and intends to finance future
acquisitions, by using cash from operations, through borrowings under its credit
facilities and, in certain cases, through the issuance of additional equity. The
Company will need additional debt or equity financing to continue its
acquisition strategy. There can be no assurance that the Company will be able to
obtain such financing if and when it is needed or that, if available, such
financing will be available on terms the Company deems acceptable. If the
Company does not have sufficient cash resources or availability under the Credit
Agreement (as defined) or if the Common Stock does not maintain sufficient value
or potential acquisition candidates are unwilling to accept equity as part of
the consideration for the sale of their businesses, the Company will be unable
to continue its acquisition strategy. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

Continued growth by the Company in the future could place strains on the
Company's management, operational and financial resources. In the future, the
Company will need to continue to develop the management skills of its managers
and supervisors and to recruit, train, motivate and manage its employees. The
Company's failure to manage growth effectively could have a material adverse
effect on the Company's results. See "Business" and "Management's Discussion and
Analysis of Results of Operations and Financial Condition."

DEPENDENCE ON SYSTEMS

The Company believes that its computer software programs are an integral
part of its business and growth strategies. The Company depends upon its
information systems generally to process orders, to manage inventory and
accounts receivable collections, to purchase, sell and ship products efficiently
and on a timely basis, to maintain cost-effective operations and to provide
superior service to its customers. While the Company has taken precautions
against certain events that could disrupt the operation of its information
systems, including implementation of an uninterruptable power source (UPS), a
disk drive redundancy

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<PAGE> 8

feature, third party off site vault data storage and telecommunications
rerouting capability, there can be no assurance that such a disruption will not
occur. If any such disruption were to occur, it might result in a partial or
complete loss of data, customer service disruptions, human resources issues and
vendor/supplier disruptions, among other problems, which could have a material
adverse effect on the Company's business and results of operation. The Company
is exploring whether and to what extent the Company's computer operating systems
will be disrupted upon the turn of the century as a result of the widely known
dating system flaw inherent in most operating systems (the "Year 2000 Problem").
There can be no assurance that the Company's systems will not be disrupted by
the Year 2000 Problem. Any such disruption could have a material adverse effect
on the Company's business and results of operations.

COMPETITION

The industry in which the Company conducts its business is highly
competitive. The Company faces competition in all customer categories of the
contractor supply industry. In the small- and medium-sized professional
contractor categories, the Company competes with traditional contractor
suppliers, mail order marketers, small hardware stores and large home center
chains. Historically, the large professional contractor has been served by
traditional specialty construction supply dealers and distributors. Recently,
however, some of the large home center chains have explored competing in this
category through in-house sales efforts. Certain existing competitors of the
Company have, and future competitors of the Company could have, substantially
greater resources, including financial resources, than the Company. There can be
no assurance that the Company will continue to compete effectively against
existing competitors or new competitors that may enter the markets in which it
conducts its business. See "Business -- Industry Overview" and "-- Competition."

GEOGRAPHIC DEPENDENCE; IMPACT OF REGIONAL WEATHER CONDITIONS

All of the Company's operations are located in the Western United States
and all but three branches are located in California and, as a result, are
affected by local economic conditions, which are beyond the Company's control.
Any recession or period of slow growth in California or the Western United
States could have a material adverse effect on the Company.

In addition, the Company's operations are affected by regional wet or dry
weather conditions which are beyond the Company's control. A prolonged or wet
winter season can and usually does adversely affect the Company's sales and
earnings due to construction delays or inactivity. Unusually dry winters can
result in regional water supply shortages resulting in government restrictions
on the number and or type of building permits issued which could also adversely
affect the Company's sales and earnings. While lower sales in any given quarter
resulting from the impact of weather conditions may be recaptured to a certain
extent in future periods, no assurances can be given that weather related
factors will not adversely affect the Company's sales and earnings in any given
fiscal year or reporting period.

FLUCTUATING OPERATING RESULTS

The Company has experienced in the past and will experience in the future
quarterly variations in net sales and net income as a result of many factors,
including product cycles of suppliers that are not controlled or influenced by
the Company, product availability, supplier relationships, customer
relationships, catalog response rates, product mix, past and potential
acquisitions, the level of selling, general and administrative expenses, the
condition of the construction industry in general and shifts in demand for
contractor supplies. The construction industry which the Company supplies is
highly sensitive to economic cycles. The Company's planned operating
expenditures are based on sales forecasts. If net sales are below expectations
in any given quarter, operating results could be materially adversely affected.

In the contractor supply industry, seasonality generally affects quarterly
sales performance. Historically, the Company's quarterly sales in the fourth
fiscal quarter (January through March) are lowest and quarterly sales in the
second fiscal quarter (July through September) are highest. See
"Business -- Industry Overview" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Quarterly Results of
Operations; Seasonality."

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EFFECTIVE VOTING CONTROL BY PRINCIPAL STOCKHOLDERS

Upon the completion of the Offering, Greg Grosch, the Company's Chairman,
Chief Executive Officer and President, KRG Capital Partners, LLC ("KRG
Capital"), Apex Investment Fund, III, L.P. ("Apex"), Bayview Investors, Ltd.
("Bayview"), Argentum Capital Partners, L.P. ("Argentum") and their respective
affiliates and certain other of the Company's directors and members of
management, consisting of Richard Gagnon, Dan Tsujioka and Chris Lane (who will
together own less than 5% of combined voting power of the Company's outstanding
voting Common Stock) will beneficially own, if taken together, 58.4% of the
combined voting power of the Company's outstanding voting Common Stock (not
including unvested options held by certain employees). If the foregoing
stockholders were to vote all of their shares of Common Stock in a similar
manner, they would effectively have sufficient voting power to elect the entire
Board of Directors of the Company and, in general, to determine (without the
consent of the Company's other stockholders) the outcome of any corporate
transaction or other matter submitted to the stockholders for approval,
including mergers, consolidations and the sale of all or substantially all of
the Company's assets, and to prevent or cause a change in control of the
Company. Greg Grosch, KRG Capital and certain of its affiliates are parties to a
stockholders agreement relating to the voting of the Company's Common Stock,
which agreement will take effect upon the closing of the Offering. See "Certain
Relationships and Related Transaction -- Stockholders Agreement" and "Principal
and Selling Stockholders."

DEPENDENCE OF KEY PERSONNEL AND SKILLED EMPLOYEES

The Company's continued success depends to a large extent upon the efforts
and ability of key managerial and sales employees, including Greg Grosch, its
Chairman, President and Chief Executive Officer. The loss of services of certain
of these key personnel could have a material adverse effect on the Company's
results of operations. The Company maintains a key-man life insurance policy on
Mr. Grosch, of which $10 million is currently assigned to the Company's existing
lenders. The Company's business also depends upon its ability to continue to
attract and retain senior managers, an outside sales force and skilled
employees, and failure to do so could adversely affect the Company's results of
operations. See "Management."

IMMEDIATE AND SUBSTANTIAL DILUTION

The Offering will result in immediate and substantial dilution of $14.93
per share of Common Stock to investors purchasing shares of Common Stock. See
"Dilution."

ANTI-TAKEOVER CONSIDERATIONS

The Company's Certificate of Incorporation and Bylaws and the Delaware
General Corporation Law (the "DGCL") contain certain provisions that may have
the effect of inhibiting a non-negotiated merger or other business combination.
In addition, the Board of Directors will have the authority, without further
action by the stockholders, to fix the rights and preferences and issue shares
of preferred stock. These provisions, and other provisions of the Company's
Certification of Incorporation, may have the effect of deterring hostile
takeovers or delaying or preventing changes of control or management of the
Company, including transactions in which stockholders might otherwise receive a
premium for their shares over the then-current market prices. In addition, these
provisions may limit the ability of stockholders to approve transactions that
they may deem to be in their best interests. See "Description of Capital Stock."

RESTRICTIONS ON PAYMENT OF DIVIDENDS ON COMMON STOCK

In the past, the Company has not declared or paid any regular cash or other
dividends on the Common Stock and does not expect to pay dividends for the
foreseeable future. The Company is a holding company with limited assets and no
operations of its own. Consequently, the Company is dependent upon dividends and
other advances from WCI as its predominant source of cash flow. The Credit
Agreement is expected to contain restrictive covenants that restrain the ability
of the Company to pay dividends. If these restrictions are subsequently lifted,
any future cash dividends will depend upon the Company's results of operations,
financial

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<PAGE> 10

conditions, cash requirements and other factors. See "Dividend Policy" and
"Description of Certain Indebtedness."

ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. Although the Company has applied to have the Common Stock quoted on
Nasdaq, there can be no assurance that an active trading market for the Common
Stock will develop or be sustained. The initial public offering price of the
Common Stock offered hereby will be determined by negotiations among the Company
and the representatives of the Underwriters and may not be indicative of the
market price for the Common Stock after the Offering. See "Underwriting." After
the Offering, the market price for shares of the Common Stock may be volatile
and may fluctuate based upon a number of factors, including many which are
beyond the control of the Company, such as business performance, general
industry trends, news announcements by competitors of the Company or changes in
the regulatory environment or in general political, market and economic
conditions. See "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 10,290,760 shares of
Common Stock outstanding. The shares of Common Stock sold in the Offering will
be freely tradeable without restriction or further registration under the
Securities Act unless held by an "affiliate" of the Company, as that term is
defined under Rule 144 of the Securities Act, which shares will be subject to
the resale limitations of Rule 144. In addition, certain existing stockholders,
including holders of restricted Common Stock, have registration rights with
respect to Common Stock held by them. In connection with the Offering, existing
stockholders holding in the aggregate 6,118,314 shares (or 59.4% of total
outstanding shares) (5,863,314 shares or 55.1% of total outstanding shares if
the Underwriters' over-allotment option is exercised in full) have agreed not to
dispose of any shares for a period of 180 days from the date of this Prospectus,
and the Company has agreed not to dispose of any shares (other than shares sold
by the Company in the Offering or issuances by the Company of certain employee
stock options and shares covered thereby) for a period of 180 days from the date
of this Prospectus, without the prior written consent of representatives of the
Underwriters. Upon expiration of such 180-day period, all of such shares of
Common Stock will be eligible for sale subject to certain volume and other
limitations of Rule 144 under the Securities Act applicable to "affiliates" of
the Company. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for sale will have on the market price of the Common Stock from time to time.
The sale of a substantial number of shares held by the existing stockholders,
whether pursuant to a subsequent public offering or otherwise, or the perception
that such sales could occur, could adversely affect the market price of the
Common Stock and could materially impair the Company's future ability to raise
capital through an offering of equity securities. See "Shares Eligible for
Future Sale" and "Underwriting."

10
<PAGE> 11

RECENT TRANSACTIONS

THE RECAPITALIZATION

In February 1997, KRG Capital formed the Company, which acquired all of the
outstanding stock of WCI from Greg Grosch, the then sole stockholder, Chairman,
President and Chief Executive Officer of WCI, through a leveraged
recapitalization (the "Recapitalization"). The Company acquired the stock of WCI
for: (i) $10 million in cash; (ii) a $1.5 million subordinated note; (iii)
87,000 shares of Common Stock; and (iv) Convertible Preferred Stock which will
automatically convert into 2,795,390 shares of Common Stock upon consummation of
the Offering. In connection with the Recapitalization, shares of redeemable
preferred stock and warrants to purchase Common Stock were purchased by three
investment funds. Such shares of redeemable preferred stock will be redeemed
upon consummation of the Offering. See "Use of Proceeds," "Principal and Selling
Stockholders" and "Certain Relationships and Related Transactions."

RECENT ACQUISITIONS

The Company has recently acquired three contractor suppliers for an
aggregate purchase price of approximately $37 million. In February 1997,
simultaneously with the Recapitalization, the Company acquired 100% of the stock
of A-Y Supply, which has stores located in Sacramento, Stockton, San Leandro,
Santa Rosa and Fresno, California. A-Y Supply generated net sales of
approximately $25.7 million for its fiscal year ended December 31, 1996. The
acquisition of A-Y Supply was effective as of January 1, 1997. Effective May 1,
1997, the Company acquired 100% of the stock of Stop Supply, located in Fresno,
California. Stop Supply generated net sales of approximately $6.2 million for
its fiscal year ended January 31, 1997. In June 1997, the Company acquired 100%
of the stock of Viking Distributing, which has stores located in San Francisco,
Dublin and San Jose, California. Viking Distributing generated approximately
$35.2 million in net sales for its fiscal year ended March 31, 1997.

PROPOSED ACQUISITIONS

The Company has entered into an agreement to acquire the assets of Burke
Concrete Accessories, L.P. ("Burke") for a total purchase price of $8.5 million,
subject to working capital adjustments as of the closing date (the "Burke
Acquisition"). Burke, with fiscal 1996 revenues of $24.9 million, is a full line
distributor of concrete accessories, construction chemicals and rental equipment
used in pour-in-place, precast and tilt-up concrete construction, renovation and
maintenance. Burke operates nine branch locations in the Western United States
(six of which are located in existing White Cap markets and three of which are
located in the Pacific Northwest). In addition, the Company has entered into a
letter of intent to acquire the stock of a one-branch contractor supplier, with
fiscal 1996 revenues of $5.4 million, which specializes in braces, inserts and
accessories for tilt-up concrete construction (together with the Burke
Acquisition, the "Proposed Acquisitions"). Completion of the Proposed
Acquisitions is expected to occur after the completion of the Offering and is
contingent upon satisfactory completion of due diligence and satisfaction of
customary closing conditions. The Offering is not contingent upon completion of
the Proposed Acquisitions.

The Company continues to evaluate potential acquisitions and negotiates
with potential acquisition candidates from time to time. The Company is
currently in discussions with several acquisition candidates, but, other than
with respect to the Proposed Acquisitions, has not entered into binding
commitments or understandings with any of such candidates.

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to be received from the sale of the 4,000,000 shares of
Common Stock by the Company in the Offering (after deducting the underwriting
discounts and estimated expenses of the Offering payable by the Company) are
estimated to be approximately $65.7 million ($71.5 million if the Underwriters'
over-allotment option is exercised in full). The Company intends to use all of
such proceeds plus such amounts as may be necessary to borrow under the Credit
Agreement to repay approximately $58.5 million of outstanding indebtedness,
consisting of (i) revolving loans of approximately $28.9 million outstanding
under WCI's existing credit agreement, bearing interest at 0.25% over the bank's
prime rate and providing for a LIBOR option of 2.5% over the LIBOR rate (the
effective interest rates ranged from 8.22% to 8.75% at June 30, 1997) and
maturing on February 1, 2002; (ii) term loans of approximately $10.6 million
outstanding under WCI's existing credit agreement, bearing interest at 0.75%
over the bank's prime rate and providing for a LIBOR option of 3.0% over the
LIBOR rate (the effective interest rates ranged from 8.72% to 9.25% at June 30,
1997) and maturing on February 1, 2002; (iii) senior subordinated notes in an
aggregate principal amount of $15.0 million held by an institutional investor
and maturing on February 28, 2005, consisting of an aggregate principal amount
of $13.0 million accruing interest at a rate of 13.0% plus an additional
deferred rate of 6.25% and an aggregate principal amount of $2.0 million
accruing interest at a rate of 11.5%; (iv) a subordinated note in an aggregate
principal amount of $1.5 million issued to the Company's Chairman, Chief
Executive Officer and President in connection with the Recapitalization,
accruing interest at a current rate of 13.0% and maturing on February 28, 2005;
and (v) subordinated notes in an aggregate principal amount of $2.5 million held
by the former owners of A-Y Supply, accruing interest at a rate of 10.0% and
maturing on February 25, 2000. In addition, the Company expects to pay
approximately $7.8 million in deferred interest and prepayment penalties
incurred in connection with the repayment of the indebtedness described above.
An affiliate of BancAmerica Robertson Stephens, one of the Representatives, is a
lender under both the Credit Agreement and WCI's existing credit agreement.
Approximately $3.0 million will be used to redeem the Company's Redeemable
Preferred Stock held by institutional investors consisting of Apex, Bayview and
Agentum and their respective affiliates and pay accrued dividends on such stock
and on the Company's Convertible Preferred Stock outstanding prior to the
completion of the Offering. See "Certain Relationships and Related
Transactions." Pending such uses, the Company intends to invest the net proceeds
of the Offering in short-term, interest-bearing investment-grade securities.

DIVIDEND POLICY

The Company has not paid dividends on its Common Stock and has no current
plans to pay cash dividends in the foreseeable future. The payment of future
dividends will be determined by the Board of Directors of the Company in light
of conditions then existing, including the Company's financial condition and
requirements, future prospects, restrictions in financing agreements, business
conditions and other factors deemed relevant by the Board of Directors. There
can be no assurance that the Company will determine to pay any cash dividends in
the future. The proposed terms of the Credit Agreement will limit the payment of
dividends on the Company's Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

12
<PAGE> 13

DILUTION

The net tangible book value (deficit) of the Company as of June 30, 1997
was $(28,748,000), or $(4.57) per share. "Net tangible book value (deficit) per
share" is determined by dividing the number of shares of Common Stock
outstanding into the net tangible book value of the Company (tangible assets
less liabilities). After giving effect to the Offering and use of proceeds
described herein, the pro forma net tangible book value of the Company at June
30, 1997 would have been approximately $31,543,000 or $3.07 per share based on
an initial public offering price of $18.00 per share. This represents an
immediate increase in the net tangible book value per share of $7.64 to present
stockholders and an immediate dilution of $14.93 per share to new investors
purchasing shares of Common Stock at the assumed public offering price.

The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share.................................... $18.00
Net tangible book value (deficit) per share before the
Offering...................................................... $(4.57)
Increase resulting from the offering............................. 7.64
------
Pro forma net tangible book value (deficit) per share after the
Offering......................................................... 3.07
------
Dilution per share to new investors................................ $14.93
======
</TABLE>

The following table summarizes the difference between existing stockholders
and new investors with respect to the number of shares of Common Stock purchased
from the Company, the total cash consideration paid, and the average price paid
per share (before deducting underwriting discounts and offering expenses):

<TABLE>
<CAPTION>
PERCENT PERCENT OF AVERAGE
SHARES OF TOTAL TOTAL CASH TOTAL PRICE
PURCHASED SHARES CONSIDERATION CONSIDERATION PER SHARE
---------- -------- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 6,290,760(a) 61.1%(b) $ 3,338,679 4.4% $ 0.53
New investors................ 4,000,000 38.9 72,000,000 95.6 $ 18.00
---------- ----- ----------- -----
Total.............. 10,290,760 100.0% $ 75,338,679 100.0%
========== ===== =========== =====
</TABLE>

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

(a) Excludes (i) 517,819 shares issuable upon the exercise of unvested options
currently held by certain employees of the Company and (ii) 104,400 shares
of Common Stock issuable upon conversion of Series B Preferred Stock held by
the former owners of Viking Distributing which are subject to a repurchase
right by the Company if certain performance targets are not achieved for the
Northern California operations of the Company. Includes: (i) currently
exercisable warrants to acquire 1,176,184 shares of Common Stock held by
certain stockholders; (ii) 37,037 shares issuable to the former shareholders
of A-Y Supply upon conversion of a subordinated convertible promissory note,
which number is determined by dividing $500,000 by 75% of the initial public
offering price per share; (iii) 18,518 shares issuable to the former owners
of Stop Supply upon exercise of a warrant, which number is determined by
dividing $250,000 by 75% of the initial public offering price per share;
(iv) 129,454 shares issuable upon exercise of vested options currently held
by certain employees of the Company; and (v) 91,534 shares of restricted
stock awarded to management which are not yet vested. See
"Management -- 1997 Incentive and Stock Option Plan" and "Principal and
Selling Stockholders."

(b) If the Underwriters' over-allotment option is exercised in full, the
percentage of shares retained by the existing stockholders would be reduced
to 56.8% of the total shares of Common Stock outstanding after the Offering.

13
<PAGE> 14

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997 and as adjusted to give effect to the Offering and
the application of the net proceeds thereof and contemplated borrowings under
the Credit Agreement. See "Use of Proceeds." This table should be read in
conjunction with "Selected Historical Financial and Operating Data," "Unaudited
Pro Forma Combined Financial Data" and the Financial Statements included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt.......................................................... $ 3,106 $ 706
======= =======
Long-term debt:
Senior revolving debt.................................................. $28,330 $ --
Senior term debt....................................................... 9,000 3,841
Subordinated debt...................................................... 19,500 --
Other long-term debt................................................... 3,552 3,552
------- -------
Total long-term debt........................................... 60,382 7,393
------- -------
Redeemable preferred stock............................................... 2,650 --
------- -------
Stockholders' equity:
Common stock........................................................... 11 90
Convertible preferred stock............................................ 2,256 --
Additional paid-in capital(a).......................................... -- 68,637
Accumulated deficit(b)................................................. (5,033) (11,202)
------- -------
Total stockholders' equity (deficit)(c)........................ (2,766) 57,525
------- -------
Total capitalization................................................... $60,266 $64,918
======= =======
</TABLE>

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

(a) As adjusted includes the recording of interest expense of $83,000 related to
the exercise of warrants by the former owners of Stop Supply at 75% of the
offering price.

(b) As adjusted includes the recording of interest expense of $167,000 related
to the conversion of the $500,000 of subordinated debt due the former owners
of A-Y Supply at 75% of the offering price, prepayment penalties of
approximately $7.8 million, approximately $800,000 in compensation expense
related to the acceleration of an employee bonus, and the write off of
deferred financing costs of approximately $1.2 million, net of income tax
benefits of approximately $4.1 million.

(c) Following the consummation of the Offering, the authorized capitalization of
the Company will consist of (i) 20,000,000 shares of Common Stock, of which
10,290,760 shares will be outstanding and (ii) 1,000,000 shares of Preferred
Stock, par value $1.00 per share, of which 60,000 shares of Series B
Preferred Stock will be outstanding. Options to purchase 647,273 shares of
Common Stock will be outstanding immediately following consummation of the
Offering.

14
<PAGE> 15

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The following unaudited pro forma combined financial data for the year
ended March 31, 1997 and the three months ended June 30, 1997 (the "Unaudited
Pro Forma Combined Financial Data") give effect to (i) the 1997 acquisitions of
A-Y Supply, Stop Supply and Viking Distributing and (ii) the Offering and the
use of proceeds described herein to repay certain indebtedness and redeem
outstanding Senior Redeemable Preferred Stock. The Unaudited Pro Forma Combined
Financial Data are based on the historical financial statements of the Company,
A-Y Supply, Stop Supply and Viking Distributing and the assumptions and
adjustments described in the accompanying notes to the Unaudited Pro Forma
Combined Financial Data. The pro forma combined statements of operations were
prepared as if such transactions had occurred on April 1, 1996. The Unaudited
Pro Forma Combined Financial Data are not necessarily indicative of the results
which actually would have occurred if such transactions had occurred on the
dates indicated or which may occur in the future. The Unaudited Pro Forma
Combined Financial Data should be read in conjunction with the Financial
Statements contained elsewhere in this Prospectus.

15
<PAGE> 16

WHITE CAP INDUSTRIES, INC.

PRO FORMA COMBINED INCOME STATEMENT
(UNAUDITED)
FISCAL YEAR ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
PRO
A-Y STOP VIKING PRO FORMA FORMA OFFERING PRO FORMA
WHITE CAP(a) SUPPLY(a) SUPPLY(b) DISTRIBUTING ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------ --------- --------- ------------ ----------- -------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $101,770 $21,689 $ 6,222 $ 35,192 $ -- $164,873 $ -- $164,873
Cost of goods
sold.............. 69,740 14,952 3,532 24,528 -- 112,752 -- 112,752
-------- ------- ------ ------- ------- -------- ------- ----------
Gross profit...... 32,030 6,737 2,690 10,664 -- 52,121 -- 52,121
-------- ------- ------ ------- ------- -------- ------- ----------
Selling, general and
administrative
expenses.......... 27,375 4,416 2,294 9,446 (660)(c) 42,871 -- 42,871
-------- ------- ------ ------- ------- -------- ------- ----------
Income from
operations...... 4,655 2,321 396 1,218 660 9,250 -- 9,250
Interest expense,
net............... 2,273 -- 182 280 -- 2,735 (1,767)(e) 968
-------- ------- ------ ------- ------- -------- ------- ----------
Income before
provision
(benefit) for
income taxes...... 2,382 2,321 214 938 660 6,515 1,767 8,282
Provision (benefit)
for income
taxes............. (414) 51 2 402 2,630(d) 2,671 725(f) 3,396
-------- ------- ------ ------- ------- -------- ------- ----------
Net income.......... $ 2,796 $ 2,270 $ 212 $ 536 $(1,970) $ 3,844 $ 1,042 $4,886
======== ======= ====== ======= ======= ======== ======= ==========
Pro forma net income
per common
equivalent
share............. $0.43
==========
Pro forma weighted
average common
equivalent shares
outstanding....... 11,260,981
==========
</TABLE>

16
<PAGE> 17

WHITE CAP INDUSTRIES, INC.

PRO FORMA COMBINED INCOME STATEMENT
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
PRO
STOP VIKING PRO FORMA FORMA OFFERING PRO FORMA
WHITE CAP(a) SUPPLY(b) DISTRIBUTING ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------ --------- ------------ ----------- -------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales..................... $ 37,311 $ 538 $8,982 $ -- $46,831 $ -- $ 46,831
Cost of goods sold............ 25,848 287 6,138 -- 32,273 -- 32,273
-------- ------ ------- ----- -------- ------- ----------
Gross profit................ 11,463 251 2,844 -- 14,558 -- 14,558
Selling, general and
administrative expenses..... 9,423 185 2,198 154(c) 11,960 -- 11,960
-------- ------ ------- ----- -------- ------- ----------
Income from operations...... 2,040 66 646 (154) 2,598 -- 2,598
Interest expense, net......... 1,319 18 20 -- 1,357 (1,114)(e) 243
-------- ------ ------- ----- -------- ------- ----------
Income before provision
(benefit) for income
taxes....................... 721 48 626 (154) 1,241 1,114 2,355
Provision (benefit) for income
taxes....................... 318 20 257 (64) 531 435(f) 966
-------- ------ ------- ----- -------- ------- ----------
Net income.................... $ 403 $ 28 $ 369 $ (90) $ 710 $ 679 $ 1,389
======== ====== ======= ===== ======== ======= ==========
Pro forma net income per
common equivalent share..... $ 0.12
==========
Pro forma weighted average
common equivalent shares
outstanding................. 11,368,075
==========
</TABLE>

17
<PAGE> 18

WHITE CAP INDUSTRIES, INC.

NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT ADJUSTMENTS

(a) A-Y Supply's results of operations are included in White Cap's income
statement from January 1, 1997 (acquisition date) forward. The A-Y Supply column
only includes the results of operations for the period April 1, 1996 through
December 31, 1996.

(b) Stop Supply's fiscal year ended January 31, 1997. Stop Supply was
acquired effective May 1, 1997. Hence, the Stop Supply information only includes
the results of operations for the one month period ended April 30, 1997.

(c) Adjustment to reflect the reduction of acquired companies' prior owners
compensation to a normalized ongoing amount reflecting current employment
agreements, which is offset, in part, by the amortization of goodwill and
covenants not to compete associated with the recent acquisitions.

<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS
ENDED ENDED JUNE
MARCH 31, 1997 30, 1997
-------------- ------------
<S> <C> <C>
Reduction in compensation:
A-Y Supply............................... $ 300 $ --
Stop Supply.............................. 170 --
Viking Distributing...................... 1,024 54
----- -----
1,494 54
Goodwill amortization:
A-Y Supply............................... (278) (69)
Stop Supply.............................. (48) (12)
Viking Distributing...................... (308) (77)
----- -----
(634) (158)
Covenant not to compete amortization:
A-Y Supply............................... (200) (50)
----- -----
Net expense (increase) reduction........... $ 660 $ (154)
===== =====
</TABLE>

(d) Adjustment to record a tax provision at a combined federal and state
rate of 41% for the entire period presented. A-Y Supply and Stop Supply were S
Corporations prior to being acquired by White Cap. White Cap converted from S
Corporation to C Corporation status in February 1997.

(e) Adjustment to reflect the change in interest expense upon repayment of
outstanding bank and subordinated debt.

(f) Adjustment to reflect the elimination of the tax benefit associated
with the reduction of interest expense due to debt retirement.

18
<PAGE> 19

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The selected consolidated results of operations set forth for the years
ended December 31, 1994 and 1995 and March 31, 1997 and the three months ended
March 31, 1996 and the selected balance sheet data set forth below as of
December 31, 1995 and March 31, 1996 and 1997 are derived from the Company's
consolidated financial statements included elsewhere in this Prospectus; such
data as of December 31, 1992 and 1993 and for the years then ended and as of
December 31, 1994 are derived from the Company's consolidated financial
statements not included herein; such data as of March 31, 1995 and for the three
months then ended and the selected balance sheet data as of June 30, 1996 are
derived from the Company's interim consolidated financial statements not
included herein; the selected balance sheet data as of June 30, 1997 and the
selected consolidated results of operations data for the three months ended June
30, 1996 and 1997 are derived from the Company's interim consolidated financial
statements included elsewhere in this Prospectus. The Company's business is
seasonal and interim results are not necessarily indicative of the results
obtainable by the Company for a full fiscal year or any other interim period.
The data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED FISCAL YEAR ENDED
YEAR ENDED DECEMBER 31, MARCH 31, ENDED JUNE 30,
------------------------------------- ----------------- MARCH 31, -----------------
1992 1993 1994 1995 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- ----------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(A):
Net sales........................ $45,125 $49,438 $69,508 $77,840 $15,841 $19,511 $ 101,770 $23,509 $37,311
Cost of sales.................... 31,119 34,373 49,420 53,961 11,246 13,627 69,740 15,992 25,848
------- ------- ------- ------- ------- ------- -------- ------- -------
Gross profit..................... 14,006 15,065 20,088 23,879 4,595 5,884 32,030 7,517 11,463
Selling, general and
administrative expenses........ 13,530 14,342 17,918 20,517 4,259 5,670 27,375 6,235 9,423
------- ------- ------- ------- ------- ------- -------- ------- -------
Income from operations........... 476 723 2,170 3,362 336 214 4,655 1,282 2,040
Interest expense, net............ 486 487 822 1,385 274 442 2,273 424 1,319
------- ------- ------- ------- ------- ------- -------- ------- -------
Income (loss) before income
tax............................ (10) 236 1,348 1,977 62 (228) 2,382 858 721
Income tax provision
(benefit)(b)................... 2 10 30 40 6 -- (414) 9 318
------- ------- ------- ------- ------- ------- -------- ------- -------
Net income (loss)................ $ (12) $ 226 $ 1,318 $ 1,937 $ 56 $ (228) $ 2,796 $ 849 $ 403
======= ======= ======= ======= ======= ======= ======== ======= =======

SELECTED OPERATING DATA:
Branch locations................. 9 9 10 12 11 12 17 12 20
Percentage change in comparable
store sales.................... 0.7% 9.8% 35.6% 6.1% 4.0% 9.9% 15.3% 13.6% 18.6%
Number of SKUs sold during
period......................... N/A N/A 10,787 11,223 8,763 9,346 15,765 9,521 10,830
Active customers................. N/A N/A 7,023 8,735 6,116(c) 6,892(c) 12,288 7,076(c) 8,640(c)
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, AT JUNE 30,
------------------------------------- ------------------------------- -----------------
1992 1993 1994 1995 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 8,201 $ 8,104 $10,840 $12,712 $10,875 $14,566 $ 17,410 $14,293 $24,727
Total assets..................... 18,200 18,087 26,750 36,192 26,211 35,287 62,292 37,613 90,642
Long-term debt, net.............. 7,620 7,550 10,472 15,815 9,860 18,095 38,888 16,580 60,382
Total stockholders' equity
(deficit)...................... 2,763 2,905 3,639 4,528 4,007 3,945 (3,030) 5,203 (2,766)
</TABLE>

- ---------------
(a) The Company changed its fiscal year end to March 31, effective March 31,
1996.

19
<PAGE> 20

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. When used herein, the words "anticipate," "believe,"
"estimate," and "expect" and similar expressions as they relate to the Company
or its management are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors."

GENERAL

The Company's revenues are generated by providing a wide variety of
specialty tools and construction materials to professional contractors. The
Company is executing an aggressive acquisition strategy, acquiring companies in
related lines of business. These acquisitions may change the Company's products,
product mix and operating margins. While the Company's management strategy,
operating efficiencies and economies of scale may present opportunities to
reduce costs, such benefits may initially be partially or completely offset by
the cost of integration such as transitional, management and administrative
costs. These various costs and possible cost savings may make historical
operating results not indicative of future performance. In connection with the
Company's rapid expansion, the Company expects to focus significant attention
and resources on technological investments that will increase productivity.

The Company expects to incur significant one-time charges in the fiscal
quarters ended September 30 and December 31, 1997. These one time charges will
include approximately $7.8 million related to prepayment penalties on the
retirement of existing debt, the charge-off of approximately $1.2 million
associated with capitalized debt issuance costs, approximately $1 million
related to the acceleration of an employee bonus, approximately $250,000
associated with termination payments, and imputed interest charges of
approximately $167,000 associated with the issuance of Common Stock at a
discount to the initial public offering price per share in order to retire a
note held by the sellers of an acquired entity.

RESULTS OF OPERATIONS

The following table sets forth various items as a percentage of net sales
or pro forma net sales, as applicable, for the actual fiscal years ended
December 31, 1994 and 1995, the actual and pro forma fiscal years ended March
31, 1997 and the actual three months ended March 31, 1995 and 1996 and June 30,
1996 and 1997 and the pro forma three months ended June 30, 1997. The pro forma
data were prepared as if the acquisitions of A-Y Supply, Stop Supply and Viking
Distributing had occurred on April 1, 1996.

20
<PAGE> 21

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS THREE MONTHS
YEAR ENDED ENDED FISCAL YEAR ENDED ENDED ENDED
DECEMBER 31, MARCH 31, MARCH 31, 1997 JUNE 30, JUNE 30, 1997
------------- ------------- ------------------ ------------ -----------------
1994 1995 1995 1996 ACTUAL PRO FORMA 1996 ACTUAL PRO FORMA
----- ----- ----- ----- ------ --------- ------------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........ 71.1 69.3 71.0 69.8 68.5 68.4 68.0 69.3 68.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross Profit....... 28.9 30.7 29.0 30.2 31.5 31.6 32.0 30.7 31.1
Selling, general and
administrative
expenses........... 25.8 26.4 26.9 29.1 26.9 26.0 26.5 25.3 25.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Income from
operations...... 3.1 4.3 2.1 1.1 4.6 5.6 5.5 5.5 5.5
Interest expense,
net................ 1.2 1.8 1.7 2.3 2.2 0.6 1.8 3.5 0.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income
tax............. 1.9 2.5 0.4 (1.2) 2.3 5.0 3.7 1.9 5.0
Income tax provision
(benefit).......... -- -- -- -- (0.4) 2.1 0.0 0.9 2.1
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss).......... 1.9% 2.5% 0.4% (1.2%) 2.7% 3.0% 3.6% 1.1% 3.0%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

The pro forma results of operations for the fiscal year ended March 31,
1997, as compared to the actual results for such fiscal year, reflect an
increase in gross margin from 31.5% to 31.6% due to the increased margins
associated with the rental businesses of A-Y Supply and Stop Supply. Pro forma
operating expenses as a percentage of net sales for the fiscal year ended March
31, 1997, as compared to the actual results for such fiscal year, were 26.0%
versus 26.9%. The lower selling, general and administrative expenses reflect
reduced annual compensation to the selling shareholders of the acquired
entities. The change in interest expense, net reflects the impact of paying off
the Company's outstanding bank and subordinated debt. The increase in the tax
provision reflects the elimination of the benefit of reinstating deferred income
taxes for the Company due to the conversion from S Corporation status to C
Corporation status in February 1997 and the recording of a 41% tax provision.

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996

Net Sales. Net sales increased $13.8 million, or 58.7%, to $37.3 million
for the three month period ended June 30, 1997 from $23.5 million for the three
month period ended June 30, 1996. The growth in net sales for the 1997 period
was the result of a 18.6% increase in same store sales during the quarter ended
June 30, 1997, the expansion of product lines, sales growth at the new branch
stores and the acquisitions of A-Y Supply, Stop Supply and Viking Distributing.

Gross Profit. Gross profit increased $3.9 million, or 52.5%, to $11.5
million for the three month period ended June 30, 1997 from $7.5 million for the
three month period ended June 30, 1996. The increase in gross profit was a
result of the increased net sales offset in part by a decrease in gross profit
margin. The gross profit margin for the three months ended June 30, 1997 was
30.7%, compared to 32.0% in the three months ended June 30, 1996. The decrease
in gross profit margin was primarily due to an aggressive promotion of certain
products in order to initiate relationships with new customers in Northern
California.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.2 million, or 51.1%, to $9.4 million in the
quarter ended June 30, 1997 from $6.2 million in the quarter ended June 30,
1996. Selling expenses increased $2.1 million, or 51.2%, to $6.2 million for the
three month period ended June 30, 1997 from $4.1 million for the three month
period ended June 30, 1996. The increase in selling expenses was due to
increased advertising, increased commissions to the outside sales force due to
the sales growth and increased costs of customer service, principally the
addition of branch personnel. Selling expenses as a percent of net sales for the
three month period ended June 30, 1997 was 16.6%, as compared to 17.4% for the
three month period ended June 30, 1996.

21
<PAGE> 22

General and administrative expenses increased $1.1 million, or 52.4%, to
$3.2 million for the three month period ended June 30, 1997 from $2.1 million
for the three month period ended June 30, 1996. General and administrative
expenses as a percentage of net sales for the three months ended June 30, 1997
was 8.6%, as compared to 8.9% for the three months ended June 30, 1996. The
increase in general and administrative expense was primarily due to increased
distribution costs to process the increased sales volume and a planned increase
in corporate functions to position the Company for future growth.

Income from Operations. Income from operations increased $0.8 million, or
59.1%, to $2.0 million for the three month period ended June 30, 1997 from $1.3
million for the three month period ended June 30, 1996. Income from operations
as a percentage of net sales remained constant at 5.5%. This reflects the
cumulative effects of the decrease in gross profit offset, in part, by the
increase in selling, general and administrative expenses as a percentage of net
sales.

Interest Expense, Net. Interest expense, net of interest income, increased
$0.9 million, or 211.1%, to $1.3 million for the three month period ended June
30, 1997 from $0.4 million for the three month period ended June 30, 1996.
Interest expense as a percentage of net sales increased to 3.5% from 1.8% in the
three month period ended June 30, 1996. This increase was due to increased
levels of debt to support the Company's growth.

Net Income. Net income decreased to $0.4 million, as compared to $0.8
million for the three month period ended June 30, 1996. The decrease in net
income was primarily related to a decrease in gross profit margins, the increase
in interest expense and the increase in the tax provision.

FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

Net Sales. Net sales increased $23.9 million, or 30.7%, to $101.8 million
in the fiscal year ended March 31, 1997 from $77.8 million in the year ended
December 31, 1995. The growth in net sales for 1997 was the result of the
acquisition of A-Y Supply in January 1997, an approximately 15% increase in same
store sales for the rest of the year, expansion of product lines and sales
growth at the new branch stores opened in 1995.

Gross Profit. Gross profit increased $8.2 million, or 34.1%, to $32.0
million in the fiscal year ended March 31, 1997 from $23.9 million in the year
ended December 31, 1995. The increase in gross profit was a result of the net
sales increase combined with an increase in gross profit margin as a percentage
of net sales. The gross profit margin as a percentage of net sales for the
fiscal year ended March 31, 1997 was 31.5%, compared to 30.7% in the year ended
December 31, 1995. The increase in gross profit margin as a percentage of net
sales was a result of White Cap's improved purchasing of products throughout the
fiscal year ended March 31, 1997. This improvement was offset by lower margins
at A-Y Supply during the fourth quarter due to the aggressive promotion of
certain products in order to initiate relationships with new customers in
Northern California.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $6.9 million, or 33.4%, to $27.4 million in
the fiscal year ended March 31, 1997 from $20.5 million in the year ended
December 31, 1995. Selling expenses increased $4.3 million, or 31.9%, to $17.8
million in the fiscal year ended March 31, 1997 from $13.5 million in the year
ended December 31, 1995. The increase in selling expenses was due to increased
advertising, increased commissions to the outside sales force due to the sales
growth and increased costs of customer service, principally the addition of
branch personnel. Selling expenses as a percentage of net sales for the fiscal
year ended March 31, 1997 increased to 17.5%, as compared to 17.3% in the year
ended December 31, 1995, as a result of the greater percentage growth than in
net sales.

General and administrative expenses include corporate administrative costs
and the costs of operating the Company's central distribution center in Costa
Mesa, California. General and administrative expenses increased $2.6 million, or
37.1%, to $9.6 million in the fiscal year ended March 31, 1997 from $7.0 million
in the year ended December 31, 1995. General and administrative expenses as a
percentage of net sales for the year ended March 31, 1997 increased to 9.4%, as
compared to 9.0% in the year ended December 31, 1995. The increase in general
and administrative expense was primarily due to increased distribution costs to
process the

22
<PAGE> 23

increased sales volume and a planned increase in corporate functions to position
the Company for future growth.

Income from Operations. Income from operations increased $1.3 million, or
38.5%, to $4.7 million in the fiscal year ended March 31, 1997 from $3.4 million
in the year ended December 31, 1995. Income from operations as a percentage of
net sales was 4.6%, as compared to 4.3% for the year ended December 31, 1995.
This increase reflects the cumulative effects of the increase in gross profit,
partially offset by the increase in selling, general and administrative
expenses.

Interest Expense, Net. Interest expense, net of interest income, increased
$0.9 million, or 64.1%, to $2.3 million in the fiscal year ended March 31, 1997
from $1.4 million in the year ended December 31, 1995. Interest expense as a
percentage of net sales increased to 2.2% from 1.8% in the year ended December
31, 1995. This increase was due to increased levels of debt to support the
Company's growth and the new debt associated with the acquisition of A-Y Supply,
combined with the higher interest rate associated with the debt utilized to
acquire A-Y Supply.

Net Income. Net income increased $0.9 million, or 44.3%, to $2.8 million in
the fiscal year ended March 31, 1997 from $1.9 million in the year ended
December 31, 1995. Net income as a percentage of net sales was 2.7%, as compared
to 2.5% for the year ended December 31, 1995. This increase reflects the
cumulative effects of the increase in gross profit and the increase in the
benefit for income taxes, offset by the increase in operating expenses and the
increase in net interest expense.

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1995

Net Sales. Net sales increased $3.7 million, or 23.2%, to $19.5 million for
the three month period ended March 31, 1996 from $15.8 million for the three
month period ended March 31, 1995. The growth in net sales for the 1996 period
was the result of a 9.9% increase in same store sales during the quarter ended
March 31, 1996, the expansion of product lines and sales growth at the new
branch stores opened in 1994 and 1995.

Gross Profit. Gross profit increased $1.3 million, or 28.1%, to $5.9
million for the three month period ended March 31, 1996 from $4.6 million for
the three month period ended March 31, 1995. The increase in gross profit was a
result of the increased net sales combined with an increase in gross profit
margin. The gross profit margin for the three months ended March 31, 1996 was
30.2%, compared to 29.0% in the three months ended March 31, 1995. The increase
in gross profit margin was a result of White Cap's improved purchasing of
products.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.4 million, or 33.1%, to $5.7 million in the
quarter ended March 31, 1996 from $4.3 million in the quarter ended March 31,
1995. Selling expenses increased $0.7 million, or 24.1%, to $3.6 million for the
three month period ended March 31, 1996 from $2.9 million for the three month
period ended March 31, 1995. The increase in selling expenses was due to
increased advertising, increased commissions to the outside sales force due to
the sales growth and increased costs of customer service, principally the
addition of branch personnel. Selling expenses as a percent of net sales for the
three month period ended March 31, 1996 was 18.5%, as compared to 18.4% for the
three month period ended March 31, 1995.

General and administrative expenses increased $0.7 million, or 50.0%, to
$2.0 million for the three month period ended March 31, 1996 from $1.4 million
for the three month period ended March 31, 1995. General and administrative
expenses as a percentage of net sales for the three months ended March 31, 1996
increased to 10.6%, as compared to 8.9% for the three months ended March 31,
1995. The increase in general and administrative expense was primarily due to
increased distribution costs to process the increased sales volume and a planned
increase in corporate functions to position the Company for future growth.

Income from Operations. Income from operations was nominal for the three
month periods ended March 31, 1996 and March 31, 1995. Income from operations as
a percentage of net sales was 1.1%, as compared to 2.1% for the three months
ended March 31, 1995. This decrease reflects the cumulative effects of the
increase in gross profit offset by the increase in selling, general and
administrative expenses.

23
<PAGE> 24

Interest Expense, Net. Interest expense, net of interest income, increased
$0.2 million, or 61.3%, to $0.4 million for the three month period ended March
31, 1996 from $0.3 million for the three month period ended March 31, 1995.
Interest expense as a percentage of net sales increased to 2.3% from 1.7% in the
three month period ended March 31, 1995. This increase was due to increased
levels of debt to support the Company's growth.

Net Loss. Net loss increased to $0.2 million, as compared to net income of
$0.1 million for the three month period ended March 31, 1995. The decrease in
net income was primarily related to increased general and administrative
expenses and increased interest expense.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

Net Sales. Net sales increased $8.3 million, or 12.0%, to $77.8 million in
the year ended December 31, 1995 from $69.5 million in the year ended December
31, 1994. The growth in net sales for 1995 was the result of a 6.1% increase in
same store sales during 1995, expansion of product lines and the opening of new
branch stores in 1994 and 1995.

Gross Profit. Gross profit increased $3.8 million, or 18.9%, to $23.9
million in the fiscal year ended December 31, 1995 from $20.1 million in the
fiscal year ended December 31, 1994. The increase in gross profit was a result
of the increase in net sales combined with an increase in gross profit margins
as a percentage of net sales. The gross profit margin as a percentage of net
sales in the year ended December 31, 1995 was 30.7%, as compared to 28.9% in the
year ended December 31, 1994. The increase in gross profit margin as a
percentage of net sales was a result of White Cap's improved purchasing of
products throughout the year.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.6 million, or 14.5%, to $20.5 million in
the year ended December 31, 1995 from $17.9 million in the year ended December
31, 1994. Selling expenses increased $1.5 million, or 12.5%, to $13.5 million in
the year ended December 31, 1995 from $12.0 million in the year ended December
31, 1994. The increase in selling expenses was due to increased advertising,
increased commissions to the outside sales force due to the sales growth and
increased costs of customer service, primarily the addition of branch personnel.
Selling expenses as a percentage of net sales for the years ended December 31,
1995 and 1994 was constant at 17.3%.

General and administrative expenses increased $1.1 million, or 18.6%, to
$7.0 million in the year ended December 31, 1995 from $5.9 million in the year
ended December 31, 1994. General and administrative expenses as a percentage of
net sales for the year ended December 31, 1995 was 9.0%, as compared to 8.4% in
the year ended December 31, 1994. The increase in general and administrative
expense was primarily due to increased distribution costs to process the
increased sales volume, a planned increase in corporate functions to position
the Company for future growth and the costs associated with opening three new
branches during 1994 and 1995.

Income from Operations. Income from operations increased $1.2 million, or
54.9%, to $3.4 million in the year ended December 31, 1995 from $2.2 million in
the year ended December 31, 1994. Income from operations as a percentage of net
sales was 4.3%, as compared to the 3.1% for the year ended December 31, 1995.
This increase reflects the effect of the increase in gross profit margins offset
by the increase in selling, general and administrative expenses.

Interest Expense, Net. Interest expense, net of interest income, increased
$0.6 million, or 68.5%, to $1.4 million in the year ended December 31, 1995 from
$0.8 million in the year ended December 31, 1994. Interest expense as a
percentage of net sales increased to 1.8% from 1.2% in the year ended December
31, 1994. This was due to increased levels of debt to support the Company's
growth.

Net Income. Net income increased $0.6 million, or 47.0%, to $1.9 million in
the year ended December 31, 1995 from $1.3 million in the year ended December
31, 1994. Net income as a percentage of net sales was 2.5%, as compared to 1.9%
for the year ended December 31, 1994. This increase reflects the effect of the
increase in gross profit margins, offset by the increases in operating expenses
and interest expense.

24
<PAGE> 25

QUARTERLY RESULTS OF OPERATIONS; SEASONALITY

The following table sets forth certain unaudited quarterly consolidated
financial data for each of the nine consecutive quarters beginning April 1,
1995. This information was derived from unaudited consolidated financial
statements that include, in the opinion of the Company, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
when read in conjunction with the consolidated financial statements of the
Company and notes thereto included elsewhere in this Prospectus. In the
contractor supply industry, seasonality generally affects quarterly sales
performance. Historically, the Company's quarterly sales in the fourth fiscal
quarter (January through March) are lowest and quarterly sales in the second
fiscal quarter (July through September) are highest. This variance is primarily
due to uncontrollable weather conditions and a somewhat predictable annual
construction cycle. White Cap manages the impact of seasonality trends by
focusing on such critical issues as staffing requirements and trends in
inventory turns.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, June 30,
1995 1995 1995 1996 1996 1996 1996 1997(a) 1997(a)(b)
-------- ------------- ------------ --------- -------- ------------- ------------ --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $ 20,081 $21,564 $ 20,354 $19,511 $ 23,509 $24,999 $ 22,383 $30,880 $ 37,311
Gross profit...... 6,240 6,560 6,484 5,884 7,517 8,044 6,987 9,482 11,463
Income from
operations...... 1,160 942 924 214 1,282 1,592 498 1,283 2,040
Net income
(loss).......... 816 582 483 (228) 849 1,206 215 525 403
</TABLE>

- ---------------
(a) Includes the results of operations for A-Y Supply, which was acquired
effective January 1, 1997.

(b) Includes the results of operations for Stop Supply and Viking Distributing,
which were acquired effective May 1, 1997 and June 25, 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary capital needs have historically been to fund (i) the
working capital requirements necessitated by its sales growth, (ii) acquiring
and operating acquired companies and (iii) distributions to the prior sole
shareholder, primarily to satisfy tax liabilities resulting from the prior S
Corporation status. The Company's primary sources of financing have been senior
and subordinated debt, cash from operations and the sale of preferred equity.
After completion of the Offering, the Company anticipates that its cash flows
from operations and available lines of credit will be adequate to support its
operations and strategic acquisition plan for the immediate future and for at
least the next 24 months.

The Company's existing credit facility will be retired upon closing of the
Offering. A new credit facility will be entered into upon closing of the
Offering. The terms of the existing and new credit facilities are described
below.

Existing Credit Facilities

Under the terms of the existing credit facility, the Company has available
secured revolving borrowings of up to $35 million (seasonal sublimit of $38
million) and has an outstanding secured term loan of $10.6 million. Revolving
loans under the existing credit facility bear interest at 0.25% over the agent
bank's prime rate and provides a LIBOR option of 2.5% over the LIBOR rate. Term
loans under the existing credit facility bear interest at 0.75% over the agent
bank's prime rate and provide for a LIBOR option of 3.0% over the LIBOR rate.
The interest rate ranged from 8.1% to 8.75% on revolving loans and 8.6% to 9.3%
on term loans at March 31, 1997. The existing credit facility also contains
certain financial covenants which require the Company to maintain a minimum net
worth, ratio of current assets to current liabilities, ratio of liabilities to
effective net worth, minimum interest coverage ratio and positive net income, to
refrain from capital expenditures in excess of certain amounts and to limit the
payment of dividends. The Company expects to be in compliance with these
covenants upon completion of the Offering and will repay and terminate the above
described credit facility.

25
<PAGE> 26

Post Offering Credit Facilities

Under the terms of the Credit Agreement (as defined), which the Company
expects will take effect shortly after the consummation of the Offering, the
Company will have available borrowings of up to $100 million (including a $75
million delayed draw term facility for acquisitions and a $25 million revolving
credit facility). Interest on amounts borrowed may be paid at the option of the
Company at a rate per annum equal to the lead bank's prime or reference rate, or
alternatively at bankers' acceptance rate or LIBOR rate plus margins, in each
case based upon the Company's ratio of total debt to operating cash flow. The
Credit Agreement is expected to contain certain restrictive covenants limiting
mergers, use of proceeds, indebtedness, liens, investments, sale of assets and
acquisitions. The Credit Agreement is also expected to contain certain financial
covenants which will require the Company to maintain a minimum net worth,
leverage ratio, fixed charge coverage ratio and asset coverage ratio. The
Company expects to be in compliance with these covenants upon completion of the
Offering.

