HUGHES SUPPLY INC, 424B4, 1996-05-17

HUGHES SUPPLY INC
424B4, 1996-05-17
ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-02215

PROSPECTUS
2,104,926 SHARES

[HUGHES SUPPLY, INC. LOGO]

COMMON STOCK

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

Of the 2,104,926 shares of Common Stock offered hereby, 1,250,000 shares
are being sold by Hughes Supply, Inc. ("Hughes Supply" or the "Company") and
854,926 shares are being sold by certain shareholders (the "Selling
Shareholders"). See "Principal and Selling Shareholders." The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Shareholders.

The Company's Common Stock is traded on the New York Stock Exchange, Inc.
(the "NYSE") under the symbol "HUG." The last reported sale price of the
Company's Common Stock on the NYSE on May 16, 1996 was $35.875 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN 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>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $34.50 $1.81 $32.69 $32.69
- -------------------------------------------------------------------------------------------------------------
Total(3) $72,619,947 $3,809,916 $40,862,500 $27,947,531
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses estimated at $425,000, all of which is payable
by the Company.

(3) The Company and one of the Selling Shareholders have granted the
Underwriters 30-day options to purchase up to 236,989 and 78,750
additional shares of Common Stock, respectively, solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Shareholders will
be $83,512,943, $4,381,404, $48,609,670 and $30,521,868, respectively.

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

The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if accepted by them and subject to
certain other conditions. It is expected that certificates for the shares of
Common Stock offered hereby will be available for delivery on or about May 22,
1996, at the offices of Smith Barney Inc., 333 W. 34th Street, New York, New
York 10001.

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

SMITH BARNEY INC. ROBERT W. BAIRD & CO.
INCORPORATED

May 16, 1996
<PAGE> 2
The following map shows the locations of the Company's branches and distribution
centers and the branch locations of the two companies recently acquired by the
Company.

[MAP]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and related notes thereto included
elsewhere or incorporated by reference in this Prospectus. As used in this
Prospectus, unless the context indicates otherwise, (i) the terms "Company" and
"Hughes Supply" mean Hughes Supply, Inc., its subsidiaries and its predecessors,
and (ii) the information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. The Company's fiscal year ends on the
last Friday in January of each year.

THE COMPANY

Hughes Supply is one of the largest diversified wholesale distributors of
materials, equipment and supplies for the construction and industrial markets
operating primarily in the southeastern and midwestern United States. The
Company distributes more than 100,000 products through 240 branches located in
21 states and Puerto Rico. The Company's customers are subcontractors, general
contractors, utilities, municipalities and manufacturers. Management believes
that the Company holds significant market share in a majority of its local
markets and is one of the largest distributors of its range of products in the
southeastern and midwestern United States. The Company's largest geographic
market is Florida (representing approximately 43% of fiscal 1996 net sales),
which is one of the largest commercial and residential construction markets in
the United States.

The products which the Company distributes are used in new construction for
commercial, residential, utility and industrial applications and for replacement
and renovation projects. Such products include materials and supplies associated
with the Company's nine major product groups, as follows: electrical; plumbing;
water and sewer; air conditioning and heating; industrial pipe, valves and
fittings; building materials; electric utilities; water systems; and pool
equipment and supplies. Each product group is sold by the Company's own
specialized and experienced sales force consisting of outside sales
representatives and inside account executives. Management believes that the
Company's mix of commercial, residential, utility and industrial business,
geographic diversification and multiple product groups reduces the impact of
economic cycles on the Company's net sales and profitability. Management
believes that no other company competes against it across all of its product
groups.

The Company's principal business objective is to achieve profitable growth,
both internally and through selective acquisitions, primarily in existing and
contiguous geographic markets. The Company has grown internally through
increases in comparable branch net sales, new branch openings and the addition
of new product groups. Since January 29, 1993, the Company has opened 25 new
branches. In addition, the Company continues to pursue an active acquisition
program to capitalize on the opportunities presented by the substantial size and
highly fragmented ownership structure of its industry. Based upon estimates
available to the Company, industry sales in the United States of products sold
by the Company exceeded $100 billion in 1995, and no wholesale distributor of
these products accounted for more than 2% of the total market. Since January 29,
1993, the Company has completed 25 acquisitions representing 87 branches,
including the PVF Acquisition (as defined herein). In addition to increased
geographic penetration, acquisitions often provide opportunities for the Company
to gain market share and to enhance and diversify product offerings. Management
believes that the most cost effective way for the Company to enter new
geographic markets is through acquisitions. All of the Company's significant
acquisitions have been accretive to the Company's earnings per share.