The Company provided net cash from operating activities of $3.6 million for
the fiscal year ending March 31, 1997 compared to net cash provided by operating
activities of $1.4 million and net cash used in operating activities of $0.8
million for the years ended December 31, 1995 and December 31, 1994,
respectively. The increase in cash provided by operating activities was
primarily due to increases in net income and accounts payable and a decrease in
prepaid expenses, together with a continued reduction in the annual increase of
inventory. The increase in cash provided by operating activities was reduced by
a 67% increase in accounts receivable from March 31, 1996 to March 31, 1997.
Such increase was primarily due to a 58% increase in net sales for the
respective quarters.

Cash used in investing activities was $18.0 million, $4.9 million and $1.3
million in the fiscal year ended March 31, 1997, and the years ended December
31, 1995 and December 31, 1994, respectively. The cash used in investing
activities was primarily for capital expenditures and, in the fiscal year ended
March 31, 1997, the purchase of A-Y Supply.

Cash provided by financing activities was $14.4 million, $3.6 million and
$2.1 million in the fiscal years ending March 31, 1997, December 31, 1995 and
December 31, 1994, respectively, primarily from increased borrowings.

Capital expenditures (other than acquisitions) were $2.1 million, $4.5
million and $1.3 million in the fiscal years ended March 31, 1997, December 31,
1995 and December 31, 1994, respectively. The Company expects to spend
approximately $2.8 million on capital expenditures for its existing operations
in the fiscal year ending March 31, 1998, primarily for office and computer
equipment, and branch remodeling and related equipment.

26
<PAGE> 27

BUSINESS

GENERAL

White Cap is one of the leading business to business retailers to
professional contractors in the Western United States. The Company offers over
25,000 stock keeping units ("SKUs") of pro-oriented specialty tools and
materials. In addition, the Company can access the full product lines of most of
its suppliers for drop-shipment to its customers. The Company markets its
products through 20 branch locations, its highly experienced outside sales force
and through the strategic distribution of its in-stock catalogs. The Company has
achieved substantial growth by acquiring leading contractor suppliers in new and
existing markets, expanding product offerings and opening new branch locations.
Since 1987, White Cap's net sales have increased at a compounded annual growth
rate of 23%, resulting from (i) acquisitions (5%), (ii) same store sales growth,
which averaged 17% over the past four years (16%), and (iii) new branch openings
(2%). The Company's active customer base (customers that have purchased at least
one item on open credit during the past 12 months) has grown from approximately
7,000 in 1994 to approximately 16,000 for the pro forma year ended March 31,
1997. For the fiscal year ended March 31, 1997, the Company had pro forma net
sales of approximately $165 million.

The Company operates in a highly fragmented, multi-billion dollar industry.
Management estimates that the total U.S. market for products sold by the Company
is several billion annually and that small, regional contractor suppliers, with
sales of less than $50 million, supply over two-thirds of the pro-contractor
market. With pro forma fiscal 1997 net sales of approximately $165 million, the
Company believes it is one of the largest suppliers to its market niche
nationwide. The Company targets medium- and large-sized professional
contractors, including professional concrete, framing, waterproofing,
landscaping, grading, electrical, mechanical and general contractors.

The Company sells a wide variety of pro-oriented products, including
construction materials, hand tools, fasteners, structural connectors, power
tools, light construction equipment, rebar, bulk and collated gun nails and
specialty cementatious products. In addition, at certain branches the Company
provides rental services on selected items such as brackets and braces used in
the construction of concrete "tilt-up" buildings, power tools and miscellaneous
light construction equipment. The Company's products are used by professional
contractors in new construction, maintenance and repair projects.

GROWTH STRATEGY

27
<PAGE> 28

(iii) expanding product offerings; and (iv) opening new branch locations. The
key elements of the Company's growth strategy are as follows:

Strategic Acquisitions. The Company seeks to acquire leading contractor
suppliers in existing and new markets that will provide geographic
diversification, product line expansion, an established customer base of medium-
and large-sized pro-contractors and a direct sales force. The Company seeks to
consolidate the operations of such acquired companies and eliminate duplicative
overhead expense. White Cap has established a successful track record for
identifying and integrating acquisitions.

Since February 1997, the Company has completed three acquisitions, A-Y
Supply, Stop Supply and Viking Distributing, thereby strengthening its position
as a market leader in the Western United States and adding approximately $63
million to pro forma fiscal 1997 net sales. The Company believes that there are
numerous attractive acquisition opportunities and that the Company's established
reputation as an industry leader, access to capital, sophisticated management
information systems and operating expertise provide it with competitive
advantages in making acquisitions. The initial focus of the Company's
acquisition strategy will be on acquiring specialty contractor suppliers in the
Western United States. The Company initially plans to finance future
acquisitions through borrowings under the Credit Agreement and cash flow from
operations.

In 1991, prior to its recent acquisitions, White Cap acquired seven branch
locations of Abco Hardware Inc. ("Abco"), its then largest competitor in
Southern California. Following this acquisition, White Cap successfully
consolidated four Abco branches with existing White Cap branches and converted
the remaining three Abco branches into the White Cap business model.

Increased Market Share. The Company believes that its position as one of
the largest suppliers in its market niche to pro-contractors in the Western
United States, combined with its established reputation for providing superior
customer service and a wide range of specialty product offerings, will enable
the Company to increase its market share. White Cap's direct sales force
utilizes industry databases to continuously prospect for new customers and new
projects. The Company also works closely with its suppliers and with licensed
architects and engineers to ensure that the specialty product lines it carries
are specified on projects. This effort focuses on targeting medium- and
large-sized professional contractors engaged in construction projects throughout
the Western United States. The Company believes its increased geographical
presence will also allow its customers to consolidate their purchases with White
Cap.

Expanded Product Offerings. The Company believes there are significant
opportunities to further expand its product offerings by distributing profitable
specialty product lines sold by acquired companies but not previously offered at
White Cap locations. As a result of its three most recent acquisitions, the
Company anticipates that it will introduce at its other Southern California
locations approximately 3,500 new SKUs. As an example, the Company expects to
expand A-Y Supply's rental business of brackets and braces used in the
construction of concrete "tilt-up" buildings, as well as the sale of related
products and accessories at certain of the Company's other branches. The Company
also intends to expand the product offerings at its newly acquired branches by
introducing approximately 2,500 new SKUs which have proven successful at White
Cap. The Company has introduced the Simpson Strong-Tie line of structural
connectors and fasteners to the A-Y Supply branches and has expanded the
offering of the Simpson Strong-Tie products carried at the Viking Distributing
branches. The Company anticipates regularly adding new products to its existing
offerings and creating new product categories.

New Branch Openings. The Company continues to evaluate opportunities to
open new branch locations where it can service new customers and provide better
service to its existing customer base. Pursuant to this strategy, the Company
has opened three branch locations since 1994. In 1994, the Company expanded
operations by opening a new branch location to service the rapidly growing Las
Vegas market. In 1995, to capitalize on the improvement in the economy in the
Western United States, the Company further expanded by opening new branch
locations in Denver and Phoenix. These strategic branch openings targeted high
growth markets where management believed the Company could capture significant
market share or further its acquisition strategy by having a competitive
presence in the marketplace.

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<PAGE> 29

INDUSTRY OVERVIEW

The Company operates in a highly fragmented, multi-billion dollar industry.
The Company believes that traditional suppliers, i.e. small regional contractor
suppliers, substantially all which have sales less than $50 million, supply over
two-thirds of the professional contractor market.

The Company believes that the customer base it serves can be classified by
customer type into the following three categories:

Small Professional Contractors. This customer category consists mostly
of home-office based contractors with approximately five or fewer
employees. Small professional contractors typically conduct home
improvement and small commercial projects, such as room additions, patios,
tenant improvements, masonry walls and landscaping. Most purchases are made
directly by the owner/contractor and approximately 90% of their work is
completed without hiring sub-contractors. Purchases by contractors in this
category consist of smaller quantities of many of the SKUs stocked by the
Company. This "multi-trade" category of customer is made up mostly of
professionals doing concrete, masonry, electrical, plumbing and wood
framing projects. Most projects are located within one hour driving
distance from the contractor's base of operations. Small professional
contractors historically have purchased construction supplies from
traditional specialty contractor suppliers, mail order catalogs, hardware
stores and home centers. A relatively small percentage of White Cap's
current net sales are from this customer category.

Medium-Sized Professional Contractors. This customer category is
comprised of contractors with approximately 6 to 50 employees who typically
operate within a relatively small geographical area. Medium-sized
professional contractors may act as general contractors, but usually act as
sub-contractors. The scope of their projects typically includes municipal
projects, retail strip centers, concrete "tilt-up" buildings and
residential construction. This category of customer depends heavily on
customer service, high same-day or next-day order fill rates and same-day
or next-day job-site or yard delivery. White Cap's outside sales force,
with its product knowledge and mobility, is perceived by these customers to
add value. Medium-sized professional contractors historically have been
primarily served by traditional specialty contractor suppliers and, to a
much lesser extent, by mail order marketers, hardware stores and home
centers.

Large Professional Contractors. This customer category is comprised
mostly of companies with over 50 employees that purchase large quantities
of specialty construction products. The large professional contractor bids
on multiple multi-million dollar projects simultaneously. This customer
category completes the major portions of a project acting as a general or
major sub-contractor. Large professional contractors can be bonded for
hundreds of millions of dollars which qualifies them for projects such as
highway bridges, sewage treatment plants, oil refineries, high rise
buildings, hotels, rapid transit projects and other major construction
projects. The large professional contractor is generally located in
multiple states and may have ten or more projects under way at any given
time. Large professional contractors often negotiate contract pricing on
many of the products they routinely purchase and demand a high level of
service. These services include same-day or next-day job-site or yard
delivery, a professional outside sales force and special credit terms.
These customers have historically been served by traditional contractor
suppliers.

The Company's focus on one-stop shopping and "business-to-business"
retailing to medium- and large-sized professional contractors distinguishes it
from many of the traditional specialty contractor suppliers with whom it
competes, as well as from large home centers, whose primary emphasis is on the
"do-it-yourself" ("DIY") consumer market and small maintenance and home
improvement contractors. Management believes that home centers can achieve only
limited market penetration among medium- and large-sized professional
contractors. The Company believes that home centers do not provide the necessary
full range of services required by these customers and lack the sales force to
establish the critical relationships necessary to service this category. The
Company believes it has a competitive advantage over home centers because it is
able to provide the professional contractor a wider range of specialty product
lines; high same-day or next-day order fill rates; same-day or next-day
delivery; a highly experienced technical sales force to provide service on

29
<PAGE> 30

and off the job site; and in-house credit facilities tailored for the
professional contractor. See "-- Competition."

There are numerous traditional contractor suppliers (most with
significantly lower revenues than the Company) in the United States that, to
varying degrees, serve small-, medium- and large-sized professional contractors
in the Company's product offering niche. Most of these contractor suppliers
operate in only one or two metropolitan areas or states. The Company believes
there are only a limited number of suppliers to medium- and large-sized
professional contractors nationwide which have annual sales in excess of $100
million, and these suppliers tend to offer a significantly narrower focused
product line than the Company.

White Cap's management believes that a period of rapid consolidation is
about to commence among traditional contractor suppliers. The Company believes
it is well positioned to capitalize on this consolidation trend and has several
competitive advantages relative to smaller competitors, including access to
capital, a wide range of product offerings and customer services, superior
purchasing power, sophisticated management information systems and an
experienced management team. The Company continues to evaluate potential
acquisitions and negotiates with potential acquisition candidates from time to
time. The Company is currently in discussions with several acquisition
candidates, but, other than with respect to the Proposed Acquisitions, has not
entered into binding commitments or understandings with any of such candidates.
See "Recent Transactions -- Proposed Acquisitions."

THE WHITE CAP BUSINESS MODEL

The Company believes that it has developed a business model that differs
substantially from that of traditional contractor suppliers in the United
States. The key elements of the Company's business model include the following:

Breadth and Depth of Products. The Company has distinguished itself from
the traditional contractor suppliers in the United States by providing the
professional contractor with a "one-stop shopping" alternative. Historically,
pro-contractors have made purchases from multiple suppliers for their specialty
tools and materials. The Company believes that its success has resulted from the
superior range of the specialty merchandise it offers to the professional
contractor. To better serve its customers' needs, the Company offers over 25,000
SKUs in selected pro-oriented product lines, which the Company believes is
substantially more than its competitors. In addition, the Company can access the
full product lines of most of its suppliers for drop-shipment to its customers.
Further, the Company maintains sufficient inventories of products necessary to
satisfy the professional contractor's large project requirements. Through its
high in-stock position and inventory management systems, the Company is able to
fulfill approximately 95% of the items included in each customer order and
provide same-day or next-day delivery.

Innovative Retail Merchandising Techniques. Management believes that White
Cap's continued growth has been the result of the implementation of innovative
retail merchandising techniques not previously utilized in marketing to medium-
and large-sized professional contractors. The Company believes its ratio of
"walk-in" and "will call" business, which is approximately 60% of net sales, is
among the highest in the industry. Traditional contractor suppliers have
historically operated on the basis of filling orders from a "closed warehouse"
with a limited display or showroom area. White Cap was among the first in its
industry to utilize "business-to-business" retail marketing techniques and the
"open warehouse" merchandising concept in the Company's sales branches,
providing the customer complete access to the products in stock both inside its
branches and in the adjacent outdoor storage yards. The typical White Cap branch
utilizes such merchandising techniques as strategic placement of product groups,
innovative product displays and video monitors showing product demonstration
tapes. Frequent in-store promotional events, such as power tool demo days,
product seminars and customer appreciation days, are examples of a few of the
retail marketing techniques employed by the Company. Through its merchandising
orientation and its innovative and aggressive marketing, including catalogs,
monthly mailings, radio advertising and trade show attendance, the Company
attracts customers to its sales branches to expose them to the wide range of
White Cap's specialty product offerings and to promote in-store purchases.

Sales Force/Customer Service. The Company's sales force consists of
approximately 178 salespersons committed to providing the highest level of
customer service. The highly skilled and knowledgeable sales force

30
<PAGE> 31

is of crucial importance to the Company's success as the salespersons'
relationships with their customers and their emphasis on customer service are
the factors which result in customer loyalty and repeat business The Company's
operating model includes one inside salesperson for approximately every two
outside salespeople. Inside salespeople are responsible for telemarketing,
processing orders and providing timely follow-up to customers' questions. The
Company's inside sales force also has the ability to locate hard-to-find
products and process special orders. White Cap's outside sales force generates
sales by making office sales calls and/or making direct sales calls to actual
job sites. In addition, the outside sales force utilizes sales leads generated
from industry databases, trade shows, vendors/suppliers, the inside counter
sales force and telemarketing. The Company's highly experienced outside sales
force is integral to the Company's efforts to add new customers and generate
additional revenue from existing customers. White Cap's outside sales force has
an average of 15 years industry experience and an average tenure of over six
years with the Company and sells the Company's products on an exclusive basis.
The Company's salespersons regularly receive product training both from internal
and external sources to ensure they are current on all product developments. As
a result the sales force is able to provide product recommendations as well as
job-site assistance and instruction. Approximately 80% of the Company's outside
sales force is paid on a 100% commission basis. The Company believes that its
increased geographic presence will more effectively allow its sales force to
serve medium- and large-sized professional contractors with projects in multiple
regions throughout California and in other targeted states.

In-Stock Catalogs and Publications. The Company provides its customers with
in-stock catalogs displaying and listing over 11,000 of the best-selling SKUs
maintained in stock. The in-stock catalogs are distributed in the branches and
by the outside sales force to approximately 40,000 professional contractors. In
addition, the Company publishes monthly the Contractor Trader which features
selected items which are on sale, as well as technical information and articles
of interest to the industry. The Contractor Trader is distributed via direct
mail to over 75,000 contractors and other industry professionals. As a result of
its consistent focus on this type of marketing, a high percentage of White Cap's
customers shop at its well stocked branches or order desired products from the
Company's in-stock catalogs. Orders are also placed directly with the outside
sales force, by telephone or facsimile. The Company is also implementing
electronic data interchange ("EDI") to better serve the ordering and invoicing
needs of its customers.

Job-Site/Yard Delivery. The Company's customers ordinarily receive next
business day delivery via the Company's fleet of delivery trucks. The Company
believes this is of crucial importance to professional contractors who rely on
the Company's reputation for on-time delivery in order to meet their critical
"just-in-time" ordering requirements and strict job production schedules. In
addition, the majority of the Company's branch managers and outside sales force
are provided with Company vehicles, usually standard pickup trucks which may be
used to supplement the Company's fleet of delivery trucks and to provide "rush"
or special delivery services.

Credit Facilities Designed for the Professional Contractor. The Company
offers its customers credit options including in-house credit lines, job-based
credit lines, revolving private label third party charge accounts and third
party equipment leasing lines. Approximately 80% of White Cap's sales are on
open account with the credit managed by White Cap's in-house credit department.
Historically, White Cap has experienced a net accounts receivable bad debt
write-off rate averaging 0.3% of net sales of the period from January 1992 to
March 31, 1997.

Strong Supplier Relationships. The Company purchases from more than 1,200
suppliers, 98% of which are manufacturers. This focus on making purchases
directly from manufacturers provides it a substantial cost advantage over
traditional contractor suppliers who historically relied more heavily on higher
cost purchases from wholesalers. Management believes that the Company's
increasing volume purchasing power as a leading contractor supplier in the
Western United States will allow it to obtain even lower prices, more favorable
credit terms, increased co-op advertising support and increased freight
allowances. White Cap enjoys excellent relationships with all of its key
suppliers and is one of the largest customers in its channel. In some of the
markets that it serves, the Company has exclusive or semi-exclusive product
distribution agreements.

Commitment to Systems Innovation. The Company has made substantial
investments in computer hardware and the development of computer software
applications which it believes allow it to achieve cost

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<PAGE> 32

savings, deliver superior customer service and centrally manage its operations.
White Cap's software applications are continually being enhanced and new
applications are continually being developed. The Company has recently installed
a customized integrated software package that provides order entry, purchasing,
inventory control, accounts receivable, accounts payable and financial statement
reporting. Among other applications, White Cap's new software is specifically
designed to track on a real-time basis the inventory level of each SKU by
branch, forecast demand by SKU and calculate appropriate reorder quantities and
lead times to maximize fill rates while minimizing inventory carrying costs. As
part of the integration of the White Cap business model at acquired companies,
branches are linked to White Cap's central computer system and are converted
over to the Company's management information systems.

OPERATIONS

Products

White Cap offers its customers over 25,000 SKUs through its 20 branch
locations. The Company sells a wide selection of brand name specialty products
for professional contractors, including: building materials, specialty
cementatious products, hand tools, fasteners, structural connectors, power
tools, light construction equipment, rebar and bulk and collated gun nails. In
addition, the Company sells certain products, including waterproofing products,
construction adhesives and collated nails, under its own private label. Such
products accounted for approximately 8% of sales in fiscal 1996 and serve to
increase recognition of the White Cap name. In addition, in certain branches the
Company provides rental services on selected items such as brackets and braces
used in the construction of concrete "tilt-up" buildings, power tools and light
construction equipment. The Company's products are used by professional
contractors in new construction, maintenance and repair projects.

The following table sets forth the Company's major product groups and the
key products offered in each category.

<TABLE>
<CAPTION>
PRODUCT CATEGORY TYPES OF PRODUCTS SOLD
- ---------------------------------------- ---------------------------------------------------
<S> <C>
Construction Materials.................. rebar, wire mesh, specialty cementatious products,
concrete adhesives, concrete curing compounds,
sealers, coatings, sealants, expansion joints
Hand Tools.............................. trowels, hammers, shovels, levels, screwdrivers,
rakes, wrenches, tape measures, ratchets and
sockets, boltcutters, wheelbarrows
Fasteners............................... machine bolts, allthread, bulk nails, gun nails,
anchor bolts, nuts, bolts, screws, mechanical
anchoring systems, staples used for roofing and
packaging
Structural Connectors................... embedded truss anchors, beam seats, holddowns,
purlin anchors, foundation anchors, post bases,
column caps, joist hangers, strap ties, framing
anchors, seismic and hurricane ties
Power Tools............................. hammer drills, rotary hammers, grinders, breaker
hammers, demolition hammers, saws, routers,
cordless drills and saws
Waterproofing Materials................. negative side water proofing products, coatings and
sealers, hydraulic cement, membrane protection
systems, bentonite waterproof systems
Light Construction Equipment............ brick and block saws, power trowels, concrete saws
and coring equipment, compactors, concrete mixers,
generators, pumps, compressors, concrete screeds
and material spreaders, surveying instruments,
pipe/conduit cutting, bending and threading
equipment
Cutting Tools........................... diamond concrete cutting blades, diamond
brick/block cutting blades, diamond coring bits,
saw blades for cutting wood, plastics and metal,
abrasive blades for cutting masonry, concrete and
metal
Rental Tools, Equipment and Braces...... tilt-up braces, compressors, generators, man-lifts,
concrete finishing machines and saws, pressure
washers, sprayers
</TABLE>

32
<PAGE> 33

<TABLE>
<CAPTION>
PRODUCT CATEGORY TYPES OF PRODUCTS SOLD
- ---------------------------------------- ---------------------------------------------------
<S> <C>
Drainage Materials...................... surface drainage systems, plastic drainage pipe,
ground stabilization fabric, subsurface drainage
systems, filter fabric
Landscape Lighting...................... wire and cable, transformers, outdoor fixtures,
pathway lights, step and deck lights, underwater
lights, bulbs and connectors
Accessories............................. safety equipment and barricades, welding equipment
and supplies, brooms, mops, buckets, water coolers,
boots, gloves, hard hats, lubricants
</TABLE>

Store Design

All of the Company's branches are well-stocked and staffed by highly
trained sales personnel. The Company's prototypical store format consists of
approximately 15,000 to 20,000 square feet of interior floor space, plus an
adjacent outdoor storage yard of approximately equal square footage. The
majority of the Company's original branches are designed as open warehouses
providing the customer complete access to the products in stock both inside the
store and in the adjacent outdoor storage yards. The Company believes that the
open warehouse design of its branches, where its customers can browse through
the aisles, gives the Company a competitive advantage over most traditional
contractor suppliers whose branches have small showrooms and sales counters.

The Company expects to convert the eight branches acquired since February
1997 to the Company's business model over the next year. This conversion process
is being scheduled to avoid the disruption of day-to-day operations during busy
quarters.

Customers

White Cap sells to a variety of professional general and specialty building
trade contractors in all three of the customer categories described above. The
Company's primary customers include general, concrete, framing, waterproofing,
landscape, grading, electrical and mechanical contractors. The Company believes
that the professional relationships maintained through its outside sales force
with its customers are of critical importance. The Company's revenues are
divided approximately equally between contractors engaged in residential
construction and contractors engaged in commercial or infrastructure
construction and maintenance projects.

As of June 30, 1997, White Cap had over 16,000 customers that have
purchased at least one item on open account during the past 12 months, in
addition to customers that do not have established credit accounts and pay upon
purchase. No one customer generates more than 1% of pro forma net sales. For the
fiscal year ended March 31, 1997, the Company's top ten customers in the
aggregate generated less than 7% of sales.

Marketing

The Company has implemented innovative retail merchandising techniques not
previously utilized in marketing to medium- and large-sized professional
contractors. White Cap was among the first in its industry to utilize
"business-to-business" retail marketing techniques and the "open warehouse"
merchandising concept in the Company's sales branches. Because of its
merchandising and marketing orientation, including innovative catalogs and
monthly mailings, creative radio advertising spots and trade show booths, the
Company believes, based on a review of sales information of its acquired
businesses and potential acquisition candidates, that it attracts three to four
times as many customers to its sales branches than most of its competitors. The
typical branch implements retail merchandising techniques such as the strategic
placement of product groups, innovative product displays and video monitors
showing product demonstration tapes. Frequent in-store promotional events, such
as power tool demo days, product seminars and customer appreciation days, are
examples of a few of the marketing techniques employed by the Company.

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<PAGE> 34

White Cap and its recently acquired companies, Viking Distributing, A-Y
Supply and Stop Supply, publish in-stock catalogs, the most recent editions of
which list over 11,000 of the best selling SKUs maintained in stock. The 1998
edition of the White Cap in-stock catalog will include SKUs not previously
carried by White Cap, many of which were previously carried by the recently
acquired companies. The Company's professionally prepared catalog has over 400
pages creatively displaying the broad array of products carried by the Company.
The combined catalogs are distributed in the branches and by the outside sales
force to approximately 40,000 professional contractors. In addition, the Company
publishes monthly the Contractor Trader which features sale pricing on selected
products as well as tips and articles of interest to the industry. The
Contractor Trader is distributed to over 75,000 professional contractors and
other industry participants. The Company has expanded its distribution of the
Contractor Trader to cover all customers of A-Y Supply, Stop Supply and Viking
Distributing since their acquisition.

Suppliers

White Cap enjoys well established relationships with all of its key
suppliers and has maintained many of these relationships for over 10 years. The
Company is one of the primary distributors for many industry brand names. In
some of the markets that the Company serves, it has exclusive or semi-exclusive
product distribution agreements, which gives it a competitive advantage on
specific product lines. Management believes that outstanding supplier
relationships and White Cap's position in the marketplace allow the Company to
have one of the lowest inventory costs in the industry. Many of the products
carried by the Company are not carried by its competitors, because they cannot
provide technical assistance in the field. In addition, many of White Cap's
products are specified by architects for particular projects because of the
efforts of the Company's professional outside sales force working in conjunction
with the manufacturer's architectural sales representatives. Many of its top
suppliers differentiate the Company as an "industrial distributor" as opposed to
a "DIY retailer." In some instances this gives the Company access to a
manufacturer's "full product line," lower prices and more favorable credit
terms.

The Company purchases from more than 1,200 suppliers, 98% of which are
manufacturers. The fact that no one supplier accounts for more than 10% of its
purchases minimizes the effects of supplier-related product shortages. The
Company carries major brands such as those identified in the following table.

Air Nail Company
American Honda Motor
Company, Inc.
Black and Decker (U.S.), Inc.
Davis Wire Corporation
Dayton Superior Corp.
Diamond Products
Electricord/A Leviton Company
Hitachi Power Tools U.S.A., Ltd.
Itochu Building Products
Company, Inc.
ITW Ramset/Red Head
Knaack Manufacturing Company
L.M. Scofield Company
Makita U.S.A. Inc.
Master Builders Technologies
Milwaukee Electric Tool
Corporation
Motorola Corporation
Multiquip, Inc.
Nicolon/Mirafi Group
Pacific Polymers, Inc.
Pacific Stihl, Inc.
Sika Corporation
Simpson Strong-Tie Company,
Inc.
S-B Power Tool Company
Soff-Cut International
Stanley-Proto Industrial Tools
3M
W.R. Meadows, Inc.
Werner Ladder Company
Weyerhaeuser Company

MANAGEMENT INFORMATION SYSTEMS

The Company has made substantial investments in computer hardware and the
development of computer software applications which it believes allow the
Company to achieve cost savings, deliver superior customer service and centrally
manage its operations. As part of the integration of the White Cap business
model at acquired companies, branches are linked to the Company's central
computer system and are converted to the Company's software applications,
including point-of-sale, order processing, order fulfillment, inventory
management, purchasing and financial reporting. White Cap's software
applications are continually being developed and enhanced. The Company has
recently installed a customized software package that provides order entry,
purchasing, inventory control, accounts receivable, accounts payable and
financial statement reporting. The software also provides a fully integrated
distribution/warehouse management system. The

34
<PAGE> 35

Company's new software is specifically designed to track on a real-time basis
the inventory level of each SKU by branch, forecast demand by SKU and calculate
optimum reorder quantities and lead times to maximize fill rates while
minimizing inventory carrying costs.

The Company's inventory management software is designed to minimize the
Company's cost of goods sold by forecasting and analyzing sales history for
every SKU in its inventory. The system can then calculate order quantities and
lead times and determine the lowest cost source of supply. Each and every order
is tracked from data entry to will call or delivery. Utilizing its customer
support software, the Company's customer service representatives are able to
inform customers on a real-time basis of the Company's in-stock position and
recommend an array of substitute products for discontinued or out-of-stock
items. In addition, the Company's system has the ability to accept and
cross-reference the product codes of suppliers and manufacturers, Universal
Product Codes (UPCs) and its own proprietary product codes. The Company is
implementing EDI in order to streamline purchasing, accounts receivable and
accounts payable.

CUSTOMER CREDIT

Approximately 80% of White Cap's sales are on open account, managed by
White Cap's in-house credit department. The Company offers its customers several
credit options including: 2% tenth prox credit terms, job-based credit lines,
revolving private label third party charge accounts and third party equipment
leasing lines. Unlike the large home centers, which do not create a "direct"
receivable from their customers, the Company utilizes its own credit facility to
allow its customers to charge their purchases. Each in-house account is opened
and credit terms are set according to the customer's creditworthiness and
purchasing profile after review by White Cap's credit department. Each account
is put on a real-time monitoring status and assigned an in-house credit manager
who communicates directly with the customer on any credit-related issues. In
addition, most state lien laws allow the Company to file a preliminary lien
notice with the owner of the real property, the lender and the general
contractor that the Company has extended credit for materials used in the
improvement of real property. A properly filed preliminary notice gives the
Company certain legal remedies, including lien rights, which allow it to look
beyond its customer for the recovery of a past due job-based receivable.

Historically, White Cap has experienced a net accounts receivable write-off
rate averaging 0.3% of net sales over the period from January 1992 to March
1997. The Company believes its collection performance can be attributed to: (i)
a credit department with extensive experience in construction credit; (ii) a
real-time customized accounts receivable software package; (iii) thorough
screening of all new accounts; and (iv) the ongoing monitoring and reevaluation
of existing accounts.

COMPETITION

White Cap competes against a broad range of building material dealers,
specialty contractor suppliers, home centers, retail hardware stores and mail
order marketers within the markets it serves. The majority of traditional
contractor suppliers in the Company's markets have only one or two locations.
White Cap competes with several multiple branch operators, all of whom
management believes have lower annual revenues than White Cap. Several specialty
contractor suppliers with revenues greater than the Company also compete in the
Company's markets, including Carlson Corporation, which specializes in
fasteners; Hilti Fastening Systems -- USA, which specializes in fastener systems
and power tools; and Fasteners, Inc., which specializes in tools and fasteners.
The Company believes that it provides a much wider range of products to service
more of the professional contractor's needs than these specialty contractor
suppliers.

The Company believes its focus on medium- and large-sized pro-contractors
distinguishes it from home center chains, whose primary emphasis is on the DIY
consumer market and small maintenance and home improvement contractors. The
Company believes that the services it offers the pro-contractor and the
relationship of its sales force with the professional contractor would be
difficult for home centers to replicate under their current structure which is
oriented more towards the DIY consumer market. However, the Company believes
that home centers are attempting to gain market share among medium-sized
professional contractors, by providing limited delivery services and limited
commercial credit facilities. In addition, the

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<PAGE> 36

Company believes that the largest of such chains have explored, and continue to
explore, competing in the medium and large pro-contractor categories through
in-house contractor sales efforts.

PROPERTIES

The Company's corporate headquarters and main distribution facility are
located in approximately 38,000 square feet of leased space (plus an adjacent
yard area of approximately 70,000 square feet) at 3120 Airway Avenue, Costa
Mesa, California. This facility is strategically located close to key major
freeways and is situated adjacent to Orange County's John Wayne Airport. White
Cap's credit and inventory control departments are operated from a separate
leased office facility in Santa Ana, California.

Approximately 40% of the SKUs stocked by the Company in its branches are
warehoused at its distribution facility in Costa Mesa, California. The Company
is implementing a program to increase drop-shipments by its suppliers directly
to branches and as a result expects the percentage of goods warehoused in the
distribution facility to continue to decline. The Company's fleet of transfer
trucks make scheduled deliveries from its distribution facilities to its 17
California branches. In addition, common carriers are used to resupply the
Company's out-of-state branches.

The Company maintains 20 branch locations in California, Nevada, Arizona,
and Colorado, all of which are leased. The leases for these 20 branches expire
at various periods between 1998 and 2007. The aggregate annual lease payments on
these properties, as of July 1997 was approximately $2,200,000. The Company also
owns a 7,500 square foot warehouse facility adjacent to its Las Vegas branch.
The Company believes that its facilities are adequate for its current needs and
that suitable additional space will be available as needed to facilitate the
Company's growth strategy. The following sets forth information concerning the
Company's operating facilities.

<TABLE>
<CAPTION>
BUILDING SQUARE YARD SQUARE
BRANCH LOCATION FOOTAGE FOOTAGE TOTAL
- ------------------------------------------------------- --------------- ----------- -------
<S> <C> <C> <C>
Chatsworth, CA......................................... 20,020 41,230 61,250
San Diego, CA.......................................... 16,261 41,951 58,212
Santa Ana, CA.......................................... 27,504 31,536 59,040
Paramount, CA.......................................... 22,320 21,710 44,030
Sacramento, CA......................................... 23,200 19,680 42,880
Ventura, CA............................................ 13,158 22,370 35,528
Riverside, CA.......................................... 17,670 17,925 35,595
San Juan, CA........................................... 14,970 17,362 32,332
Fresno, CA............................................. 21,040 6,390 27,430
Thousand Palms, CA..................................... 7,840 15,316 23,156
Temecula, CA........................................... 9,430 13,650 23,080
Stockton, CA........................................... 10,500 8,925 19,425
San Leandro, CA........................................ 13,452 6,629 20,081
Santa Rosa, CA......................................... 11,100 630 11,730
San Francisco, CA...................................... 52,000 20,000 72,000
Dublin, CA............................................. 10,000 0 10,000
San Jose, CA........................................... 9,800 3,000 12,800
Phoenix, AZ............................................ 13,230 24,400 37,630
Denver, CO............................................. 9,676 10,076 19,752
Las Vegas, NV.......................................... 10,505 21,095 31,600
------- ------- -------
Total........................................ 333,676 343,875 677,551
======= ======= =======
</TABLE>

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<PAGE> 37

EMPLOYEES

As of July 31, 1997, White Cap had approximately 640 employees, consisting
of approximately 106 at its Costa Mesa, California headquarters and 534 at its
branch locations. White Cap's sales force consists of 178 sales professionals.
The Company considers its relations with its employees to be satisfactory.

LITIGATION

The Company is from time to time a party to litigation arising in the
normal course of its business. Management believes that none of these actions
will have a material adverse effect on the financial condition or results of
operations of the Company.

37
<PAGE> 38

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE COMPANY

The directors, executive officers and key employees of the Company and
their respective ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Greg Grosch 50 Chairman of the Board of Directors, Chief Executive Officer and
President
Richard Gagnon 44 Senior Vice President and National Sales Manager
Dan Tsujioka 48 Executive Vice President -- Merchandising, Secretary and Director
Chris Lane 36 Chief Financial Officer and Director
Jack Karg 48 Vice President and Chief Operations Officer
Brian Etter 32 Vice President and Treasurer
Gary Zwilling 50 Director of Credit
Charles Gruden 48 Director of Human Resources
Michael Monroe 48 Regional Vice President Sales
Albert Malatesta 57 Regional Vice President Branch Operations
Mark King 37 Director
James Johnson 59 Director
Charles Hamilton 49 Director
</TABLE>

Mr. Grosch is Chairman, Chief Executive Officer and President of the
Company and has nearly 25 years experience in retailing. In 1976, Mr. Grosch
formed White Cap Industries, Inc. and since then has directed and been directly
involved in all aspects of the business and implementation of the Company's
growth strategy. Prior to joining the Company, Mr. Grosch held sales and
marketing positions with a major regional grocery chain and a national oil
company. Mr. Grosch holds a Bachelor's Degree in marketing from California State
University -- Northridge.

Mr. Tsujioka joined the Company in November 1996 as Executive Vice
President and was elected Director in February 1997. In July 1997, Mr. Tsujioka
was appointed Executive Vice President -- Merchandising, with responsibility for
Company-wide merchandising. Mr. Tsujioka was a member of the original founding
group and the first general manager of Home Depot, Inc., where he started the
first prototype warehouse for Home Improvement Supplies (the predecessor to Home
Depot). Mr. Tsujioka was with Home Depot and its predecessors from 1980 to 1989.
From 1994 to 1995, Mr. Tsujioka served as Vice President of Special Projects for
Home Depot training store managers and district managers in a "back to basics"
training program. From 1995 to 1996, Mr. Tsujioka was Vice President of
Merchandising for Home Depot. From 1989 to 1993, Mr. Tsujioka was retired.

Mr. Gagnon joined the Company in 1979. Since 1985, he has been Senior Vice
President and National Sales Manager of the Company overseeing the Company's
sales force. Mr. Gagnon has over twenty years experience in the contractor
supplier industry and also holds a California contractor's license.

Mr. Lane has been a special consultant to the Company since 1995 and was
appointed Chief Financial Officer of the Company in April 1997. Mr. Lane was
elected as a Director of the Company in February 1997. From 1992 to 1997, Mr.
Lane performed merger and acquisition and litigation support services as a
partner with the Orange County, California accounting firm of Kieckhafer, Lane &
Schiffer LLP. From 1986 to 1992, Mr. Lane was with Arthur Andersen LLP. He was
an Audit Manager when he left the firm in 1992. In June 1997, Mr. Lane also
entered into an agreement with KRG Capital agreeing to act as a Director of KRG
Capital.

Mr. Karg joined the Company in 1995 as Chief Operations Officer. From 1979
to 1995, Mr. Karg was employed at Audiovox Corporation, where he progressed from
Credit Manager handling thirteen western states to Assistant Vice President of
West Coast Operations to Vice President of Western Operations in 1988.

38
<PAGE> 39

As Vice President of Western Operations, Mr. Karg was responsible for all
aspects of operations of Audiovox's automotive and cellular businesses.

Mr. Etter joined the Company in July 1997 as Vice President and Treasurer.
From 1992 to 1997, Mr. Etter was employed with Apria Healthcare Group ("Apria"),
where he progressed from Finance Manager to Director of Operational Finance in
1994. As Director of Operational Finance, Mr. Etter was responsible for the
financial management and analysis of over 350 branches and five divisions. At
Apria, Mr. Etter actively participated in the planning and integration of over
35 acquisitions and in the merger of the two largest competitors in the home
healthcare industry. From 1989 to 1992, Mr. Etter was with Arthur Andersen &
Company. He was an Audit Senior in the Enterprise Group when he left the firm in
1992.

Mr. Zwilling joined the Company in August of 1985 and serves as Director of
Credit. Previously, he spent three years with Knox Industrial Supply as credit
manager and six years with Orco Construction Supply as credit manager and
controller.

Mr. Gruden joined the Company in April 1997 and serves as Director of Human
Resources. Previously, Mr. Gruden spent seven and half years at IKEA as an Area
Human Resource Manager and was responsible for over 1,000 employees in IKEA's
Western region.

Mr. Monroe joined the Company in June 1997 as Regional Vice President
Sales. From 1982 to June 1997 he was the President and an owner of Viking
Distributing. From 1977 to 1982, Mr. Monroe was an Outside Sales Representative
for Viking Distributing Supply Company.

Mr. Malatesta joined the Company in June 1997 as Regional Vice President
Branch Operations. From 1982 to June 1997, he was the Vice President, Operations
Manager, and an owner of Viking Distributing. Previously, Mr. Malatesta spent
twenty-six years at R&H Wholesale Hardware where he progressed to General
Manager.

Mr. King has been a director of the Company since February 1997. Mr. King
is the founder and Managing Director of KRG Capital. Mr. King has 14 years
experience as a senior executive, an investment banker and the lead principal in
the completion of 15 strategic acquisitions involving middle market companies.
From September 1994 to January 1996, Mr. King served as Vice President of LM
Capital Corporation, a registered investment advisor specializing in private and
public equity investments and strategic acquisitions. From 1988 to 1992, Mr.
King was the Co-Founder, President and Vice Chairman of Industrial Services
Technologies, Inc. ("IST"), a provider of maintenance services to the refinery,
fertilizer and chemicals industries and from 1992 to the present, he has served
as Vice Chairman of IST. Mr. King serves as a director of various private
companies.

Mr. Johnson has been a director of the Company since February 1997. Mr.
Johnson is the co-founder of and has been a Managing General Partner of Apex
Investment Partners, a Chicago based manager of investment funds, since 1988.
Prior to founding Apex, from 1986 to 1988, Mr. Johnson was the co-founder and
general partner of Knightsbridge Partners, an investment banking firm. From 1974
to 1986, Mr. Johnson served in various positions, including Senior Vice
President, with Beatrice Companies. From 1965 to 1974, Mr. Johnson held various
positions, including Senior Manager, with KPMG Peat Marwick. Mr. Johnson serves
as a director of various private companies.

Mr. Hamilton has been a director of the Company since February 1997. Mr.
Hamilton has over 26 years of investment experience in the fields of securities
analysis, corporate finance and venture capital. He is currently a principal in
the private equity group at Robertson, Stephens & Company, where he has also
served as a managing director since 1981. Mr. Hamilton has served as a director
of numerous venture-financed companies in recent years and he is presently on
the board of eight private companies.

At present all directors are elected and serve until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal.
There are no family relationships between any of the Directors or executive
officers of the Company. Following the consummation of the Offering each
director shall serve until the following annual meeting when a successor is duly
elected and qualified or until his or her earlier death, resignation or removal.

39
<PAGE> 40

In addition, following the consummation of the Offering, the Company
intends to appoint at least two additional outside directors.

COMMITTEES OF THE BOARD

The Board of Directors has established an Audit Committee and a
Compensation Committee. The initial members of the Audit Committee are Messrs.
King, Johnson and Hamilton. The Audit Committee oversees actions taken by the
Company's independent auditors, recommends the engagement of auditors and
reviews the Company's internal accounting policies and practices. The initial
members of the Compensation Committee are Messrs. King, Johnson and Hamilton.
The Compensation Committee approves the compensation of executives of the
Company, makes recommendations to the Board of Directors with respect to
standards for setting compensation levels and administers the Company's
incentive plans. The Company expects that the two outside directors appointed
following the Offering will join the Audit and Compensation Committees.

COMPENSATION OF EXECUTIVE OFFICERS

The following tables set forth the cash compensation of the Chief Executive
Officer and the three other most highly compensated executive officers of the
Company for the year ended March 31, 1997. No other person who served as an
executive officer of the Company during the fiscal year ended March 31, 1997
received compensation which exceeded $100,000 for such year.

<TABLE>
<CAPTION>
CASH COMPENSATION(A)
--------------------- ALL OTHER
OFFICERS CAPACITIES IN WHICH SERVED SALARY BONUS(B) COMPENSATION(C)
- --------------- ---------------------------------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Greg Grosch Chairman, President and Chief $408,763 $ -- $33,419
Executive Officer
Richard Gagnon Senior Vice President and National 190,649 121,507 5,218
Sales Manager
Gary Joslin Treasurer(d) 157,500 2,000 --
Jack Karg Vice President and Chief 97,731 30,000 --
Operations Officer
</TABLE>

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

(a) Amounts shown include compensation for services rendered in all capacities
to White Cap during the year ended March 31, 1997.

(b) Includes all cash bonuses earned during year ended March 31, 1997 and paid
during the year ended March 31, 1997 or subsequent thereto. Also includes
all cash bonuses paid during year ended March 31, 1997 for services rendered
during the year ended March 31, 1996.

(c) Amounts shown include the Company's contribution to the named individuals'
401(k) plan, life insurance and additional disability and unemployment
policies.

(d) Mr. Joslin also served as the Company's Chief Financial Officer during the
fiscal year ended March 31, 1997. Mr. Joslin resigned from his position with
the Company in July 1997.

40
<PAGE> 41

STOCK OPTION GRANTS

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following discloses options granted during the year ended March 31,
1997 for the executives named in the compensation table above.

<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed Annual
---------------------------------------------------------------- Rates of Stock Price
NUMBER OF % of Total Appreciation
SECURITIES Options/SARs for Option Term(d)(e)
UNDERLYING Granted to ------------------------------
OPTIONS/SARS Employees in Exercise of Expiration 5% Annual 10% Annual
NAME GRANTED(#)(a)(b) Fiscal Year(%) Base Price($) Date(c) Growth Rate($) Growth Rate($)
- -------------------- ---------------- --------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Greg Grosch -- -- -- -- -- --
Richard Gagnon -- -- -- -- -- --
Gary Joslin -- -- -- -- -- --
Jack Karg 24,795 3.8% $2.48 March 31, 2007 $ 38,693 $ 97,654
</TABLE>

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

(a) All of such options were granted under the Existing Plan (as defined).

(b) The options vest in equal installments over a five-year period.

(c) The options granted are subject to earlier termination and repurchase upon
the occurrence of certain events related to termination of employment.

(d) The dollar amounts in these columns represent potential value that might be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming that the market price of the Common Stock appreciates
in value from the date of the grant at the 5% and 10% annual rates
prescribed by regulation, and therefore are not intended to forecast
possible future appreciation, if any, of the price of the Common Stock.

(e) In calculating the potential realizable value, the Company used an estimated
market price of $2.48 per share as of the grant date.

COMPENSATION OF DIRECTORS

Member of the Company's Board of Directors serve without cash compensation.
Upon completion of the Offering, directors will be eligible for incentive awards
under the Incentive Plan (as defined). See "-- Equity Incentive Plan."

EMPLOYMENT AGREEMENTS

Grosch Employment Agreement. In November 1996, the Company and Mr. Grosch
entered into an employment agreement (the "Grosch Employment Agreement")
providing for Mr. Grosch's employment as Chairman, President and Chief Executive
Officer. The initial employment period expires November 2001 and will
automatically extend for successive one year periods thereafter unless the
Company or Mr. Grosch gives notice of intent not to renew.

The Grosch Employment Agreement provides for an initial base salary of
$300,000 plus (i) an annual incentive bonus based upon the Company's operating
performance and (ii) specified cost of living increases. In addition, the
Company has taken out a key man life insurance policy on Mr. Grosch's life
payable to the Company but assigned to the Company's lenders.

Upon termination by Mr. Grosch for good reason or termination by the
Company without cause, Mr. Grosch would be entitled to receive his base salary
during the period that is the lesser of (i) three years or (ii) the remainder of
the term, plus a supplemental severance payment. The Grosch Employment Agreement
also provides that the Company may terminate Mr. Grosch for cause, and Mr.
Grosch would be entitled to

41
<PAGE> 42

receive his base salary during the period that is the lesser of (i) two years or
(ii) the remainder of the term, plus a maximum supplemental severance payment of
$375,000. The Grosch Employment Agreement includes a confidentiality provision
and a non-solicitation provision.

Gagnon Employment Agreement. In February 1997, the Company and Mr. Gagnon
entered into an employment agreement (the "Gagnon Employment Agreement")
providing for Mr. Gagnon's employment as Senior Vice President and National
Sales Manager of the Company. The initial employment period expires February
2002 and shall automatically extend for successive one year periods thereafter
unless the Company or Mr. Gagnon gives notice of intent not to renew.

The Gagnon Employment Agreement provides for an initial base salary of
$200,000 plus (i) an annual fixed bonus of $100,000 based on the Company's
operating performance, (ii) an annual variable incentive bonus based upon the
Company's operating performance, (iii) specified cost of living increases and
(iv) an additional incentive bonus of $1,000,000, payable after three years. In
the event of an initial public offering, the additional incentive bonus becomes
immediately earned.

Upon termination by Mr. Gagnon for good reason or termination by the
Company without cause, Mr. Gagnon would be entitled to receive (i) his base
salary during the period that is the lesser of twelve months or the remainder of
the term, and (ii) a prorated portion of any fixed or variable bonus earned
through the date of termination. The Gagnon Employment Agreement also provides
that if the Company terminates Mr. Gagnon for cause or if Mr. Gagnon employment
terminates as a result of voluntary resignation, he would be entitled to receive
his base salary only through the date of termination.

The Gagnon Employment Agreement also includes a confidentiality provision,
a non-solicitation provision, and a nondisclosure and invention and copyright
assignment agreement.

1997 INCENTIVE AND STOCK OPTION PLAN

In 1997, the Company adopted the 1997 Long Term Incentive and Stock Option
Plan of White Cap Industries, Inc. (the "Existing Plan") designed to provide
incentives to present and future executive, managerial, marketing, technical,
other key employees, and consultants and advisors of the Company and its
subsidiaries as may be selected in the sole discretion of the Company's Board of
Directors. The Existing Plan provided for aggregate option grants of up to
660,848 shares. As of June 30, 1997, options to purchase an aggregate of 647,273
shares of Common Stock at an exercise price of $2.48 per share were outstanding
under the Existing Plan. No additional grants shall be made under the Existing
Plan after the consummation of the Offering.

EQUITY INCENTIVE PLAN

In connection with the Offering, the Company has adopted the 1997 Long-Term
Equity Incentive Plan (the "Incentive Plan") designed to update and replace the
Existing Plan.

The Incentive Plan provides for the granting to directors, employees and
other key individuals who perform services for the Company and its subsidiaries
("Participants") of the following types of incentive awards: stock options,
stock appreciation rights ("SARs"), restricted stock, performance units,
performance grants and other types of awards that the Compensation Committee of
the Board (the "Committee") deems to be consistent with the purposes of the
Incentive Plan. An aggregate of 500,000 shares of Common Stock have been
reserved for issuance under the Incentive Plan. The Incentive Plan affords the
Company latitude in tailoring incentive compensation for the retention of key
personnel, to support corporate and business objectives, and to anticipate and
respond to a changing business environment and competitive compensation
practices.

The Committee will have exclusive discretion to select the Participants and
to determine the type, size and terms of each award, to modify the terms of
awards, to determine when awards will be granted and paid, and to make all other
determinations which it deems necessary or desirable in the interpretation and
administration of the Incentive Plan. The Incentive Plan is scheduled to
terminate ten years from the date that

42
<PAGE> 43

the Incentive Plan was initially approved and adopted by the stockholders of the
Company, unless extended for up to an additional five years by action of the
Board of Directors. With limited exceptions, including termination of employment
as a result of death, disability or retirement, or except as otherwise
determined by the Committee, rights to these forms of contingent compensation
are forfeited if a recipient's employment or performance of services terminates
within a specified period following the award. Generally, a Participant's rights
and interest under the Incentive Plan will not be transferable except by will or
by the laws of descent and distribution or pursuant to a qualified domestic
relations order.

Options, which include nonqualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Common Stock at
a price fixed by the Committee. The option price may be less than, equal to or
greater than the fair market value of the underlying shares of Common Stock, but
in no event shall the exercise price of an incentive stock option be less than
the fair market value on the date of grant. Options generally will expire not
later than ten years after the date on which they are granted. Options will
become exercisable at such times and in such installments as the Committee shall
determine. Payment of the option price must be made in full at the time of
exercise in such form (including, but not limited to, cash or Common Stock of
the Company) as the Committee may determine.

An SAR may be granted alone, or in tandem with options, either at the time
of grant of the related option or by amendment thereafter to an outstanding
option. SARs granted in tandem with options shall be exercisable only when, to
the extent and on the condition that any related option is exercisable. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.

Upon the exercise of an SAR, the Participant shall be entitled to a
distribution in an amount equal to the difference between the fair market value
of a share of Common Stock on the date of exercise and the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of shares of Common Stock as to
which the SAR is exercised. The Committee shall decide whether such distribution
shall be in cash, in shares of Common Stock having a fair market value equal to
such amount, in other securities having a fair market value equal to such amount
or in a combination thereof.

A restricted stock award is an award of a given number of shares of Common
Stock which are subject to a restriction against transfer and to a risk of
forfeiture during a period set by the Committee. During the restriction period,
the Participant generally has the right to vote and receive dividends on the
shares. Dividends received while under restriction are treated as compensation.

Performance awards are those whose final value, if any, is determined by
the degree to which specified performance objectives have been achieved during
an award period set by the Committee, subject to such adjustments as the
Committee may approve based on relevant factors. Performance objectives are
based on such measures of performance, including, without limitation, measures
of Company, unit or Participant performance, or any combination of the
foregoing, as the Committee may determine. The Committee may make such
adjustments in the computation of any performance measure as it deems
appropriate. The Committee shall determine the portion of each performance award
that is earned by a participant on the basis of the Company's performance over
the performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in shares of Common Stock,
cash, other securities of the Company, or any combination thereof, as the
Committee may determine.