The Company's acquisition strategy is to acquire profitable distribution
businesses with strong management and well-developed market positions and
customer franchises. Acquisitions can generally be categorized as fill-in
acquisitions or new market acquisitions. Fill-in acquisitions are generally
smaller in size and represent new branches within existing product groups and
existing geographic markets. Since January 29, 1993, the Company has completed
fill-in acquisitions of 28 branches, and management believes that significant
additional fill-in acquisition opportunities are available.

New market acquisitions represent the addition of new product groups,
within related commercial construction and industrial product categories, or the
entry into new geographic markets, or both. During the last three fiscal years,
the Company has increasingly focused on new market acquisitions with the goal of
adding products and product groups with higher gross margins, increasing sales
to the replacement and

3
<PAGE> 4

industrial markets (which tend to be less cyclical than new construction
markets), achieving greater geographic diversification and developing additional
opportunities for future fill-in acquisitions and new branch openings. Recent
new market acquisitions completed by the Company include (i) The Treaty
Distribution Group, resulting in a significant increase in the Company's water
and sewer products business in new geographic markets, (ii) Moore Electric
Supply, Inc., resulting in a significant increase in the Company's electrical
products business in new geographic markets, (iii) Florida Pipe & Supply
Company, the Company's initial entry into the industrial pipe, valve and fitting
market, (iv) Elasco Inc., resulting in a significant increase in the Company's
electric utilities business in new geographic markets, and (v) PVF Holdings,
Inc. ("PVF"), resulting in a significant increase in the Company's industrial
pipe, valve and fitting business in new geographic markets.

The Company's operating strategy is based on decentralizing customer
related functions at the branch level, such as sales and local inventory
management, and centralizing certain administrative functions at the corporate
level, such as credit, human resources, finance and accounting, and management
information systems. Other key elements of the Company's operating strategy
include:

- Comprehensive and diversified product groups;

- Superior customer service;

- Local market focus;

- Well-trained and experienced workforce; and

- Volume purchasing power.

Hughes Supply differentiates itself from consumer-oriented, large format,
do-it-yourself ("DIY") home center retailers with respect to the type of
customer served, breadth of products offered and level of service provided.
Management believes that the Company's customers, unlike DIY customers, are
typically professionals who choose their building materials suppliers primarily
on the basis of product availability, price, relationships with sales personnel,
and the quality and scope of services offered by such suppliers. Furthermore,
professional customers generally buy in large volumes, are involved in ongoing
jobs or projects lasting months or years resulting in repeat buying situations,
and require specialized services not typically provided by large format DIY home
center retailers. Customer services provided by the Company include credit,
design assistance, material specifications, scheduled job site delivery, job
site visits to ensure satisfaction, technical product services, including
blueprint take-off and computerized order quotes, and assistance with product
returns. Accordingly, the Company has been able to serve customer groups that
large format DIY home center retailers generally do not emphasize.

As a result of the Company's operating and acquisition strategies, net
sales increased to $1.1 billion in fiscal 1996 from $735.0 million in fiscal
1994, a compound annual growth rate of 21.3%; operating income increased to
$29.9 million in fiscal 1996 from $13.1 million in fiscal 1994, a compound
annual growth rate of 51.0%; and the number of branches increased to 212
branches at the end of fiscal 1996 from 143 branches at the end of fiscal 1994,
a compound annual growth rate of 21.8%.

Hughes Supply was founded as a general partnership in Orlando, Florida in
1928 and was incorporated as a Florida corporation in 1947. The Company's
executive offices are located at 20 North Orange Avenue, Suite 200, Orlando,
Florida 32801, and its telephone number is (407) 841-4755.

RECENT RESULTS

THE PVF ACQUISITION

On May 13, 1996, the Company acquired substantially all of the assets,
properties and business of PVF and its subsidiaries and assumed certain of their
liabilities (the "PVF Acquisition"). The aggregate consideration paid in the PVF
Acquisition was approximately $99.5 million, consisting of cash in the amount of
$44.4 million, the issuance by the Company of a subordinated interim note (the
"seller note") in the principal amount of $30 million, the issuance of 669,956
shares of Common Stock and the assumption of $6.5 million of bank debt.
Concurrently, the Company is offering privately (the "Notes Offering") an
aggregate of $98 million of Senior Notes (the "Notes"), approximately $74.4
million of the proceeds of which will be used to repay the temporary loan used
to fund the cash portion of the amount paid in the PVF Acquisition and the
seller note. The balance of the proceeds will be used to repay a portion of the
Company's bank debt. See "Use of Proceeds" and "Description of Notes."