Upon the liquidation or dissolution of the Company all outstanding awards
under the Incentive Plan shall terminate immediately prior to the consummation
of such liquidation or dissolution, unless otherwise provided by the Committee.
In the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, distribution of assets, or any
other change in the corporate structure or shares of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares or other property reserved for issuance under the Incentive Plan, in the
number and kind of shares or other property covered by grants previously made
under the Incentive Plan, and in the exercise price of outstanding options and
SARs. In the event of any merger, consolidation or other reorganization in which
the

43
<PAGE> 44

Company is not the surviving or continuing corporation or in which a change in
control is to occur, all of the Company's obligations regarding options, SARs
performance awards, and restricted stock that were granted hereunder and that
are outstanding on the date of such event shall, on such terms as may be
approved by the Committee prior to such event, be assumed by the surviving or
continuing corporation or canceled in exchange for property (including cash).

Certain Federal Tax Consequences under the Incentive Plan. The following
discussion addresses certain federal income tax consequences under current law
to recipients of awards made under the Incentive Plan. The following discussion
is intended only as a general summary of the federal income tax consequences
arising under the Incentive Plan based upon the Internal Revenue Code (the
"Code") as currently in effect. Because federal income tax consequences will
vary as a result of individual circumstances, each Participant should consult
his tax advisor with respect to the tax consequences of such participation.
Moreover, the following summary relates only to a Participants' federal income
tax treatment, and the state, local and foreign tax consequences may be
substantially different.

A Participant to whom a nonqualified stock option is granted will not
recognize any income at the time of the grant. When a Participant exercises a
nonqualified stock option, he generally will recognize ordinary compensation
income equal to the difference, if any, between the fair market value of the
Common Stock he receives at such time and the option's exercise price. The
Participant's tax basis in such shares will be equal to the exercise price paid
plus the amount includable in his gross income as compensation, and his holding
period for such shares will begin on the day on which he recognizes taxable
income in respect of such shares.

A Participant to whom an incentive stock option is granted will not
recognize any ordinary income at the time of grant or at the time of exercise.
However, upon the exercise of an incentive stock option, the Participant
generally will be required to include the excess of fair market value of the
Common Stock over the option's exercise price in his alternative minimum taxable
income and, as a result, he may be subject to an alternative minimum tax
("AMT"). In order to obtain incentive stock option treatment for federal income
tax purposes, a Participant (i) must be an employee of the Company or a
subsidiary continuously from the date of grant until any termination of
employment and (ii) in the event of such a termination, must exercise an
incentive stock option within three months after such termination, except if
disabled, in which case exercise may occur within one year from the date of
termination of employment. If a Participant holds Common Stock received upon the
exercise of an incentive stock option for more than one year after exercise and
more than two years after the option was granted (the "Statutory Holding
Periods"), then upon a sale of such Common Stock he will recognize long-term
capital gain or loss equal to the difference, if any, between the sale price of
such shares and the option's exercise price. If the Participant has not held
such shares for the Statutory Holding Periods, when he sells such shares (a
"disqualifying disposition") he will recognize ordinary compensation income
equal to the lesser of (i) the excess, if any, of the fair market value of such
shares on the date of exercise over the exercise price or (ii) the excess, if
any, of the sale price over the exercise price. Any additional gain or any loss
on such sale will constitute capital gain or loss, short- or long-term depending
upon whether the Participant has held the Common Stock for more than one year
after the exercise date. The tax basis of such shares to the Participant, for
purposes of computing such other gain or loss, will be equal to the exercise
price paid plus the amount includable in his gross income as compensation, if
any.

A participant will not recognize any taxable income as a result of the
inclusion of SARs in a nonqualified stock option or an incentive stock option.
At the time of exercise, a Participant generally will recognize ordinary
compensation income in an amount equal to the cash and the fair market value of
the Common Stock he receives to satisfy his SARs. The Participant's tax basis in
any such shares received pursuant to a SAR will be equal to the amount
includable in his gross income as compensation in respect of such shares, and
the Participant's holding period therefor will begin on the day on which he
recognizes taxable income in respect of such shares.

With respect to restricted stock awards, unless he files a timely election
with the Internal Revenue Service under Section 83(b) of the Code (a "Section
83(b) election"), a Participant who receives Common Stock pursuant to a
restricted stock award will not recognize any taxable income upon the receipt of
such award, but will recognize taxable compensation income at the time his
interest in such shares is no longer

44
<PAGE> 45

subject to the repurchase option imposed by the Plan in an amount equal to the
fair market value of such shares at such time. Alternatively, by filing a
Section 83(b) election within 30 days after the shares are granted, the
Participant may elect to recognize ordinary income equal to the fair market
value of the shares on the grant date. In either event, the Participant's tax
basis in such shares will be equal to the amount includable in his gross income
as compensation, and his holding period for such shares will begin on the date
his compensation income is determined. If a Participant does not make a Section
83(b) election, dividends paid on restricted stock awards will be includable in
his income as compensation when received.

A Participant to whom a performance grant award is made will not recognize
taxable income at the time such award is made. Such Participant generally will
recognize taxable income, however, at the time cash, Common Stock or other
Company securities or property are paid to him pursuant to such award in an
amount equal to the amount of such cash and the fair market value at such time
of such shares, securities or property. The tax basis of any such shares,
securities or property received by a Participant pursuant to a performance grant
award will be equal to the amount includable in his gross income as compensation
in respect of such shares, securities or property, and the holding period
therefor will begin on the day on which he recognizes taxable income in respect
of such shares, securities or property. Any income equivalents paid to a
Participant with respect to his performance grant award should generally be
regarded as compensation.

If a Participant who receives Common Stock under the Incentive Plan
(whether pursuant to the exercise of an option, as a restricted stock award, or
as a performance grant award) is subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (such recipient, an
"Insider"), the tax consequences may be different from those described above.
Generally, an Insider will not recognize income (or, in the case of the exercise
of an incentive stock option, alternative minimum taxable income) on receipt of
Common Stock. However, by filing a Section 83(b) election with the Internal
Revenue Service no later than 30 days after the date of transfer of property
(e.g., after exercise of a nonqualified stock option that was granted within six
months of such exercise), an Insider may elect to be taxed based upon the fair
market value of the Common Stock at the time of such transfer.

Subject to certain limitations described in the next paragraph, the company
for which a Participant is performing services generally will be allowed to
deduct amounts that are includable in the Participant's income as ordinary
compensation income at the time such amounts are so includable, provided that
such amounts qualify as reasonable compensation for personal services actually
rendered.

With limited exceptions, the Company may not deduct certain compensation
paid to its chief executive officer or any of its four other highest paid
executives to the extent such compensation exceeds $1 million in any taxable
year. Depending on the circumstances, some or all of the compensation paid to
such an executive under the Incentive Plan may be nondeductible.

45
<PAGE> 46

PRINCIPAL AND SELLING STOCKHOLDERS

The table and footnotes below sets forth certain information regarding
beneficial ownership of the Common Stock as of September 30, 1997, assuming
exercise of options exercisable with 60 days of the date hereof, by (i) each
person or entity who owns of record or beneficially 5% or more of the Common
Stock, (ii) each director of the Company, (iii) the Chief Executive Officer and
each other executive officer quoted in the Summary Compensation Table and (iv)
all officers and directors of the Company as a group. To the knowledge of the
Company, each of such stockholders has sole voting and investment power as to
the shares shown unless otherwise noted.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OF COMMON STOCK PERCENTAGE OF SHARES OF
NUMBER OF BENEFICIALLY OWNED COMMON STOCK BENEFICIALLY
SHARES OF PRIOR TO THE OWNED AFTER THE
NAME COMMON STOCK OFFERING(i)(j) OFFERING(i)(j)
- ----------------------------- ------------ -------------------- -------------------------
<S> <C> <C> <C>
Greg Grosch.................. 2,699,690(a) 42.9% 26.2%
Dan Tsujioka................. 178,447(b) 2.8 1.7
Chris Lane................... 157,761(c) 2.5 1.5
Richard Gagnon............... 174,000(d) 2.8 1.7
Gary Joslin.................. -- -- --
Jack Karg.................... 4,959(e) * *
Mark M. King................. 1,727,273(f)(j) 27.4 16.8
James A. Johnson............. 843,302(g)(j) 13.4 8.2
Charles A. Hamilton.......... 221,921(h)(j) 3.5 2.2
Apex Investment Fund III,
L.P. and affiliate......... 843,302(g)(j) 13.4 8.2
KRG Capital Partners, LLC.... 1,727,273(f)(j) 27.4 16.8
All Officers and Directors as
a Group (9 Persons)........ 6,007,353(f)(g)(h) 95.5 58.4
</TABLE>

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

* Indicates less than one percent.

(a) Includes 269,967 shares held by trusts for the benefit of Mr. Grosch's
children.

(b) Includes 8,874 shares held by trusts for the benefit of Mr. Tsujioka's
children and options to acquire 7,603 shares which become exercisable on
September 30, 1997.

(c) Includes 91,534 shares of restricted stock which vest over a three year
period. Includes 21,250 shares held by Mr. Lane's wife.

(d) All of the shares held by Mr. Gagnon were purchased from Mr. Grosch
effective February 25, 1997 but 139,200 of such shares remain subject to
repurchase by Mr. Grosch in the event Mr. Gagnon leaves the Company prior to
February 25, 2001. Twenty-five percent of the remaining 139,200 shares vest
each year commencing February 25, 1998 and vested shares are no longer
subject to the repurchase right of Mr. Grosch.

(e) Includes options to acquire 4,959 shares which become exercisable on
September 30, 1997.

(f) Includes 1,727,273 shares held by members of KRG Capital Investments II,
LLC, an investment limited liability company ("KRG II") of which KRG Capital
is the manager. The managing directors of KRG Capital are Mark M. King,
Bruce L. Rogers and Charles R. Gwirtsman. All the shares held by members of
KRG II are subject to a voting agreement providing KRG Capital the right to
vote all of such shares. Mr. King is a Managing Director and the founder of
KRG Capital and as a result may be deemed to share beneficial ownership of
all such shares covered by the voting agreement. Mr. King disclaims
beneficial ownership of all shares covered by the voting agreement, other
than 339,323 shares held directly by Mr. King, his wife, and a trust formed
for the benefit of their children.

(g) Includes 790,375 shares issuable upon exercise of warrants held by Apex
Investment Fund III, L.P. and 52,927 shares issuable upon exercise of
warrants held by Apex Strategic Partners LLC. Mr. Johnson is the President
of Stellar Investment Co., a managing member of Apex Management III, LLC,
which is

46
<PAGE> 47

the sole general partner of Apex Investment Fund III, L.P. and the Manager
of Apex Strategic Partners, LLC. As a result, Mr. Johnson may be deemed to
share beneficial ownership of such shares, although he disclaims such
beneficial ownership.

(h) Includes 221,921 shares held by Bayview Investors, L.P. Mr. Hamilton is a
managing director of BancAmerica Robertson Stephens, the general partner of
Bayview Investors, Ltd.

(i) Total outstanding shares include the following: (i) 37,037 shares issuable
to the former shareholders of A-Y Supply upon conversion of a subordinated
convertible promissory note (determined by dividing $500,000 by 75% of the
initial public offering price per share); (ii) 18,518 shares issuable to the
former owners of Stop Supply upon exercise of a warrant (determined by
dividing $250,000 by 75% of the initial public offering price per share);
(iii) 1,176,184 shares issuable upon exercise of warrants held by Apex,
Bayview and Argentum; and (iv) 129,454 shares issuable upon exercise of
currently vested stock options granted to employees of the Company. Does not
include 104,400 shares issuable upon conversion of Series B Preferred Stock
held by the former owners of Viking Distributing which are subject to a
repurchase right by the Company if certain performance targets are not
achieved for the Northern California operations of the Company.

(j) Shares and percentages are calculated without giving effect to the
Underwriters' over-allotment option. Assuming the Underwriters'
over-allotment option is exercised, up to 255,000 shares (42.5% of the over-
allotment shares) will be sold by certain stockholders of the Company. In
such event, the percentage of total shares beneficially owned by Apex,
Bayview, Argentum and KRG Capital will be 6.9%, 1.8%, .9% and 15.3%,
respectively.

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<PAGE> 48

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

The total amount of authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, par value $0.01 per share, and 1,000,000
shares of preferred stock, par value $1.00 per share (the "Preferred Stock").
Upon completion of the Offering, 10,290,760 shares of Common Stock will be
issued and outstanding, and no shares of Preferred Stock will be outstanding
other than 60,000 shares of Series B Preferred Stock described below. The
discussion herein describes the Company's capital stock, the Certificate of
Incorporation and Bylaws as anticipated to be in effect upon consummation of the
Offering. The following summary of certain provisions of the Company's capital
stock describes all material provisions of, but does not purport to be complete
and is subject to, and qualified in its entirety by, the Certificate of
Incorporation and the Bylaws of the Company that are included as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.

COMMON STOCK

As of September 15, 1997, there were 6,105,752 shares of Common Stock
outstanding held by 80 holders of record. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders. The issued and outstanding shares of Common Stock are,
and the shares of Common Stock being offered will be upon payment therefor,
validly issued, fully paid and nonassessable. Subject to the prior rights of the
holders of any Preferred Stock and restrictions contained in the Credit
Agreement, the holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the Board may from time to time determine. See "Dividend
Policy."

Following consummation of the Offering, the shares of Common Stock will not
be redeemable or convertible, and the holders thereof will have no preemptive or
subscription rights to purchase any securities of the Company and no rights to
convert their Common Stock into any other securities. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata the assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities and
subject to the prior rights of any holders of Preferred Stock then outstanding.

The Common Stock has been approved for quotation on Nasdaq under the symbol
"WHCP."

PREFERRED STOCK

The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of additional shares of Preferred Stock in
series and may, at the time of issuance, determine the rights, preferences and
limitations of each series. If so designated by the Board, a series of Preferred
Stock may be subject to redemption for cash, property or rights under
circumstances, and subject to conditions, as may be designated by the Board.
Satisfaction of any dividend preferences of outstanding shares of Preferred
Stock would reduce the amount of funds available for the payment of dividends on
shares of Common Stock. Holders of shares of Preferred Stock may be entitled to
receive a preference payment in the event of any liquidation, dissolution or
winding-up of the Company before any payment is made to the holders of shares of
Common Stock. Under certain circumstances, the issuance of shares of Preferred
Stock may render more difficult or tend to discourage a merger, tender offer or
proxy contest, the assumption of control by a holder of a large block of the
Company's securities or the removal of incumbent management. The Board, without
stockholder approval, may issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the holders of shares of Common
Stock. Upon consummation of the Offering, there will be no shares of Preferred
Stock outstanding.

In connection with the acquisition of Viking Distributing, the Company
issued 60,000 shares of Series B Convertible Preferred Stock to the former
owners of Viking Distributing. The Series B Preferred Stock is nonvoting, has a
liquidation preference of $0.10 per share and is convertible into 104,400 shares
of Common

48
<PAGE> 49

Stock following the expiration of the redemption period described below. The
Series B Preferred Stock is subject to mandatory redemption at its liquidation
value if certain three year compounded growth rates are not achieved for the
Company's Northern California operations.

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS

The Restated Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be
taken by written consent in lieu of a meeting. The Restated Certificate of
Incorporation and the By-laws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of the Board of Directors or by the chief executive
officer of the Company. Stockholders will not be permitted to call a special
meeting or to require the Board to call a special meeting.

The Restated Certificate of Incorporation contains a "fair price" provision
pursuant to which any Business Combination (as defined therein) involving an
interested stockholder and the Company or any subsidiary would require approval
by the affirmative vote of the holders of at least 66 2/3% of the shares of
voting stock of the Company. The fair price provision of the Restated
Certificate of Incorporation provides that 66 2/3% stockholder vote is not
required if the Business Combination is approved by 70% of the continuing
directors or if certain procedures and price requirements are satisfied.
Instead, the vote, if any, required by applicable Delaware law or by any other
provision of the Restated Certificate of Incorporation would be necessary.

The By-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board. Stockholders at an
annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of the
Board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to the
Company's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. Although the By-laws do not
give the Board the power to approve or disapprove stockholder nominations of
candidates or proposals regarding other business to be conducted at a special or
annual meeting, the By-laws may have the effect of precluding the conduct of
certain business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company.

The Company's By-Laws provide that the number of Directors of the Company
will be fixed from time to time exclusively by the Board of Directors. The
By-Laws provide that any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the actions so
taken, is executed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.

SECTION 203 OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly-held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the transaction
is approved by the Board of Directors prior to the date the interested
stockholder obtained such status, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned by
(a) persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) on

49
<PAGE> 50

or subsequent to such date the "business combination" is approved by the board
of directors and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the "interested stockholder." A "business combination" is
defined to include mergers, asset sales and other transactions resulting in
financial benefit to a stockholder. In general, an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts with
respect to the Company and, accordingly, may discourage attempts to acquire the
Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the Amended and Restated Certificate of Incorporation provides that the Company
shall indemnify directors and officers of the Company to the fullest extent
permitted by such law.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for the Company's Common Stock is American
Stock Transfer & Trust Company.

DESCRIPTION OF CERTAIN INDEBTEDNESS

Upon consummation of the Offering or shortly thereafter, the Company
expects to terminate its existing credit agreement and enter into a Credit
Agreement (the "Credit Agreement") with Bank of America National Trust and
Savings Association and other institutions party thereto (the "Banks"), pursuant
to which the Company will have available borrowings of up to $100 million. Loans
under the Credit Agreement will consist of $75 million in aggregate principal
amount of delayed draw term loans to be used for acquisitions (the "Term Loans")
and a $25 million revolving credit facility (the "Revolving Credit Facility"),
which will permit the Company to finance working capital, future acquisitions,
letters of credit and other general corporate needs. This information relating
to the Credit Agreement is qualified in its entirety by reference to the
complete text of the documents entered into in connection therewith. The
following is a description of the general terms of the Credit Agreement.

Indebtedness of the Company under the Credit Agreement will be guaranteed
by all subsidiaries of the Company now owned or hereafter acquired and secured
by a first priority security interest in (i) all capital stock of all direct and
indirect subsidiaries of the Company, now owned or hereafter acquired, and (ii)
all tangible and intangible property of the Company and its direct and indirect
subsidiaries, now owned or hereafter acquired.

Indebtedness under the Credit Agreement will bear interest at a floating
rate. Indebtedness under the Revolving Credit Facility (the "Revolving Loans")
and the Term Loans will bear interest at a rate based (at the Company's option)
upon (i) the Base Rate (defined as in the Credit Agreement) or (ii) the
Eurodollar Rate (as defined in the Credit Agreement) for one, two, three or six
months, in each case. Applicable margins will range from 0% to 0.75% in the case
of Base Rate loans and 0.875% to 1.75% in the case of Eurodollar loans,
depending upon the Company's ratio of total debt to operating cash flow.

The Term Loans and the Revolving Loans will mature four years following the
date of initial borrowing. The Credit Agreement will provide for mandatory
repayments, subject to certain exceptions, of the Term Loans based on certain
net proceeds from the sale of equity securities by the Company subsequent to the
Offering, asset sales outside the ordinary course of business and insurance
proceeds not redeployed.

The Revolving Loans may be repaid and reborrowed. The Company is required
to pay to the lenders under the Credit Agreement a customary commitment fee upon
closing, as well as an unused line fee.

50
<PAGE> 51

The Credit Agreement will contain certain financial covenants which require
the Company to maintain: (i) a minimum net worth equal to 80% of the Company's
consolidated net worth as of the closing of the Credit Agreement (giving effect
to the Offering) plus 50% of consolidated net income of the Company for each
fiscal year plus 75% of the net proceeds of future equity offerings; (ii) a
maximum consolidated total debt to adjusted EBITDA ratio ranging from 3.5 to 1.0
to 3.0 to 1 over the term of the Credit Agreement; (iii) a minimum fixed charge
coverage ratio ranging from 3.0 to 1 to 1.25 to 1 over the term of the Credit
Agreement; and (iv) a minimum asset coverage ratio ranging from 0.85 to 1.0 to
1.0 to 1.0 over the term of the Credit Agreement. The Credit Agreement will also
contain covenants which, among other things, limit the incurrence of additional
indebtedness in excess of $10 million (other than contingent obligations,
existing indebtedness and unsecured acquisition related indebtedness),
dividends, transactions with affiliates, asset sales, acquisition, mergers and
consolidation, prepayments of other indebtedness, liens and encumbrances,
capital expenditures in excess of $5 million in any fiscal year and other
matters customarily restricted in such agreements.

The Credit Agreement will contain customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults to certain other indebtedness, certain events of bankruptcy and
insolvency, ERISA, judgment defaults, failure of any guaranty or security
agreement supporting the Credit Agreement to be in full force and effect and
change of control of the Company or WCI.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

THE RECAPITALIZATION

In February 1997, KRG Capital formed the Company, which acquired all of the
outstanding stock of WCI from Greg Grosch, the then sole stockholder, Chairman,
President and Chief Executive Officer of WCI, through the Recapitalization. The
Company acquired the stock of WCI for (i) $10 million in cash; (ii) a $1.5
million subordinated note; (iii) 87,000 shares of Common Stock; and (iv)
Convertible Preferred Stock which will automatically convert into 2,795,390
shares of Common Stock upon consummation of the Offering. In connection with the
Recapitalization, shares of redeemable preferred stock and warrants to purchase
Common Stock were purchased by three investment funds. Such shares of redeemable
preferred stock will be redeemed upon consummation of the Offering. See "Recent
Transactions," "Use of Proceeds" and "Principal Stockholders."

MANAGEMENT AGREEMENT

The Company and WCI are parties to a five-year management agreement with
KRG Capital, pursuant to which KRG Capital provides financial management
consulting and advisory services. Under the terms of such agreement, (i) the
Company paid KRG Capital a transaction closing fee of $300,000 in connection
with the closing of Stock Purchase Agreement, dated November 26, 1996, by and
between Holdings and Mr. Grosch and (ii) the Company and WCI agreed to pay KRG
Capital a base management fee of $250,000 per year. During the year ended March
31, 1997, the Company and WCI paid KRG Capital fees of $62,500 pursuant to such
agreement. KRG Capital received an aggregate transaction closing fee from WCI in
the amount of $100,000 following the closings of the acquisitions of Stop Supply
and Viking Distributing.

Upon completion of the Offering, KRG Capital, the Company and WCI will
terminate the existing management agreement and enter into a transaction
advisory agreement pursuant to which the Company and WCI will pay to KRG Capital
an annual transaction advisory fee of $200,000 and a formula based transaction
fee payable upon the completion of additional acquisitions by the Company or
WCI. The transaction fee will be (i) $50,000 for any transactions where the
aggregate transaction value is $20 million or less, unless the Board of
Directors determines the transaction presented unusual complexities in which
case the fee may be adjusted upward upon approval of the Board of Directors, and
(ii) an amount to be agreed upon and approved by the Board of Directors, but in
no event less than $50,000, for any transaction where the aggregate transaction
value exceeds $20 million.

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<PAGE> 52

STOCKHOLDER AGREEMENT

The Company, KRG Capital, Mr. Grosch and certain affiliates of KRG Capital
are parties to an Amended and Restated Stockholders Agreement (the "Stockholders
Agreement"), which will take effect upon the closing of the Offering and will
have a term of ten years. The Stockholders Agreement provides that so long as
Mr. Grosch or parties related to KRG Capital hold at least 5% of the issued and
outstanding Common Stock, (i) Mr. Grosch and KRG Capital will each be entitled
to designate one director, (ii) the stockholder parties will vote all of their
shares for such designees and (iii) KRG Capital will be entitled to have one
additional KRG Capital principal attend all board meetings as a non-voting
observer.

LEASES

The Company leases two properties located in Las Vegas, Nevada and San Juan
Capistrano, California, respectively, from Greg Grosch and his wife. Both leases
were entered into in May 1994 and are six year leases renewable for 4 successive
five year terms at the Company's option. Monthly rent under the leases is $5,565
for the Las Vegas property and $9,135 for the San Juan Capistrano property. The
terms of each lease are to be renegotiated upon each renewal. Payments under the
Las Vegas lease totaled $66,780 in the year ended March 31, 1997, and payments
under the San Juan Capistrano lease totaled $109,620 in such year.

The Company also leases a property in Riverside, California from Black
Marlin Investment Company and the Nuttal Trust (the "Landlord"). Black Marlin
Investment Company is wholly owned by Mr. and Mrs. Grosch. The Riverside lease
has a term of six years expiring in 2002. Monthly rent under the Riverside lease
is $7,403. Payments under the Riverside Lease to the Landlord totaled $48,119 in
the year ended March 31, 1997.

The Company is a guarantor of certain indebtedness of Greg Grosch, his wife
and the Landlord secured by mortgages on the three properties described above.
The Company believes that the terms of the leases described above are no less
favorable to the Company than terms that could be obtained with unaffiliated
third parties in arms-length transactions.

ISSUANCE OF SENIOR REDEEMABLE PREFERRED SHARES AND WARRANTS

On February 25, 1997, the Company issued 127,541 shares of its Redeemable
Preferred Stock at a purchase price of $3.92 per share and warrants to purchase
221,921 shares of Common Stock at a purchase price of $0.01 per share to Bayview
Investors, Ltd., an affiliate of BancAmerica Robertson Stephens. The Company
expects to redeem the Redeemable Preferred Stock and pay accrued dividends on
such stock with a portion of the net proceeds from the Offering. See "Use of
Proceeds" and "Underwriting."

CERTAIN STOCKHOLDERS

Apex Investment Fund III, L.P., Apex Strategic Partners LLC and Argentum
Capital Partners, L.P. combined own more than 10% of both the common equity and
the preferred equity of the Company. These entities are affiliates of First
Analysis Securities Corporation, one of the Underwriters in the Offering.

CREDIT AGREEMENT

An affiliate of BancAmerica Robertson Stephens is a lender under both the
Credit Agreement and WCI's existing credit agreement.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering there has been no public market for the Common Stock
of the Company. Sales of substantial amounts of Common Stock in the public
market could adversely affect market prices of the Common Stock and make it more
difficult for the Company to sell equity securities in the future at a time and
price which it deems appropriate.

Upon completion of the Offering, the Company will have outstanding
10,290,760 shares of Common Stock (not including (i) 517,819 shares issuable
upon the exercise of unvested options held by certain members of management,
(ii) 104,000 shares of Common Stock issuable upon conversion of Series B
Preferred Stock held by the former owners of Viking Distributing which are
subject to a repurchase right by the Company if certain performance targets are
not achieved for the Northern California operations of the

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<PAGE> 53

Company and (iii) 500,000 shares reserved for sale or grant in the future under
the Incentive Plan). The 4,000,000 shares sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
unless held by "affiliates" of the Company. The remaining 6,290,760 outstanding
shares of Common Stock quoted above may not be sold unless they are registered
under the Securities Act or unless an exemption from registration, such as the
exemption provided by Rule 144 under the Securities Act, is available. In
addition, beginning 90 days after the date of this Prospectus, holders of vested
stock options may sell shares of Common Stock acquired upon due exercise of such
options subject to the provisions of Rule 701 under the Securities Act ("Rule
701").

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned "restricted
securities" for at least one but less than two years, and any affiliate of the
Company who has owned shares for at least one year, is entitled to sell within
any three month period a number of shares that does not exceed the greater of 1%
of the outstanding shares of the Company's Common Stock (approximately 102,940
shares immediately after the Offering) or the average weekly trading volume in
the Company's Common Stock on Nasdaq during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain provisions regarding
the manner of sale, notice requirements and the availability of current public
information about the Company. A stockholder (or stockholders whose shares are
aggregated) who is not an affiliate of the Company for at least 90 days prior to
a proposed transaction and who has beneficially owned "restricted securities"
for at least two years is entitled to sell such shares under Rule 144 without
regard to the limitations described above.

Any employee, officer or director of the Company who purchased his or her
shares prior to the date of this Prospectus or holds vested stock options as of
that date pursuant to a written compensatory plan or contract is entitled to
rely on the resale provisions of Rule 701, which permits non-affiliates to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus.

The Company and all of its current stockholders holding in the aggregate
6,118,314 shares of Common Stock (5,863,314 shares if the Underwriters'
over-allotment option is exercised in full) have agreed not to sell publicly
shares of capital stock of the Company for a period of 180 days following the
closing date of the Offering without the prior written consent of the
Representative. Such stockholders have further agreed that they will not
otherwise dispose of any shares of capital stock of the Company unless the
person to whom such disposition is made agrees to substantially the same as the
foregoing. The Company has further agreed that during such 180-day period it
will not sell privately shares of Common Stock unless the price per share
received by the Company for such Common Stock is equal to or greater than the
initial public offering price. Upon issuance of 647,273 shares of Common Stock
reserved for issuance upon the sale of shares to, and exercise of options in the
future by, employees under the Existing Plan, such shares will be subject to the
same restrictions on resale imposed on the other shares held by members of
management described above.

As soon as practicable after 90 days following the date of this Prospectus,
the Company will file a Form S-8 registration statement under the Securities Act
to register the shares of Common Stock issuable under the Company's option
plans. This registration statement would become effective immediately upon
filing. Shares issued upon the exercise of stock options after the effective
date of the Form S-8 registration statement would be eligible for resale in the
public market without restriction, subject to Rule 144 limitations applicable to
affiliates and the lock-up agreements applicable to certain options as described
in the preceding paragraph.

The Company, Mr. Grosch, KRG Capital, Apex, Bayview and Argentum are
parties to a registration rights agreement dated February 25, 1997 (the
"Registration Rights Agreement"). After the Offering, an aggregate of 5,492,186
shares of Common Stock owned or issuable upon exercise of warrants, in the
aggregate, by such stockholders will be entitled to certain rights to register
such shares ("Registrable Shares") under the Securities Act pursuant to the
Registration Rights Agreement. Subject to certain conditions, the registration
rights granted with respect to the Common Stock may be exercised by holders of a
majority of the outstanding shares of such Registrable Shares. Subject to
certain conditions, piggyback registration rights are available at all times for
the Registrable Shares.

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<PAGE> 54

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and BancAmerica Robertson Stephens ("Robertson Stephens") are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company the number of shares of Common Stock that each Underwriter has
agreed to purchase as set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............................... 1,896,000
BancAmerica Robertson Stephens.................................................... 1,264,000
BT Alex. Brown Incorporated....................................................... 60,000
Goldman, Sachs & Co. ............................................................. 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................................ 60,000
NationsBanc Montgomery Securities, Inc. .......................................... 60,000
Prudential Securities Incorporated................................................ 60,000
Robert W. Baird & Co. Incorporated................................................ 30,000
William Blair & Company, L.L.C. .................................................. 30,000
Blackford Securities Corp. ....................................................... 30,000
Crowell, Weedon & Co. ............................................................ 30,000
Cruttenden Roth Incorporated...................................................... 30,000
First Analysis Securities Corporation............................................. 30,000
First of Michigan Corporation..................................................... 30,000
Interstate/Johnson Lane Corporation............................................... 30,000
Janney Montgomery Scott Inc. ..................................................... 30,000
Libra Investments, Inc. .......................................................... 30,000
McDonald & Company Securities, Inc. .............................................. 30,000
Parker/Hunter Incorporated........................................................ 30,000
Raymond James & Associates, Inc. ................................................. 30,000
Rodman & Renshaw, Inc. ........................................................... 30,000
Roney & Co. ...................................................................... 30,000
Sands Brothers & Co., Ltd. ....................................................... 30,000
Sutro & Co. Incorporated.......................................................... 30,000
Wedbush Morgan Securities Inc. ................................................... 30,000
---------
Total................................................................... 4,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered are subject to approval of certain legal matters by counsel and certain
other conditions. If any shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares (other than
shares covered by the over-allotment option described below) must be purchased.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the price to the
public set forth on the cover page of this Prospectus, and to certain dealers
(who may include the Underwriters) at such price less a concession not in excess
of $0.76 per share. The Underwriters may allow, and such dealers may reallow,
discounts not in excess of $0.10 per share to

54
<PAGE> 55

any other Underwriter and certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.

The Company and certain selling stockholders have granted an option to the
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 600,000 additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
net of underwriting discounts and commissions. such option may be exercised at
any time until 30 days after the date of this Prospectus. See "Principal
Stockholders." To the extent that the Representatives exercise such option, each
of the Underwriters will be committed, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment as indicated in the preceding table.

At the Company's request, the Underwriters have reserved up to 200,000
shares for sale at the initial public offering price to certain of the Company's
employees, members of their immediate families and other individuals who are
business associates of the Company in each case as such parties have expressed
an interest in purchasing such shares. The number of shares available for sale
to the general public will be reduced to the extent these individuals purchase
such reserved shares. Any reserved shares not purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.

The Company, its officers and directors, certain of its shareholders and
certain employees of the Company have agreed, subject to certain exceptions, not
to directly or indirectly sell, offer to sell, grant any option for the sale of
or otherwise dispose of any shares of Common Stock or securities convertible
into or exchangeable or exercisable for Common Stock, without the prior written
consent of DLJ, on behalf of the Underwriters, for a period of 180 days after
the date of this Prospectus. See "Shares Eligible for Future Sale."

Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations between the Company and the Representatives. Among the factors
considered in determining the initial public offering price, in addition to
prevailing market conditions, are price-earnings ratios of publicly traded
companies that the Representatives believe to be comparable to the Company,
certain financial information of the Company, the history of, and the prospects
for, the Company and the industry in which it competes, and assessment of the
Company's management, its past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial public offering price.

The Common Stock has been approved for quotation on Nasdaq under the symbol
"WHCP."

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

Under Rule 2720 of the Conduct Rules of the NASD ("Rule 2720"), the Company
is considered an affiliate of Robertson Stephens and First Analysis Securities
Corporation, one of the Underwriters in the Offering, ("First Analysis") because
(i) Robertson Stephens, through its affiliate Bayview Investors, Ltd., may be
deemed to beneficially own 10.2% of the preferred equity of the Company, (ii) an
amount greater than 10% of the net proceeds from the Offering will be directed
to Bank of America, an affiliate of Robertson Stephens and (iii) First Analysis
Securities Corporation, one of the Underwriters in the Offering, may be deemed
to beneficially own more than 10% of both the Common Stock and the preferred
equity of the Company through its affiliates Apex Investment Fund III, L.P.,
Apex Strategic Partners LLC and Argentum Capital Partners, L.P. See "Certain
Relationships and Related Transactions" and "Use of Proceeds." This Offering is
being conducted in accordance with Rule 2720 which provides that, among other
things, when an NASD member participates in the underwriting of an affiliate's
equity securities, the price can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards ("QIU"). In
accordance with this requirement, DLJ has assumed the responsibilities of acting
as QIU and will recommend a maximum price in compliance with the requirements of
Rule 2720. In connection with the Offering, DLJ is performing due diligence
investigations and reviewing and participating in the preparation of this
Prospectus

55
<PAGE> 56

and the Registration Statement of which this prospectus forms a part. As
compensation for the services of DLJ as QIU, the Company has agreed to pay DLJ
$5,000.

LEGAL MATTERS

The legality of the shares of Common Stock will be passed upon for the
Company by Kirkland & Ellis, New York, New York. Lance C. Balk who is a partner
of Kirkland & Ellis, as of the date of this Prospectus, holds 9,761 shares of
the Company's Common Stock. Certain legal matters relating to the Offering will
be passed upon for the Underwriters by Latham & Watkins, New York, New York.

EXPERTS

The consolidated balance sheets of White Cap Industries, Inc. as of March
31, 1997, March 31, 1996 and December 31, 1995; the consolidated statements of
operations, consolidated statements of cash flows and consolidated statements of
stockholders' equity of White Cap Industries, Inc. for the fiscal year ended
March 31, 1997 and the years ended December 31, 1995, December 31, 1994 and for
the three months ended March 31, 1996; the financial statements of A-Y Supply,
Inc. as of and for the year ended December 31, 1996; and the financial
statements of Viking Distributing Co. as of and for the fiscal year ended March
31, 1997 included in this Prospectus and the registration statement of which it
is a part, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
such reports.

The balance sheet of A-Y Supply, Inc. as of December 31, 1995 and the
statements of income, stockholders' equity and cash flows of A-Y Supply, Inc.
for the years ended December 31, 1995 and 1994 included in this Prospectus and
the registration statement of which it is a part, have been so included in
reliance on the reports of Burnett, Umphress & Kilgour, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, (the
"Commission") a Registration Statement on Form S-1 under the Act with respect to
the shares of Common Stock being offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, copies of which may be obtained upon payment of the fees prescribed by
the Commission or examined without charge at (i) the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and (ii) the Commission's regional offices located at
500 W. Madison Street, Suite 1400, Chicago, Illinois 60661 and 75 Park Plaza,
14th Floor, New York, New York 10007. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete,
and in each instance where such contract or other document is an exhibit to the
Registration Statement, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each statement being
qualified in all respects by such reference.

56
<PAGE> 57

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

WHITE CAP INDUSTRIES, INC.

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets at December 31, 1995, March 31, 1996, March 31, 1997 and
June 30, 1997 (unaudited)......................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1994,
December 31, 1995, the three months ended March 31, 1996, the year ended March 31,
1997 and the three months ended June 30, 1996 and 1997 (unaudited)................ F-4
Consolidated Statements of Stockholders' Equity (deficit) for the years ended
December 31, 1994, December 31, 1995, the three months ended March 31, 1996, the
year ended March 31, 1997 and the three months ended June 30, 1997 (unaudited).... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
December 31, 1995, the three months ended March 31, 1996, the year ended, March
31, 1997 and for the three months ended June 30, 1996 and 1997 (unaudited)........ F-6
Notes to Consolidated Financial Statements.......................................... F-7

A-Y SUPPLY, INC.
Reports of Independent Public Accountants........................................... F-18
Balance Sheets as of December 31, 1995 and 1996..................................... F-19
Statements of Income for the years ended December 31, 1994, 1995 and 1996........... F-21
Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and
1996.............................................................................. F-22
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996....... F-23
Notes to Financial Statements....................................................... F-24

VIKING DISTRIBUTING CO.
Report of Independent Public Accountants............................................ F-27
Balance Sheet as of March 31, 1997.................................................. F-28
Statement of Operations for the year ended March 31, 1997........................... F-29
Statement of Changes in Stockholders' Equity for the year ended March 31, 1997...... F-30
Statement of Cash Flows for the year ended March 31, 1997........................... F-31
Notes to Financial Statements....................................................... F-32
</TABLE>

F-1
<PAGE> 58

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To White Cap Industries, Inc.:

We have audited the accompanying consolidated balance sheets of WHITE CAP
INDUSTRIES, INC. (a Delaware corporation) and subsidiary as of December 31,
1995, March 31, 1996 and March 31, 1997 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 1994 and 1995, the three month period ended March 31, 1996 and for
the year ended March 31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of White Cap
Industries, Inc. and subsidiary as of December 31, 1995, March 31, 1996 and
March 31, 1997 and the results of their operations and their cash flows for the
years ended December 31, 1994 and 1995, the three month period ended March 31,
1996 and for the year ended March 31, 1997, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Orange County, California
August 12, 1997

F-2
<PAGE> 59

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER MARCH 31,
31, ------------------------- JUNE 30,
1995 1996 1997 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 297,000 $ 205,000 $ 214,000 $ 2,882,000
Accounts receivable, net of allowance for doubtful
accounts of $270,000, $702,000, $525,000 and
$812,000 at December 31, 1995, March 31, 1996,
March 31, 1997 and June 30, 1997, respectively.... 11,588,000 11,487,000 19,175,000 27,279,000
Inventories......................................... 16,337,000 15,786,000 20,426,000 23,029,000
Prepaid expenses and other.......................... 339,000 335,000 441,000 489,000
Deferred income taxes............................... -- -- 738,000 1,235,000
----------- ----------- ----------- -----------
28,561,000 27,813,000 40,994,000 54,914,000
----------- ----------- ----------- -----------
RECEIVABLE FROM STOCKHOLDER........................... 586,000 481,000 -- --
PROPERTY AND EQUIPMENT, net........................... 6,849,000 6,768,000 7,461,000 9,059,000
RENTAL EQUIPMENT, net................................. -- -- 500,000 475,000
INTANGIBLE ASSETS, net................................ -- -- 13,205,000 25,982,000
OTHER ASSETS.......................................... 196,000 225,000 132,000 212,000
----------- ----------- ----------- -----------
$36,192,000 $35,287,000 $62,292,000 $90,642,000
=========== =========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt................... $ 627,000 $ 689,000 $ 3,156,000 $ 3,106,000
Accounts payable.................................... 12,894,000 10,422,000 17,162,000 22,299,000
Accrued liabilities................................. 2,328,000 2,136,000 3,266,000 4,782,000
----------- ----------- ----------- -----------
15,849,000 13,247,000 23,584,000 30,187,000
----------- ----------- ----------- -----------
LONG-TERM DEBT, net of current portion................ 15,815,000 18,095,000 38,888,000 60,382,000
----------- ----------- ----------- -----------
DEFERRED INCOME TAXES................................. -- -- 200,000 189,000
----------- ----------- ----------- -----------
SENIOR REDEEMABLE PREFERRED STOCK,
$.01 par value:
Designated -- 680,000 shares; issued and
outstanding -- none at December 31, 1995 and March
31, 1996; 675,969 at March 31, 1997 and June 30,
1997.............................................. -- -- 2,650,000 2,650,000
----------- ----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 8, 9, and 10)
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible Preferred Stock, $.01 par value:
Designated -- 2,700,000 shares; issued and
outstanding -- none at December 31, 1995 and March
31, 1996; 2,180,479 at March 31, 1997 and
2,240,479 at June 30, 1997........................ -- -- 2,250,000 2,256,000
Common Stock, $.01 par value:
Authorized -- 10,000,000 shares; issued and
outstanding -- 4,160 shares at December 31, 1995
and March 31, 1996; 600,000 at March 31, 1997
and 652,606 at June 30, 1997 (7,238 and
1,044,000 and 1,135,534 shares post split,
respectively)................................... -- -- 6,000 11,000
Additional paid-in capital........................ 4,000 4,000 -- --
Retained earnings (accumulated deficit)........... 4,524,000 3,941,000 (5,286,000) (5,033,000)
----------- ----------- ----------- -----------
4,528,000 3,945,000 (3,030,000) (2,766,000)
----------- ----------- ----------- -----------
$36,192,000 $35,287,000 $62,292,000 $90,642,000
=========== =========== =========== ===========
</TABLE>

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

F-3
<PAGE> 60

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS THREE MONTHS ENDED
--------------------------- ENDED YEAR ENDED --------------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET SALES........................ $69,508,000 $77,840,000 $19,511,000 $101,770,000 $23,509,000 $37,311,000
COST OF GOODS SOLD............... 49,420,000 53,961,000 13,627,000 69,740,000 15,992,000 25,848,000
----------- ----------- ----------- ------------ ----------- -----------
Gross Profit................... 20,088,000 23,879,000 5,884,000 32,030,000 7,517,000 11,463,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES........ 17,918,000 20,517,000 5,670,000 27,375,000 6,235,000 9,423,000
----------- ----------- ----------- ------------ ----------- -----------
Income from operations......... 2,170,000 3,362,000 214,000 4,655,000 1,282,000 2,040,000
INTEREST EXPENSE, NET............ 822,000 1,385,000 442,000 2,273,000 424,000 1,319,000
----------- ----------- ----------- ------------ ----------- -----------
Income (loss) before provision
(benefit) for income taxes... 1,348,000 1,977,000 (228,000) 2,382,000 858,000 721,000
PROVISION (BENEFIT) FOR INCOME
TAXES.......................... 30,000 40,000 -- (414,000) 9,000 318,000
----------- ----------- ----------- ------------ ----------- -----------
Net income (loss).............. $ 1,318,000 $ 1,937,000 $ (228,000) $ 2,796,000 $ 849,000 $ 403,000
=========== =========== =========== ============ =========== ===========
PRO FORMA INFORMATION
(unaudited):
Historical income (loss) before
provision (benefit) for
income taxes................. $ 1,348,000 $ 1,977,000 $ (228,000) $ 2,382,000 $ 858,000
Pro forma income tax provision
(benefit).................... 553,000 811,000 (93,000) 977,000 352,000
----------- ----------- ----------- ------------ -----------
Pro forma net income (loss).... $ 795,000 $ 1,166,000 $ (135,000) $ 1,405,000 $ 506,000
=========== =========== =========== ============ ===========
Pro forma net income (loss) per
share........................ $ 0.19 $ 0.03
============ ===========
Pro forma weighted average
shares outstanding........... 7,260,981 7,368,075
============ ===========
</TABLE>

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

F-4
<PAGE> 61

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
CONVERTIBLE RETAINED
PREFERRED STOCK COMMON STOCK ADDITIONAL EARNINGS
---------------------- ------------------ PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- ---------- -------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993... -- $ -- 4,160 $ -- $ 4,000 $ 2,901,000 $ 2,905,000
Stockholder
distributions........... -- -- -- -- -- (584,000) (584,000)
Net income................. -- -- -- -- -- 1,318,000 1,318,000
--------- --------- ------- ------ ------- ----------- -----------
BALANCE, December 31, 1994... -- -- 4,160 -- 4,000 3,635,000 3,639,000
Stockholder
distributions........... -- -- -- -- -- (1,048,000) (1,048,000)
Net income................. -- -- -- -- -- 1,937,000 1,937,000
--------- --------- ------- ------ ------- ----------- -----------
BALANCE, December 31, 1995... -- -- 4,160 -- 4,000 4,524,000 4,528,000
Stockholder
distributions........... -- -- -- -- -- (355,000) (355,000)
Net loss................... -- -- -- -- -- (228,000) (228,000)
--------- --------- ------- ------ ------- ----------- -----------
BALANCE, March 31, 1996...... -- -- 4,160 -- 4,000 3,941,000 3,945,000
Recapitalization:
Stockholder
distributions......... -- -- -- -- -- (6,252,000) (6,252,000)
Purchase and retirement
of WCI common stock... -- -- (4,160) -- (4,000) (5,716,000) (5,720,000)
Common stock issued..... -- -- 600,000 6,000 -- -- 6,000
Series A-1 convertible
preferred stock
issued................ 1,496,843 2,250,000 -- -- -- -- 2,250,000
Series A-2 convertible
preferred stock
issued................ 683,636 -- -- -- -- -- --
Preferred dividend
accretion............... -- -- -- -- -- (55,000) (55,000)
Net income................. -- -- -- -- -- 2,796,000 2,796,000
--------- --------- ------- ------ ------- ----------- -----------
BALANCE, March 31, 1997...... 2,180,479 2,250,000 600,000 6,000 -- (5,286,000) (3,030,000)
Sale of common stock
(unaudited)............. -- -- 52,606 5,000 -- -- 5,000
Sale of convertible
preferred stock
(unaudited)............. 60,000 6,000 -- -- -- -- 6,000
Preferred dividend
accretion (unaudited)... -- -- -- -- -- (150,000) (150,000)
Net income (unaudited)..... -- -- -- -- -- 403,000 403,000
--------- --------- ------- ------ ------- ----------- -----------
BALANCE, June 30, 1997
(unaudited)............. 2,240,479 $2,256,000 652,606 $11,000 $ -- $ (5,033,000) $(2,766,000)
========= ========= ======= ====== ======= =========== ===========
</TABLE>

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

F-5
<PAGE> 62

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS THREE MONTHS ENDED
-------------------------- ENDED YEAR ENDED -------------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)............................. $ 1,318,000 $ 1,937,000 $ (228,000) $ 2,796,000 $ 849,000 $ 403,000
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization............... 811,000 1,109,000 347,000 1,524,000 355,000 687,000
Gain on disposition of property and
equipment................................. (3,000) (4,000) (1,000) (28,000) -- (1,000)
Changes in assets and liabilities, net of
effects from acquisitions:
(Increase) decrease in accounts
receivable................................ (2,421,000) (2,098,000) 100,000 (4,861,000) (2,087,000) (3,437,000)
(Increase) decrease in inventories.......... (5,396,000) (2,592,000) 551,000 (1,698,000) 79,000 2,674,000
(Increase) decrease in prepaid expenses..... 294,000 (308,000) (25,000) 955,000 (72,000) (75,000)
Increase in deferred tax asset.............. -- -- -- (738,000) -- (9,000)
Increase (decrease) in accounts payable..... 3,562,000 2,969,000 (2,472,000) 5,079,000 3,158,000 2,606,000
Increase (decrease) in accrued expenses..... 1,008,000 417,000 (181,000) 405,000 (575,000) (406,000)
Increase in deferred tax liability.......... -- -- -- 200,000 -- (11,000)
---------- ----------- ----------- ------------ ------------ -------------
Net cash provided by (used in) operating...... (827,000) 1,430,000 (1,909,000) 3,634,000 1,707,000 2,431,000
---------- ----------- ----------- ------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (1,259,000) (4,525,000) (266,000) (2,120,000) (178,000) (653,000)
Proceeds from sale of property and
equipment................................... -- 15,000 2,000 139,000 -- 10,000
Purchase of A-Y Supply, net of $1,323,000 in
cash acquired............................... -- -- -- (16,502,000) -- --
Purchase of Viking Distributing Co., net of
$145,000 in cash acquired................... -- -- -- -- -- (16,046,000)
Purchase of Stop Supply, Inc., net of $61,000
in cash acquired............................ -- -- -- -- -- (3,698,000)
---------- ----------- ----------- ------------ ------------ -------------
Net cash used in investing activities (1,259,000) (4,510,000) (264,000) (18,483,000) (178,000) (20,387,000)
---------- ----------- ----------- ------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under line of credit
agreement................................... 2,812,000 1,871,000 2,397,000 467,000 (747,000) 14,197,000
Principal payments on notes payable........... (417,000) (498,000) (176,000) -- (769,000) (14,173,000)
Proceeds received from notes payable.......... 477,000 3,712,000 121,000 22,235,000 -- 20,739,000
Principal payments on subordinated note
payable to stockholder...................... (325,000) -- -- -- -- --
(Increase) decrease in receivable from
stockholder................................. -- (372,000) 105,000 481,000 82,000 --
Stockholder distributions paid................ (442,000) (1,483,000) (366,000) (6,241,000) -- --
Preferred dividend accretion.................. -- -- -- (55,000) -- (150,000)
Preferred stock issued........................ -- -- -- 4,900,000 -- 6,000
Common stock issued........................... -- -- -- 6,000 -- 5,000
Common stock purchased and retired............ -- -- -- (5,720,000) -- --
Increase in deferred finance costs............ -- -- -- (1,215,000) -- --
---------- ----------- ----------- ------------ ------------ -------------
Net cash provided by (used in) financing
activities.................................. 2,105,000 3,230,000 2,081,000 14,858,000 (1,434,000) 20,624,000
---------- ----------- ----------- ------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 19,000 150,000 (92,000) 9,000 95,000 2,668,000
CASH AND CASH EQUIVALENTS, beginning of
period........................................ 128,000 147,000 297,000 205,000 205,000 214,000
---------- ----------- ----------- ------------ ------------ -------------
CASH AND CASH EQUIVALENTS, end of period........ $ 147,000 $ 297,000 $ 205,000 $ 214,000 $ 300,000 $ 2,882,000
========== =========== =========== ============ ============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for --
Interest...................................... $ 902,000 $ 1,455,000 $ 455,000 $ 2,451,000 $ 446,000 $ 1,290,000
========== =========== =========== ============ ============ =============
Income taxes.................................. $ 16,000 $ 48,000 $ -- $ 10,000 $ 36,000 $ 100,000
========== =========== =========== ============ ============ =============
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

The Company acquired various shop equipment under its equipment lease
financing arrangements totaling approximately $456,000 and $518,000 during the
years ended December 31, 1994 and 1995, respectively.

During the year ended March 31, 1997 and the three months ended June 30,
1997, the Company acquired all of the outstanding capital stock of A-Y Supply,
Inc., Viking Distributing Co. and Stop Supply, Inc. In conjunction with these
acquisitions, the following liabilities were assumed:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, THREE MONTHS ENDED
1997 JUNE 30, 1997
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Fair value of assets acquired............................................... $ 20,216,000 $ 24,878,000
Cash and notes payable exchanged for capital stock.......................... (17,825,000) (19,538,000)
------------ ------------
Liabilities assumed......................................................... $ 3,391,000 $ 5,340,000
============ ============
</TABLE>

In connection with the recapitalization transaction in February 1997, the
Company distributed certain property recorded at $284,000 to its shareholder,
and the Company's shareholder assumed certain debt totaling $242,000.