4
<PAGE> 5

PVF, a privately owned company headquartered in Houston, Texas, is a
specialty distributor of stainless steel and nickel alloy based pipe, valve and
fitting products to industrial customers. PVF is one of the leading providers of
pipe, valve and fitting products for use by industrial companies that operate
manufacturing processes involving highly corrosive or high temperature fluids,
such as those of the petrochemical, food and beverage, and paper industries.
Management of the Company believes that PVF carries one of the country's
broadest and deepest inventories of such products, consisting of more than
15,000 different items sold to approximately 4,000 active accounts. PVF sells
both directly to end-users and to supply houses that sell to end-users through
16 regional branch locations concentrated in the southeastern and southwestern
United States.

For the 12 months ended December 31, 1995, PVF had net sales of $109.2
million and operating income of $27.7 million. On a pro forma basis, giving
effect to the PVF Acquisition, the Company's fiscal 1996 net sales were $1.2
billion, operating income was $57.0 million and, as of the end of fiscal 1996,
the Company had 228 branches located in 19 states and Puerto Rico. See "Selected
Unaudited Pro Forma Consolidated Financial Data."

The PVF Acquisition is a new market acquisition which provides the Company
with several strategic benefits, including: (i) a well-established position in
the stainless steel and specialty alloy sector of the pipe, valve and fitting
products market; (ii) a higher gross margin product group than the Company's
other product groups; (iii) greater focus on targeted industrial and replacement
markets; (iv) a strong management team; and (v) new opportunities for additional
fill-in acquisitions. Additional growth opportunities for the Company related to
the PVF Acquisition include incremental sales of complementary valve products
(which represented only 2% of PVF's fiscal 1995 net sales) and new branch
openings, including the expected opening of a branch in Southern California.

HUGHES SUPPLY FIRST QUARTER RESULTS

Based upon preliminary unaudited results for the first quarter ended April
30, 1996, the Company had net sales of $315.6 million compared to $264.2 million
in the first quarter of 1995, and net income of $4.3 million compared to $3.4
million in the first quarter of 1995. Fully diluted earnings per share were $.57
compared to $.47 in the first quarter of 1995. The quarterly operating results
stated above have been restated to include the acquisition of Elasco Inc., which
was consummated on April 26, 1996 and was accounted for using the pooling of
interests method of accounting.

RISK FACTORS

For a discussion of certain factors that should be considered by
prospective purchasers of the Common Stock offered hereby, see "Risk Factors."

FORWARD-LOOKING STATEMENTS

This Prospectus, including the information incorporated by reference
herein, includes "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
subject to the safe-harbor created by such sections. The Company's actual
results may differ significantly from the results discussed in such
forward-looking statements. Certain factors that might cause such differences
include, but are not limited to, the "Risk Factors" described herein.

THE OFFERING

<TABLE>
<S> <C>
Common Stock being offered by:
The Company............................................... 1,250,000 shares
The Selling Shareholders.................................. 854,926 shares
Common Stock to be outstanding after this offering.......... 9,309,615 shares(1)
Use of proceeds............................................. To repay indebtedness under
the Company's revolving credit
facility and line of credit
agreement. See "Use of
Proceeds."
NYSE symbol................................................. HUG
</TABLE>

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

(1) Based on the number of shares of Common Stock outstanding on May 15, 1996
and including an estimated aggregate of 1,155,749 shares of Common Stock
issued or issuable in the PVF Acquisition and the acquisition of Elasco Inc.
Does not include 527,519 shares of Common Stock issuable upon the exercise
of stock options outstanding as of May 15, 1996.