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

F-6
<PAGE> 63

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

1. BUSINESS ORGANIZATION

White Cap Industries, Inc. (formerly White Cap Holdings, Inc.) ("WCI"), was
formed in November 1996 as a Delaware corporation and had no prior operating
history. White Cap Industries Corp. (formerly White Cap Industries, Inc. )
("WCIC") was formed in February 1976 as a California corporation.

In February 1997, WCI and WCIC completed a transaction whereby the sole
shareholder of WCIC exchanged all of the outstanding stock of WCIC for preferred
stock of WCI, cash and dividends. This transaction was accounted for as a
recapitalization because there was not unilateral change of control of WCIC.
Through this recapitalization transaction, WCIC became a wholly owned subsidiary
of WCI. The operating results for all periods prior to the recapitalization
transaction consist entirely of the historical results of WCIC. Hereinafter WCI
and WCIC are collectively referred to as the "Company".

The Company is a business-to-business retailer of specialty tools and
materials to professional contractors throughout the Western United States. At
March 31, 1997, the Company's operations consisted of a central distribution
center located in Costa Mesa, California and 20 retail stores located in
California, Las Vegas, Phoenix, and Denver.

Effective January 1, 1997, the Company acquired all of the capital stock of
A-Y Supply, Inc. (see Note 3). Subsequent to March 31, 1997, the Company
acquired Stop Supply, Inc. and Viking Distributing Co., Inc. (see Note 10).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements and related notes
include the accounts of White Cap Industries, Inc. and its wholly owned
subsidiary White Cap Industries Corp. All intercompany account balances and
transactions have been eliminated in consolidation.

Use of Estimates

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

Concentration of Credit Risk

The majority of sales are on a credit basis to professional concrete,
framing, waterproofing, landscaping, grading, electrical, mechanical and general
contractors located throughout the Western United States. Many customers are
under-capitalized and generally represent a higher than normal credit risk. In
many cases this risk is somewhat mitigated by filing a preliminary notice on
materials for specific jobs sites. The Company records an estimated allowance
for doubtful accounts and adjusts this estimate periodically based upon
historical experience and specific knowledge of a customer's financial
condition. No single customer represents more than three percent of the accounts
receivable balance shown in the accompanying consolidated balance sheets.

Inventories

Inventories are stated at the lower of cost (weighted average, which
approximates FIFO) or market and consist primarily of purchased products held
for sale.

F-7
<PAGE> 64

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

Property and Equipment

Property and equipment are recorded at cost and depreciated based on the
estimated useful lives of depreciable assets using primarily the straight-line
method for financial reporting purposes and accelerated methods for tax
purposes. Estimated useful lives are as follows:

<TABLE>
<S> <C>
Building............................... 30 years
Transportation equipment............... 3 to 10 years
Machinery and equipment................ 2 to 10 years
Office equipment....................... 3 to 5 years
Lesser of useful life
Leasehold improvements................. or term of lease
</TABLE>

Upon retirement of property and equipment, the asset and accumulated
depreciation and amortization accounts are relieved and any gain or loss is
reflected in operations. Maintenance costs and repairs are expensed as incurred.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

Intangibles Assets

Intangible assets consist of goodwill, covenant not to compete and deferred
financing costs. Goodwill represents the excess of cost over the fair value of
net assets acquired in business combinations accounted for under the purchase
method. Management has evaluated its accounting for goodwill, considering such
factors as historical profitability and future undiscounted operating cash
flows, and believes that the asset is realizable and that the amortization
period is appropriate.

Intangible assets are amortized on a straight-line basis over the following
estimated useful lives:

<TABLE>
<S> <C>
Goodwill................ 40 years
Covenant not to compete... Term of the agreement (5 years)
Deferred financing
costs................. Term of the agreements (5 to 8 years)
</TABLE>

Revenue Recognition

Revenue from product sales is recognized as orders are picked up by
customers or upon delivery to customers. The Company also rents equipment to
customers under short-term agreements and such revenue is recognized over the
rental period as earned. The Company establishes reserves for estimated customer
returns, allowances and discounts at the time the related revenue is recognized.

Cost of Goods Sold

Cost of goods sold consists primarily of the purchase cost of the product
plus transportation to the Company's facilities. Vendor rebates are recognized
on an accrual basis in the period earned as a reduction to cost of goods sold.

F-8
<PAGE> 65

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

Income Taxes

The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109. The statement
requires an asset and liability approach for financial accounting and reporting
of income taxes. Deferred taxes are determined based on the estimated future tax
effects of differences between the financial and tax basis of assets and
liabilities given the provisions of the enacted tax laws. Prior to the
recapitalization transaction completed in February 1997, WCI was taxed as an S
Corporation (see Note 6).

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximates the fair value. In addition, the carrying value of
all borrowings approximate fair value based on interest rates currently
available to the Company.

Cash Management

The Company has a cash management program that processes cash receipts and
provides for centralized cash disbursements using certain zero-balance accounts.
This cash management program may result in negative book cash balances in
various zero-balance disbursement accounts. At December 31, 1995, March 31, 1996
and March 31, 1997, such negative cash balances total approximately $2.8
million, $577,000 and $2.7 million, respectively, and are included in accounts
payable.

Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board issued SFAS 123
"Accounting for Stock-Based Compensation". As permitted under SFAS 123, the
Company has elected to continue to account for employee stock-based compensation
under APB Opinion No. 25 and therefore presents the necessary pro forma
disclosures (see Note 8).

Unaudited Pro Forma Net Income

Pro Forma net income represents the results of operations adjusted to
reflect a provision for income tax on historical income before income taxes,
which gives effect to the change in the Company's income tax status to a C
Corporation for all periods presented. The difference between the pro forma
income tax rates utilized and the federal statutory rate of 34% relates
primarily to state income taxes (net of federal benefit) and certain permanent
differences.

Unaudited Pro Forma Net Income Per Share

Pro forma net income per share has been computed by dividing pro forma net
income, net of senior redeemable preferred stock dividends, by the pro forma
weighted average number of shares outstanding. In accordance with a regulation
of the Securities and Exchange Commission (SEC), such computation includes all
common equivalent shares (using the treasury stock method and the initial public
offering price) issued twelve months prior to the filing of the initial public
offering as if they were outstanding for the entire period presented.
Additionally, in accordance with SEC rules, 586,833 shares are included in the
pro forma weighted average shares, representing the number of shares necessary
to pay the portion of the fiscal 1997 stockholders dividend that exceeded the
earnings for such period. Common equivalent shares from convertible stock are
included in the calculation as if converted. Further, the pro forma weighted
average shares outstanding has been adjusted to reflect a 1.74-for-1 stock split
of the common stock which will be effected immediately prior to the consummation
of the proposed initial public offering (See Note 10). Actual share amounts have
not been adjusted to reflect this split.

Historical net income per share has not been presented because it is not
indicative of the ongoing entity.

F-9
<PAGE> 66

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

New Accounting Pronouncements

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". This
statement is effective for both interim and annual reporting periods ending
after December 15, 1997. SFAS No. 128 replaces primary EPS with basic EPS and
fully diluted EPS with diluted EPS. Basic EPS is computed by dividing reported
earnings by weighted average shares outstanding. Diluted EPS is computed in the
same way as fully diluted EPS, except that the calculation now uses the average
share price for the reporting period to compute dilution from options under the
treasury stock method. Management does not believe that adoption of this
standard will have a significant impact on earnings per share.

In June 1997, the FASB issued SFAS Nos. 130 and 131 "Reporting
Comprehensive Income" and "Disclosures about Segments of an Enterprise and
Related Information." FASB No. 130 and No 131 are effective for fiscal years
beginning after December 15, 1997, with earlier adoption permitted. The Company
does not believe that adoption of these standards will have a material effect on
the Company.

Unaudited Quarterly Information

The accompanying financial information as of June 30, 1997 and for the
three months ended June 30, 1996 and 1997 is unaudited and has been prepared on
substantially the same basis as the annual financial statements. In the opinion
of management, the unaudited information contains all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial position
and results of operations as of such date and for such periods.

3. ACQUISITION OF A-Y SUPPLY, INC.

Effective January 1, 1997, the Company acquired 100 percent of the
outstanding capital stock of A-Y Supply, Inc. ("A-Y") for approximately $16.8
million in cash and notes. The total assets related to this acquisition are
$20.2 million, including goodwill of $10.1 million and a covenant not to compete
of $1 million. Total liabilities of $3.4 million were assumed. This acquisition
was accounted for as a purchase. Accordingly, the results of operations of A-Y
are included in the consolidated financial position of the Company beginning on
the effective date of the acquisition. In February 1997 A-Y was merged into the
Company.

The following summary, prepared on a pro forma basis, combines the results
of operations as if A-Y had been acquired as of the beginning of the fiscal year
ended March 31, 1997, after including the impact of adjustments for amortization
of intangibles, C Corporation income taxes and interest expense on the
acquisition debt.

<TABLE>
<S> <C>
Net sales...................................... $123,459,000
Net income..................................... $ 1,772,000
Earnings per share............................. $ 0.24
Pro forma weighted average shares
outstanding.................................. 7,260,981
</TABLE>

The pro forma information is presented for informational purposes only and
is not necessarily indicative of the operating results that would have occurred
had the acquisition been consummated as of the above date, nor are they
indicative of future operating results. The pro forma weighted average shares
outstanding has been adjusted to reflect a 1.74-for-1 stock split of common
stock which will be effected immediately prior to the consummation of the
proposed initial public offering (see Note 10).

F-10
<PAGE> 67

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

4. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS

Property and Equipment

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, MARCH 31, JUNE 30,
1995 1996 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Land and building......................... $ 379,000 $ 379,000 $ 471,000 $ 471,000
Transportation equipment.................. 4,708,000 4,813,000 5,233,000 6,513,000
Machinery and equipment................... 2,143,000 2,164,000 2,474,000 4,341,000
Office equipment.......................... 2,283,000 2,339,000 3,163,000 4,059,000
Leasehold improvements.................... 1,474,000 1,521,000 1,697,000 2,173,000
----------- ----------- ----------- -----------
10,987,000 11,216,000 13,038,000 17,557,000
Less -- accumulated depreciation.......... (4,138,000) (4,448,000) (5,577,000) (8,498,000)
----------- ----------- ----------- -----------
$ 6,849,000 $ 6,768,000 $ 7,461,000 $ 9,059,000
=========== =========== =========== ===========
</TABLE>

Rental Equipment

Rental equipment consists primarily of construction equipment acquired in
connection with the A-Y acquisition and is net of accumulated depreciation of
approximately $20,000 and $45,000 at March 31, 1997 and June 30, 1997,
respectively.

Intangible Assets

Intangible assets consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, MARCH 31, JUNE 30,
1995 1996 1997 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Goodwill.......................................... $ -- $ -- $11,124,000 $24,177,000
Covenant not to compete........................... -- -- 1,000,000 1,000,000
Deferred financing costs and other................ -- -- 1,215,000 1,125,000
----------- ----------- ----------- -----------
-- -- 13,339,000 26,302,000
Less -- accumulated amortization.................. -- -- (134,000) (320,000)
----------- ----------- ----------- -----------
$ -- $ -- $13,205,000 $25,982,000
=========== =========== =========== ===========
</TABLE>

Accrued Liabilities

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, MARCH 31, JUNE 30,
1995 1996 1997 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Payroll and payroll related......................... $ 1,330,000 $ 600,000 $ 979,000 $1,383,000
Sales tax........................................... 551,000 532,000 947,000 998,000
Commissions......................................... 179,000 173,000 327,000 209,000
Other............................................... 268,000 831,000 1,013,000 2,192,000
----------- ----------- ----------- ----------
$ 2,328,000 $2,136,000 $3,266,000 $4,782,000
=========== =========== =========== ==========
</TABLE>

F-11
<PAGE> 68

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

5. LONG-TERM DEBT

Long-term debt consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, MARCH 31, JUNE 30,
1995 1996 1997 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Senior Loan and Security Agreement:
Revolving line of credit.......................... $11,269,000 $13,666,000 $14,133,000 $28,330,000
Term Loan......................................... -- -- 12,000,000 11,400,000
Senior Subordinated Investor Notes, at 19.25
percent, secured by certain assets, maturing
February 2005..................................... -- -- 7,032,000 15,000,000
Subordinated Shareholder Note, interest at 13
percent, maturing February 2005................... -- -- 1,500,000 1,500,000
Senior Subordinated A-Y Shareholders' Notes,
interest at 10 percent, maturing March 2000....... -- -- 3,000,000 3,000,000
Note payable secured by transportation equipment,
interest at 8.25 percent, maturing August 2005.... 3,129,000 3,113,000 3,043,000 3,025,000
Other............................................... 2,044,000 2,005,000 1,336,000 1,233,000
----------- ----------- ----------- -----------
16,442,000 18,784,000 42,044,000 63,488,000
Less -- Current portion......................... (627,000) (689,000) (3,156,000) (3,106,000)
----------- ----------- ----------- -----------
$15,815,000 $18,095,000 $38,888,000 $60,382,000
=========== =========== =========== ===========
</TABLE>

Senior Loan and Security Agreement

The Company has a loan and security agreement (the "Agreement") with
certain senior lenders (the "Banks"), which provides a $25 million revolving
line of credit and a $12 million term loan. The Agreement expires in February
2002. The revolver bears interest at 1/4 percent over the Bank's prime rate and
provides for a Libor option of 2 1/2 percent over the Libor rate. The term loan
bears interest at 3/4 percent over the Bank's prime rate and provides for a
Libor option of 3 percent over the Libor rate. For the period ended March 31,
1997, the interest rates ranged from 8.1 to 8.75 percent on the revolver and
from 8.6 to 9.3 percent on the term loan. Borrowings under the revolver portion
of the security agreement are based on advance rates of 85 percent and 65
percent of eligible accounts receivable and inventory, respectively. The
Agreement includes financial covenants for net worth, working capital, fixed
charge coverage and inventory turnover, among others. This agreement has
prepayment penalties associated with early retirement. (See Note 10.)

Senior Subordinated Investor Notes

During fiscal 1997, the Company entered into a senior subordinated purchase
agreement in an amount of $7 million ("First Closing Note") with an unrelated
investor. The agreement also authorizes an additional note in the amount of $3
million ("Second Closing Note"), none of which was outstanding at March 31,
1997. The First Closing Note bears interest at 19.25 percent per annum of which
6.25 percent is deferred. Such deferred interest is payable no later than
February 2002. In the event the Company completes an initial public offering or
transfers substantially all of the assets of the Company in a consolidation or
merger, the Company will be required to prepay the entire principal balance, all
accrued but unpaid interest and certain prepayment penalties. (See Note 10). The
agreement includes certain financial covenants, as defined. The note is
subordinated to the senior debt and A-Y shareholder notes discussed below.

F-12
<PAGE> 69

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

Senior Subordinated A-Y Shareholders' Notes

Under the terms of the A-Y acquisition, the Company entered into three
separate subordinated note agreements with the former shareholders of A-Y,
aggregating $3 million. These notes are subordinated to the senior debt. The
notes may be prepaid at the Company's option without penalty. In the event the
Company closes an initial public offering with minimum net proceeds of $15
million, the Company must use any amount over $15 million to prepay the unpaid
principal balance and accrued interest on these notes. One of the notes, in the
amount of $500,000, contains a non-detachable warrant that allows the holder, in
the event of an initial public offering of the Company, to purchase shares of
the Company's common stock by converting the note payable (A-Y Warrant). The
number of shares issuable upon conversion shall be calculated by dividing the
then outstanding principal balance of the note by an amount equal to 75 percent
of the fair value of one share of the Company's common stock at the date of
exercise. The A-Y Warrant expires the sooner of 20 days after the completion of
an initial public offering or February 25, 2000. In the event the warrant is
exercised, the excess of the fair value of the stock issued over the balance of
the note payable ($167,000) will be charged to interest expense in the period
the warrant is exercised.

Annual maturities of long-term debt as of March 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31:
------------------------------------------------
<S> <C>
1998............................................ $ 3,156,000
1999............................................ 4,558,000
2000............................................ 4,595,000
2001............................................ 2,787,000
2002............................................ 16,912,000
Thereafter...................................... 10,036,000
-----------
$42,044,000
===========
</TABLE>

6. INCOME TAXES

The significant components of the Company's deferred income tax assets
(liability) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1997
------------ --------- ---------
<S> <C> <C> <C>
Current deferred tax assets:
Inventory reserves................... $ -- $ 350,000
Allowance for bad debt............... -- -- 250,000
Other................................ -- -- 138,000
-------- -------- --------
$ -- $ -- $ 738,000
======== ======== ========
Long-term deferred tax liability --
Depreciation......................... $ -- $ -- $(200,000)
======== ======== ========
</TABLE>

Although realization of the above deferred tax assets is not assured,
management believes that realization is more likely than not through future
taxable earnings.

Prior to the recapitalization transaction completed in February 1997, the
Company was taxed as an S Corporation. Under these provisions, taxable income or
loss was included in the personal tax return of the stockholder of WCIC.
Therefore, no provision for federal or state income taxes was reflected in the
historical financial statements. As an S Corporation, the Company was subject to
a minimum franchise tax of $800, or

F-13
<PAGE> 70

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

1.5% of taxable income, which is included in the Company's tax provision for the
years ended December 31, 1994 and 1995.

Effective February 26, 1997, the Company terminated its S Corporation
status and converted to a C Corporation for both federal and state purposes. As
a result of this change in income tax status, the Company recorded an income tax
benefit of approximately $500,000 to establish net deferred tax assets during
the year ended March 31, 1997. The benefit for income taxes for the year ended
March 31, 1997 primarily represents this tax benefit net of C Corporation income
taxes.

7. STOCKHOLDERS' EQUITY

At March 31, 1997, the authorized capital stock of WCI consists of
10,000,000 shares of common stock and 5,000,000 shares of preferred stock, of
which 3,380,000 shares of preferred stock has been designated.

Senior Redeemable Preferred Stock

In connection with the recapitalization transaction, WCI issued 675,969 of
senior redeemable preferred stock (Senior Preferred Stock) in a private
placement for an aggregate price of $2,650,000. The Senior Preferred Stock
accrues cumulative dividends of eight percent per annum and, in the event of an
initial public offering (IPO) or the sale of the Company, has a mandatory
redemption feature. The Senior Preferred Stock is redeemable for the stated
amount plus accrued dividends (Redemption Price). In the event that WCI does not
complete an IPO or sale of the Company, WCI must offer to redeem the Senior
Preferred Stock on March 1, 2005 at the Redemption Price. The Senior Preferred
Stock has a total liquidation preference of $2,650,000 plus accrued dividends.
Accrued dividends of approximately $19,000 are included in accrued liabilities
as of March 31, 1997.

Convertible Preferred Stock

In connection with the recapitalization transaction, WCI issued 1,496,843
shares (convertible into 2,604,507 shares of Common Stock, post split) of Series
A-1 Preferred Stock ("A-1 Preferred") in a private placement for an aggregate
purchase price of $2,250,000. In addition, WCI issued 683,636 shares
(convertible into 1,189,527 shares of Common Stock, post split) of Series A-2
Preferred Stock ("A-2 Preferred") to WCIC's former shareholder, together with
other consideration, in exchange for all outstanding common shares of WCIC.

The A-1 Preferred and the A-2 Preferred accrue cumulative dividends of
approximately $393,000 per year. At the option of the holder, each share of the
A-1 and A-2 Preferred can be converted into one share (1.74 shares, post split)
of common stock. Such conversion is automatic in the event of an IPO or upon
merger or sale of the Company. The conversion rate is subject to adjustment
under certain circumstances pursuant to anti-dilution provisions. In addition,
the A-2 Preferred is subject to redemption at $.0146 per share if the Company
does not attain certain earnings levels during the three cumulative fiscal years
ending 1999 and the five cumulative fiscal years ended 2001, as defined. Accrued
dividends of approximately $36,000 are included in accrued liabilities as of
March 31, 1997.

Common Stock Warrants

In connection with the issuance of the Senior Redeemable Preferred Stock,
the Company issued warrants to purchase 675,969 shares (1,176,186 shares, post
split) of common stock at an exercise price of $0.01 per share ($.006 per share,
post split) (estimated fair value). The warrants expire on March 1, 2007.

F-14
<PAGE> 71

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

8. EMPLOYEE BENEFIT PLANS

Employee Stock Option Plan

On March 19, 1997, the Company adopted the 1997 Long Term Incentive and
Stock Option Plan ("the Plan"). The Plan reserves for issuance to employees,
members of the board of directors, consultants and independent contractors a
maximum of 379,798 shares of the Company's A-1 Preferred or common stock
(convertible into 660,849 shares of Common Stock, post split) upon exercise of
stock options, stock appreciation rights, and restricted or performance stock
awards. Stock options may be granted as "Incentive Stock Options" (as defined by
the Internal Revenue Code of 1986) or as nonqualified options. The exercise
price is determined by the Compensation Committee and may not be less than 100
percent of the fair market value at the date of grant. For Incentive Stock
Options the exercise price for options granted to individuals who own more than
ten percent of the total combined voting power of all classes of the stock of
the Company shall be 110 percent of the fair value at the date of grant. Each
option and award shall expire on the date determined by the Compensation
Committee but may not extend beyond ten years for incentive stock options and
fifteen years for nonqualified options. Awards under the Plan may be granted
through February 1, 2007.

Options to acquire an aggregate of 348,976 shares of A-1 Preferred
(convertible into 607,218 shares of Common Stock, post split) at an exercise
price of $4.31 per share were granted to employees on March 31, 1997. The
options vest over five years, beginning September 30, 1997 and expire March 31,
2007. At March 31, 1997, a total of 30,822 shares (convertible into 53,630
shares of Common Stock, post split) remain available for future grant under the
Plan.

The Company has adopted the disclosure-only provision of SFAS 123.
Accordingly, no compensation cost has been recorded for stock option grants. Had
compensation cost for the Plan been determined based on the fair value at the
grant date for awards in fiscal 1997 consistent with the provision of SFAS 123,
the effect would not have been material for all periods presented.

The fair value of each A-1 Preferred option is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 1997: Dividend yield of
zero percent; zero expected volatility; risk-free rate of 6.38 percent; and
expected lives of five years. The weighted-average exercise price of the options
granted during fiscal 1997 is $4.31 per share and the weighted-average fair
value is $1.18 per share.

401(k) Plan

The Company maintains a defined contribution benefit plan (the "401(k)
Plan") covering substantially all of its employees. Company contributions to the
401(k) Plan are voluntary and at the discretion of the Company. The Company's
expense related to the 401(k) Plan totaled $152,000 and $131,000 for the years
ended December 31, 1994 and December 31, 1995, $2,000 for the three months ended
March 31, 1996 and $99,000 for the year ended March 31, 1997.

Other

On February 25, 1997 a major shareholder of the Company sold 100,000 shares
(convertible into 174,000 shares of Common Stock, post split) of Series A-2
convertible preferred stock to an officer of the Company for the estimated fair
value of $.0146 per share. Of the shares, 80,000 (convertible into 139,200
shares of Common Stock, post split) are subject to repurchase by the major
shareholder. The repurchase option lapses at a rate of 25% a year for such
shares commencing February 25, 1998.

F-15
<PAGE> 72

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

9. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has entered into operating leases that expire at various dates
through 2004. Total rental expense under these operating leases was
approximately $1,663,000 and $1,743,000 for the years ended December 31, 1994
and 1995, $443,000 for the three months ended March 31, 1996 and $1,868,000 for
the year ended March 31, 1997. Future minimum rentals on these operating leases
are as follows:

<TABLE>
<S> <C>
YEAR ENDING MARCH 31:
-------------------------------------------------
1998............................................. $1,730,000
1999............................................. 1,622,000
2000............................................. 1,560,000
2001............................................. 1,241,000
2002............................................. 1,030,000
Thereafter....................................... 2,236,000
----------
$9,419,000
==========
</TABLE>

Employment Agreements/Bonus Plans

The Company entered into employment agreements with certain key management
employees with a minimum term of 5 years. These agreements specify annual base
salary levels, incentive bonuses which are payable if the Company attains
certain earnings goals, as defined, and severance provisions that range from
zero to three years of base compensation. The Company accrues for these bonuses
based on management's estimates of achieving such performance goals and has
included these amounts in accrued liabilities at March 31, 1997. One employment
agreement contains a guaranteed bonus of $1 million which is being accrued over
the three year period benefitted. In the event of an initial public offering,
this bonus becomes immediately earned. The Company will record the remaining
unamortized amount of this bonus in the period the IPO closes ($890,000 at July
1, 1997).

Loan Guarantee

The Company leases certain facilities under operating lease agreements with
one of the Company's stockholders and the Company currently guarantees the debt
of the stockholder related to this property. The stockholder is currently in the
process of refinancing this debt and, in management's opinion, the Company will
be released as a guarantor when the refinancing is completed.

10. SUBSEQUENT EVENTS -- (UNAUDITED)

Acquisitions of Stop Supply, Inc. and Viking Distributing Co., Inc.

Effective May 1, 1997, the Company acquired the common stock of Stop
Supply, Inc. ("Stop") in exchange for approximately $3,275,000 in cash and a
warrant exercisable into common stock of the Company at 75 percent of the
initial public offering price, up to a maximum of $250,000. Stop currently
operates one construction supply store located in Central California. Effective
June 25, 1997, the Company acquired the common stock of Viking Distributing Co.,
Inc. ("Viking") in exchange for approximately $15,750,000 in cash and the
assumption of $500,000 of short-term debt. Viking operates three construction
supply stores located in Northern California. In connection with these
acquisitions, the Company borrowed an additional $8 million under the Senior
Subordinated Investor Agreement and approximately $13 million under the Senior
Loan and Security Agreement (see Note 5). In connection with these acquisitions
the maximum borrowings provided

F-16
<PAGE> 73

WHITE CAP INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF JUNE 30, 1997 AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997 ARE UNAUDITED)

for under the Company's revolving line of credit was increased to $35 million.
The terms of the amended Agreement also provide for seasonal maximum borrowings
of $38 million.

Proposed Public Offering

Subsequent to March 31, 1997 the Company has proposed the filing of a Form
S-1 Registration Statement with the Securities and Exchange Commission to sell
common stock to the public. The majority of such proceeds will be used to repay
debt. If the Company is successful at completing this offering and repaying the
debt, it will incur debt prepayment charges of approximately $7.8 million, which
will be charged to operations in the period the debt is repaid. In addition, if
the Company is successful at completing this offering, the Company will write
off approximately $1.2 million associated with capitalized debt issuance costs.

F-17
<PAGE> 74

To the Board of Directors
A-Y SUPPLY, INC.
North Highlands, California

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheet of A-Y SUPPLY, INC. as of
December 31, 1995, and the related statements of income, stockholder's equity
and retained earnings and cash flows for the years ended December 31, 1995 and
1994. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A-Y SUPPLY INC. as of
December 31, 1995, and the results of its operations and its cash flows for the
years ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles.

BURNETT, UMPHRESS & KILGOUR

Rancho Cordova, California
March 1, 1996

F-18
<PAGE> 75

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To A-Y Supply, Inc.:

We have audited the accompanying balance sheet of A-Y SUPPLY, INC. (a
California corporation) as of December 31, 1996, and the related statements of
income, stockholder's equity and cash flows for the year then ended. 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. The financial statements of A-Y Supply, Inc. as of December 31, 1995,
were audited by other auditors whose report dated March 1, 1996, expressed an
unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A-Y Supply, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Sacramento, California
January 31, 1997

F-19
<PAGE> 76

A-Y SUPPLY, INC.

BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash.............................................................. $1,387,893 $1,323,206
Receivables....................................................... 2,415,939 2,776,951
Inventory......................................................... 1,734,438 2,941,360
Prepaid expenses.................................................. 4,494 22,035
Property held for sale............................................ 824,841 --
Assets to be distributed to stockholders.......................... -- 904,228
---------- ----------
Total current assets...................................... 6,367,605 7,967,780
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net of accumulated
depreciation of $765,330, and $703,255 in 1996 and 1995
respectively...................................................... 894,497 903,202
COVENANT NOT TO COMPETE, net of accumulated amortization of $6,612
and $6,112 in 1996 and 1995, respectively......................... 5,500 5,000
---------- ----------
Total assets.............................................. $7,267,602 $8,875,982
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable...................................................... $ 350,000 $ 350,000
Accounts payable.................................................. 1,278,528 1,462,050
Accrued expenses.................................................. 187,694 227,023
Current maturity of long-term debt................................ 107,538 130,466
Payable to stockholders for assets to be distributed.............. -- 904,228
---------- ----------
Total current liabilities................................. 1,923,760 3,073,767
---------- ----------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturity........................... 149,218 117,711
Note payable -- related party..................................... 200,000 200,000
---------- ----------
Total long-term liabilities............................... 349,218 317,711
---------- ----------
Total liabilities......................................... 2,272,978 3,391,478
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, no par value, 100,000 shares authorized, 348 shares
issued and outstanding......................................... 34,800 34,800
Retained earnings................................................. 4,959,824 5,449,704
---------- ----------
Total stockholders' equity................................ 4,994,624 5,484,504
---------- ----------
Total liabilities and stockholders' equity................ $7,267,602 $8,875,982
========== ==========
</TABLE>

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

F-20
<PAGE> 77

A-Y SUPPLY, INC.

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
SALES............................................... $17,490,588 $21,669,850 $25,708,057
COST OF SALES....................................... 12,471,375 15,446,837 17,319,781
----------- ----------- -----------
Gross profit from sales........................... 5,019,213 6,223,013 8,388,276
EQUIPMENT RENTAL INCOME, net........................ 304,664 390,898 367,218
----------- ----------- -----------
Gross profit from operations...................... 5,323,877 6,613,911 8,755,494
SELLING EXPENSES.................................... 1,917,912 2,160,933 2,534,883
GENERAL AND ADMINISTRATIVE EXPENSES................. 2,415,935 2,488,818 3,147,477
----------- ----------- -----------
Income from operations............................ 990,030 1,964,160 3,073,134
WRITEDOWN OF ASSETS TO BE DISTRIBUTED TO FAIR MARKET
VALUE............................................. -- -- (61,780)
OTHER INCOME........................................ 230,279 160,836 155,446
OTHER EXPENSES...................................... (33,967) (43,976) (135,214)
----------- ----------- -----------
Income before provision for taxes................. 1,186,342 2,081,020 3,031,586
PROVISION FOR INCOME TAX............................ 17,725 29,821 50,470
----------- ----------- -----------
Net income........................................ $ 1,168,617 $ 2,051,199 $ 2,981,116
=========== =========== ===========
</TABLE>

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

F-21
<PAGE> 78

A-Y SUPPLY, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK
------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993..................... 348 $34,800 $3,014,422 $3,049,222
Net Income..................................... -- -- 1,168,617 1,168,617
Distributions to stockholders.................. -- -- (684,329) (684,329)
--- ------- ---------- ----------
BALANCE AT DECEMBER 31, 1994..................... 348 34,800 3,498,710 3,533,510
Net Income..................................... -- -- 2,051,199 2,051,199
Distributions to stockholders.................. -- -- (590,085) (590,085)
--- ------- ---------- ----------
BALANCE AT DECEMBER 31, 1995..................... 348 34,800 4,959,824 4,994,624
Net Income..................................... -- -- 2,981,116 2,981,116
Distributions to stockholders.................. -- -- (1,587,008) (1,587,008)
Assets to be distributed to stockholders....... -- -- (904,228) (904,228)
--- ------- ---------- ----------
BALANCE AT DECEMBER 31, 1996..................... 348 $34,800 $5,449,704 $5,484,504
=== ======= ========== ==========
</TABLE>

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

F-22
<PAGE> 79

A-Y SUPPLY, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $1,168,617 $2,051,199 $ 2,981,116
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization........................ 163,658 189,188 252,553
Provision for doubtful accounts...................... 21,574 32,939 25,460
Provision for inventory reserve...................... -- -- 22,000
Writedown of assets to fair market value............. -- -- 61,780
Changes in assets and liabilities --
Accounts receivable.................................. (69,981) (623,610) (386,472)
Increase (decrease) in inventory..................... 54,919 (145,993) (1,228,922)
Prepaid expenses..................................... 14,096 11,222 (17,541)
Increase (decrease) in accounts payable.............. (260,129) 174,576 189,573
Accrued expenses..................................... 15,320 48,946 33,278
---------- ---------- -----------
Net cash provided by operating activities....... 1,108,074 1,738,467 1,932,825
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for equipment and leasehold
improvements......................................... (149,273) (322,782) (502,835)
Proceeds from disposition of equipment.................. 36,963 25,590 179,429
Investment in property held for sale.................... (474,319) (350,522) (78,519)
Proceeds from employees................................. 15,006 92 --
---------- ---------- -----------
Net cash used in investing activities........... (571,623) (647,622) (401,925)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from new debt.................................. 350,000 -- 350,000
Principal payments on debt.............................. (102,994) (106,936) (358,579)
Distributions to stockholders........................... (684,329) (590,085) (1,587,008)
---------- ---------- -----------
Net cash used in financing activities........... (437,323) (697,021) (1,595,587)
---------- ---------- -----------
Net increase (decrease) in cash................. 99,128 393,824 (64,687)
CASH, beginning of year................................... 894,941 994,069 1,387,893
---------- ---------- -----------
CASH, end of year......................................... $ 994,069 $1,387,893 $ 1,323,206
========== ========== ===========
SUPPLEMENTAL DISCLOSURES REGARDING CASH FLOWS:
Cash paid for --
Income tax........................................... $ 23,825 $ 26,800 $ 42,620
========== ========== ===========
Interest............................................. $ 53,907 $ 60,257 $ 56,803
========== ========== ===========
Noncash items --
Assets to be distributed to stockholders............. -- -- $ 904,228
Automotive equipment purchased through debt.......... $ 86,209 $ 294,801 $ --
========== ========== ===========
</TABLE>

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

F-23
<PAGE> 80

A-Y SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company's Activities

A-Y Supply, Inc. (the "Company") is engaged primarily in the wholesale
distribution of construction materials and supplies to contractors and the
rental and repair of construction equipment. The Company has facilities located
in North Highlands, Stockton, San Leandro, Clovia and Santa Rosa, California.

Use of Estimates in Preparation of Financial Statements

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

Concentration of Credit Risk

Cash includes amounts deposited in financial institutions in excess of
Federal Deposit Insurance Corporation limits.

Inventory

Inventory consists of building materials, supplies, tools and equipment
which is stated at the lower of cost (determined on the first-in, first-out
method) or market.

Equipment and Leasehold Improvements

Equipment and leasehold improvements are recorded at cost and include
improvements that significantly add to the asset's productivity or extend its
useful life. Costs of maintenance and repairs are charged to expense. Upon
retirement or disposal of equipment and leasehold improvements, the costs and
related depreciation are removed from the accounts, and gain or loss, if any, is
reflected in current operations. Rental equipment represents assets held for
rental to customers. Depreciation is computed using the straight-line and
declining balance method. The estimated useful lives used for calculating
depreciation for equipment and leasehold improvements are as follows:

<TABLE>
<CAPTION>
LIFE
-------------
<S> <C>
Automotive equipment........................... 5 years
Office equipment............................... 5 - 7 years
Rental equipment............................... 5 years
Leasehold improvements......................... 5 - 39 years
</TABLE>

Covenant Not to Compete

The covenant not to compete is being amortized over 240 months.
Amortization expense for the years ended 1996, 1995 and 1994 was $500 and has
been included in general and administrative expenses.

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, principally
long-term debt, approximate their estimated fair values.

F-24
<PAGE> 81

A-Y SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under these provisions, the Company passes through
the taxable income to its stockholders each year as earned. S corporations doing
business in California are subject to a 1.5% California franchise tax on taxable
income.

Reclassifications

Reclassifications have been made to the 1994 and 1995 financial statements
to conform to the 1996 presentation.

2. SALE TO OUTSIDE INVESTOR

In an agreement dated December 31, 1996, the stockholders have entered into
an agreement to sell the stock of the Company to an outside investor (the
"Investor") for agreed upon consideration. The closing purchase price is
contingent upon a calculation based upon net current assets (as defined in the
agreement) which includes certain audited current assets and current liabilities
of the Company as of December 31, 1996.

Prior to the agreement closing, the stockholders will distribute to
themselves assets listed on the 1995 balance sheet as property held for sale and
vehicles which are included in 1995 equipment and leasehold improvements. During
1996, these assets were written down to their fair market value and transferred
to assets to be distributed to stockholders on the 1996 balance sheet. The
related payable, termed payable to stockholders for assets to be distributed,
represents the distribution which will be made during 1997.

3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements as of December 31, 1995 and 1996
consist of the following:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Automotive equipment........................ $ 784,161 $ 846,216
Office equipment............................ 174,331 215,200
Rental equipment............................ 513,660 475,267
Leasehold improvements...................... 125,600 131,849
---------- ----------
1,597,752 1,668,532
Less -- Accumulated depreciation............ (703,255) (765,330)
---------- ----------
$ 894,497 $ 903,202
========== ==========
</TABLE>

4. NOTE PAYABLE

As of December 31, 1995 the note payable consists of a $1,000,000 line of
credit with WestAmerica Bank. The line bears interest at prime plus 1.75% per
annum, payable monthly and expires on September 30, 1996. The line is secured by
inventory, chattel paper, accounts receivable, contract rights and general
intangibles. The line of credit is personally guaranteed by the Company
stockholders. As of December 31, 1995, there was an outstanding balance of
$350,000 on the note.

As of December 31, 1996, the note payable consists of a $350,000 short-term
promissory note with WestAmerica Bank. The note bears interest at the bank's
index rate plus .75% per annum, with interest payable monthly. The note expires
on May 31, 1997. The note is secured by inventory, chattel paper, accounts
receivable, contract rights and general intangibles. The note is personally
guaranteed by the Company stockholders.

F-25
<PAGE> 82

A-Y SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

5. LONG-TERM DEBT

Long-term debt as of December 31, 1995 and 1996 consists of the following:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Various auto loans, secured by automotive equipment,
aggregate monthly payments ranging from $481 to
$1,741, including principal and interest ranging
from 8.40% to 13.0%, due through October 2000...... $ 256,756 $ 248,177
Less -- Current maturity............................. (107,538) (130,466)
--------- ---------
$ 149,218 $ 117,711
========= =========
</TABLE>

Aggregate maturities on long-term debt over the next four years are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
--------------------------------------------------
<S> <C>
1997.............................................. $130,466
1998.............................................. 73,842
1999.............................................. 33,351
2000.............................................. 10,518
--------
$248,177
========
</TABLE>

6. RELATED PARTY TRANSACTIONS

The note payable-related party represents an unsecured amount due to a
relative of the stockholder. Monthly interest payments are made at a rate of 8%
per annum. The note will be paid in full as a part of the purchase described in
Note 2.

The Company leases showroom, office, warehouse and distribution space
located in North Highlands, Stockton, San Leandro and Santa Rosa from the
stockholders under various informal operating lease agreements. These informal
agreements will be finalized prior to the sale described in Note 2.

Lease expense related to the above operating leases is reported in general
and administrative expenses. For the years ended December 31, 1994, 1995 and
1996, these expenses amounted to $298,338, $290,640 and $327,987, respectively.

7. 401(k) PLAN

The Company adopted a defined contribution 401(k) plan during the year
ended December 31, 1994. The amount contributed by the Company is to be
determined annually by the Board of Directors. During the year ended December
31, 1994, 1995, and 1996, the Company contributed approximately $19,927, $24,000
and $33,000 to the plan, respectively. This amount is included in general and
administrative expenses.

F-26
<PAGE> 83

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Viking Distributing Co.:

We have audited the accompanying balance sheet of Viking Distributing Co.
as of March 31, 1997, and the related statements of operations, changes in
stockholders' equity and cash flows for the year then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Viking Distributing Co. as
of March 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
San Francisco, California,
June 13, 1997

F-27
<PAGE> 84

VIKING DISTRIBUTING CO.

BALANCE SHEET AS OF MARCH 31, 1997

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 145,428
Accounts receivable, net of allowance for doubtful accounts of $43,000......... 3,939,518
Inventories.................................................................... 3,917,281
Prepaid expenses............................................................... 17,295
Deferred taxes................................................................. 487,981
----------
Total current assets........................................................ 8,507,503
PROPERTY AND EQUIPMENT, net...................................................... 943,124
DEPOSITS......................................................................... 28,012
----------
Total assets................................................................ $9,478,639
----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................................... $ 214,140
Current maturities of obligations under capital leases......................... 33,299
Accounts payable............................................................... 2,281,603
Accrued liabilities............................................................ 1,169,259
Income taxes payable........................................................... 343,687
Sales taxes payable............................................................ 246,969
----------
Total current liabilities................................................... 4,288,957
----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities........................................ 501,828
Obligations under capital leases, less current maturities...................... 90,777
Deferred rent.................................................................. 32,392
----------
Total long-term liabilities................................................. 624,997
----------
Total liabilities........................................................... 4,913,954
----------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000 shares authorized; 33,363 shares issued and
outstanding................................................................. 51,000
Retained earnings.............................................................. 4,513,685
----------
Total stockholders' equity.................................................. 4,564,685
----------
Total liabilities and stockholders' equity.................................. $9,478,639
----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-28
<PAGE> 85

VIKING DISTRIBUTING CO.

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997

<TABLE>
<S> <C>
NET SALES....................................................................... $35,191,898
COST OF GOODS SOLD.............................................................. 24,527,881
-----------
Gross profit.......................................................... 10,664,017
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 9,446,093
-----------
Income from operations................................................ 1,217,924
OTHER EXPENSE: Interest expense, net............................................ (280,175)
-----------
Income before provision for income taxes.............................. 937,749
PROVISION FOR INCOME TAXES...................................................... 402,178
-----------
Net income............................................................ $ 535,571
===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-29
<PAGE> 86

VIKING DISTRIBUTING CO.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE, MARCH 31, 1996....................... 33,363 $51,000 $3,978,114 $ 4,029,114
Net income.................................. 0 0 535,571 535,571
------ ------- ---------- ----------
BALANCE, MARCH 31, 1997....................... 33,363 $51,000 $4,513,685 $ 4,564,685
------ ------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-30
<PAGE> 87

VIKING DISTRIBUTING CO.

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1997

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................... $ 535,571
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization............................................... 296,316
Changes in assets and liabilities:
Accounts receivable, trade................................................ (226,452)
Deferred taxes............................................................ (374,240)
Inventory................................................................. (444,161)
Prepaid expenses.......................................................... (3,759)
Accounts payable.......................................................... 96,537
Income taxes payable...................................................... (28,560)
Deferred rent............................................................. 8,046
Sales tax payable......................................................... 23,045
Accrued liabilities....................................................... 712,396
---------
Net cash provided by operations........................................ 594,739
---------
CASH FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................................ (268,776)
---------
CASH FROM FINANCING ACTIVITIES:
Repayment on line of credit.................................................... (200,000)
Payments for long-term debt.................................................... (36,848)
---------
Net cash used for financing activities................................. (236,848)
Net increase in cash................................................... 89,115
CASH, beginning of year.......................................................... 56,313
---------
CASH, end of year................................................................ $ 145,428
---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest......................................... $ 260,000
Cash paid during the year for taxes............................................ 485,000
</TABLE>

The accompanying notes are an integral part of these statements.

F-31
<PAGE> 88

VIKING DISTRIBUTING CO.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

Operations

Viking Distributing Co. (the Company) distributes a broad range of
professional-grade portable power tools, fasteners, construction equipment and
supplies to general contractors, specialty contractors and public agencies. The
majority of the Company's sales are in Northern California. The Company is
subject to certain risk factors, including, but not limited to, strong
competition and the volatility of the construction industry. This volatility can
adversely impact the Company's results of operations.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires certain estimates be made by management.
Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are made up of cash on hand and in the bank.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents that are
held by the Company's bank. The Company has not experienced any losses related
to its financial instruments.

Inventories

Inventories are stated at the lower of cost (weighted average, which
approximates first-in, first-out) or market.

Property and Equipment

Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method over the useful lives of assets as follows:

<TABLE>
<S> <C>
Trucks and automobiles......................... 5 years
Furniture and fixtures......................... 7 years
Machinery and equipment........................ 3 to 5 years
10 years or the life of the lease,
Leasehold improvements......................... whichever is shorter
</TABLE>

Revenue Recognition

Sales are recognized as products are shipped.

Deferred Rent

Certain of the Company's leases contain fixed escalations of the minimum
annual lease payments during the original term of the lease. The Company
recognizes rent expense on a straight-line basis, recording the difference
between the rental amount charged to operations and the amount payable under the
lease as deferred rent.

F-32
<PAGE> 89

VIKING DISTRIBUTING CO.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997

Income Taxes

The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under the liability method, deferred taxes are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.

2. PROPERTY AND EQUIPMENT:

Property and equipment at March 31, 1997, consists of:

<TABLE>
<S> <C>
Trucks and automobiles.................................. $ 874,533
Machinery and equipment................................. 603,388
Leasehold improvements.................................. 395,473
Furniture and fixtures.................................. 71,990
-----------
Total......................................... 1,945,384
Less: Accumulated depreciation.......................... (1,002,260)
-----------
$ 943,124
===========
</TABLE>

Total depreciation expense for the year ended March 31, 1997, was $296,316.
Included in property and equipment are depreciated amounts totaling $150,000
related to assets held under capital leases.

3. BANK LINE OF CREDIT:

The Company has a line of credit agreement with a bank to provide for
short-term borrowings with interest at a rate of one point over the bank's prime
rate (9.50 percent at March 31, 1997). Loan advances of up to $1,000,000 are
available. The Company had no borrowings outstanding at March 31, 1997, under
this agreement. The outstanding principal is due and payable in full on March 1,
1998.

The Company is required by the bank to maintain certain financial covenants
covering current ratio, tangible net worth, ratio of total liabilities to
tangible net worth, and ratio of cash flow to debt service, and requiring
profitable operations (all as defined in the agreement) in addition to certain
nonfinancial covenants. The Company was in compliance with all of these
covenants as of March 31, 1997.

4. NOTES PAYABLE:

The Company has the following notes payable at March 31, 1997:

<TABLE>
<S> <C>
Notes payable to the principal stockholders of the Company, bearing
interest at 12 percent per annum; maturing in June 2001................ $ 150,000
Notes payable to related parties, collateralized by several of the
Company's trucks and automobiles, payable in monthly installments,
including interest at annual percentage rates ranging from 9 percent to
9.5 percent and maturing between August 1997 and March 1999............ 123,871
Notes payable to a number of financial institutions, collateralized by
several of the Company's trucks and automobiles, payable in monthly
installments, including interest at annual percentage rates ranging
from 8.75 percent to 10 percent and maturing between December 1997 and
June 1999.............................................................. 87,097
</TABLE>

F-33
<PAGE> 90

VIKING DISTRIBUTING CO.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997

<TABLE>
<S> <C>
Note payable to a bank, collateralized by receivables, inventories and
equipment, payable in 60 monthly installments of principal of $5,000
plus interest at 1.25 percent above the bank's prime rate (9.5 percent
at March 31, 1997), maturing on March 1, 2001.......................... 240,000
Note payable to a bank, collateralized by receivables, inventories and
equipment, payable in 60 monthly installments of principal of $1,667
plus interest at 1.25 percent above the bank's prime rate (9.5 percent
at March 31, 1997), maturing on June 15, 2000.......................... 65,000
Note payable to a bank, collateralized by receivables, inventories and
equipment, payable in 48 monthly installments of principal of $3,125
plus interest at 1.25 percent above the bank's prime rate (9.5 percent
at March 31, 1997), maturing on June 15, 1998.......................... 50,000
---------
Notes payable............................................................ 715,968
Less: Current maturities................................................. (214,140)
---------
Notes payable, net of current maturities................................. $ 501,828
---------
</TABLE>

Future minimum debt repayments under the notes payable above are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
--------------------------------------------------
<S> <C>
1998....................................... $214,140
1999....................................... 164,025
2000....................................... 103,573
2001....................................... 81,736
2002....................................... 152,494
--------
$715,968
========
</TABLE>

5. LEASES:

The Company conducts its operations from leased facilities consisting of a
main office and warehouse facility and branch sales offices, warehouses and
retail stores. All leases are classified as operating leases and all have a
five-year term. The leases generally provide that the Company pay the taxes,
insurance and maintenance expenses related to the leased properties.

The Company also leases certain vehicles and computer equipment under
capital leases.

F-34
<PAGE> 91

VIKING DISTRIBUTING CO.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997

The future minimum lease payments in the aggregate are as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31 CAPITAL OPERATING
-------------------------------------------------------- ------- ----------
<S> <C> <C>
1998.................................................. $42,974 $ 351,278
1999.................................................. 42,974 366,544
2000.................................................. 40,148 307,634
2001.................................................. 22,387 50,047
2002.................................................. 2,974 0
------- ----------
151,457 $1,075,503
=========
Less: Amounts allocated to interest..................... 27,381
-------
Present value of net minimum payments................... 124,076
Less: Current maturities................................ 33,299
-------
Long-term capital obligations........................... $90,777
=======
</TABLE>

Total rent expense under building leases was $326,544 for the year ended
March 31, 1997.

The Company is involved in various lawsuits, claims and injuries that are
incidental to its business. In the opinion of management, the resolution of
these matters will not materially affect the business position, results of
operations or liquidity of the Company.

6. INCOME TAXES:

The provision for income taxes shown in the accompanying statement of
operations is composed of the following for the year ended March 31, 1997:

<TABLE>
<S> <C>
Current:
Federal........................................ $ 605,605
State.......................................... 170,813
---------
776,418
---------
Deferred:
Federal........................................ (282,875)
State.......................................... (91,365)
---------
(374,240)
---------
$ 402,178
=========
</TABLE>

The deferred tax asset reflected in the accompanying balance sheet includes
the following at March 31, 1997:

<TABLE>
<S> <C>
Deferred taxes:
Accrued bonuses................................. $160,000
Accrued vacation and other benefits............. 142,648
Accrued profit sharing.......................... 62,250
State franchise taxes payable................... 11,859
Obsolescence reserve............................ 21,420
Capitalized overheads related to inventory...... 45,365
Other........................................... 44,439
--------
$487,981
========
</TABLE>

F-35
<PAGE> 92

VIKING DISTRIBUTING CO.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997

7. PROFIT-SHARING PLAN:

The Company operates a profit-sharing plan covering all of its eligible
employees. The Company can contribute, at the discretion of the Board of
Directors, up to 15 percent of qualified wages to the plan. For the year ended
March 31, 1997, the Company declared a contribution of $150,000 to the plan,
which is included in accrued liabilities at March 31, 1997.

8. SUBSEQUENT EVENT:

During March 1997, the principal stockholders of the Company entered into
an agreement to sell all of the Company's stock to an outside investor for an
agreed-upon consideration as defined in the agreement. This agreement is
expected to close during June 1997. Prior to the closing, the current
stockholders will distribute to themselves $400,000 in bonuses which are
included in accrued liabilities at March 31, 1997.

F-36
<PAGE> 93

[PHOTOS OF COMPANY'S PRODUCTS AND/OR FACILITIES]
<PAGE> 94

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 7
Recent Transactions....................... 11
Use of Proceeds........................... 12
Dividend Policy........................... 12
Dilution.................................. 13
Capitalization............................ 14
Unaudited Pro Forma Combined Financial
Data.................................... 15
Selected Historical Financial and
Operating Data.......................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 20
Business.................................. 27
Management................................ 38
Principal and Selling Stockholders........ 46
Description of Capital Stock.............. 48
Description of Certain Indebtedness....... 50
Certain Relationships and Related
Transactions............................ 51
Shares Eligible for Future Sale........... 52
Underwriting.............................. 54
Legal Matters............................. 56
Experts................................... 56
Additional Information.................... 56
Index to Financial Statements............. F-1
</TABLE>

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

UNTIL NOVEMBER 16, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
4,000,000 SHARES

[WHITE CAP INDUSTRIES LOGO]

COMMON STOCK
------------------------

PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

BANCAMERICA ROBERTSON STEPHENS
OCTOBER 22, 1997
======================================================