5
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
JAN. 26, 1996
-------------------------
JAN. 31, JAN. 29, JAN. 28, JAN. 27, PRO FORMA AS
1992(1) 1993 1994 1995 ACTUAL ADJUSTED(2)
-------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................... $558,299 $600,185 $734,958 $875,459 $1,082,179 $1,258,842
Gross profit................... 106,523 115,111 144,492 176,327 223,606 277,580
Operating expenses............. 107,958 109,352 131,383 154,693 193,718 217,897
Operating income (loss)........ (1,435) 5,759 13,109 21,634 29,888 59,683
Interest expense............... 6,439 5,117 5,055 5,284 7,484 12,622
Interest and other income...... 2,058 3,743 2,981 2,848 4,605 5,542
Income (loss) before
income taxes................. (5,816) 4,385 11,035 19,198 27,009 52,603
Net income (loss).............. $ (3,856) $ 2,841 $ 6,524 $ 11,485 $ 16,050 $ 31,253
======== ======== ======== ======== ========= ==========
Earnings (loss) per share
Primary...................... $ (0.76) $ 0.56 $ 1.27 $ 1.83 $ 2.34 $ 3.37
======== ======== ======== ======== ========= ==========
Fully diluted................ $ (0.76) $ 0.56 $ 1.19 $ 1.81 $ 2.31 $ 3.35
======== ======== ======== ======== ========= ==========
OPERATING DATA:
Branches at end of period...... 124 130 143 173 212 240
Comparable branch sales
increases (decrease)(3)...... (14)% 3% 17% 13% 8%
</TABLE>

<TABLE>
<CAPTION>
AS OF JANUARY 26, 1996
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED(4)
-------- ------------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $180,512 $234,120
Total assets................................................. $379,096 $516,415
Long-term debt, less current portion......................... $106,215 $163,681
Shareholders' equity......................................... $154,143 $217,659
</TABLE>

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

(1) Fiscal 1992 represents a 53-week fiscal year.
(2) Gives effect to the following as if each had occurred as of January 28,
1995: (i) the PVF Acquisition; (ii) the acquisitions completed by the
Company on or after January 27, 1996 through April 1, 1996 and the
acquisition of Elasco Inc. (the "Fiscal 1997 Acquisitions"); and (iii) this
offering, the Notes Offering and the application of the net proceeds
therefrom by the Company. See "Selected Unaudited Pro Forma Consolidated
Financial Data."
(3) Comparable branch sales increases are calculated for each period presented
by comparing the net sales results in a fiscal year with the net sales
results for the prior fiscal year (for those branches that were open for
the entire fiscal year and the entire prior fiscal year).
(4) Gives effect to the following as if each had occurred as of January 26,
1996: (i) the PVF Acquisition; (ii) the Fiscal 1997 Acquisitions; and (iii)
this offering, the Notes Offering and the application of the net proceeds
therefrom by the Company.

6
<PAGE> 7

RISK FACTORS

In addition to the other information included or incorporated by reference
in this Prospectus, prospective investors should consider carefully the
following information relating to the Company and the Common Stock before making
an investment in the Common Stock offered hereby.

RISKS OF ACQUISITION STRATEGY

A significant portion of the Company's growth strategy is based upon the
acquisition of other building products businesses. During the normal course of
its business, the Company pursues suitable acquisition opportunities in selected
markets. There can be no assurance, however, that the Company will be able to
continue to identify and acquire appropriate businesses or obtain financing for
such acquisitions on satisfactory terms. In addition, no assurance can be given
that the Company will be successful in integrating the business obtained in the
PVF Acquisition or any other acquired business into its existing operations, or
that such integration will not result in unforeseen operational difficulties or
require a disproportionate amount of management's attention. Future acquisitions
may be financed through the incurrence of additional indebtedness or through the
issuance of Common Stock or the issuance of equity-linked securities, which may
be dilutive to the Company's shareholders. Furthermore, there can be no
assurance that competition for acquisition opportunities in the building
products industry will not escalate, thereby increasing the cost to the Company
of making further acquisitions or causing the Company to refrain from making
further acquisitions. See "Business -- Acquisition Strategy" and "-- The PVF
Acquisition."

DEPENDENCE ON CONSTRUCTION MARKETS, ESPECIALLY IN FLORIDA

Demand for the Company's products depends to a significant degree on the
commercial, residential and industrial construction markets. The level of
activity in the commercial construction market depends largely on vacancy and
absorption rates, interest rates, regional economic outlooks, the availability
of financing and general economic conditions. The level of activity in the
residential construction market depends on new housing starts and residential
renovation projects, which are a function of many factors, including interest
rates, availability of financing, housing affordability, unemployment,
demographic trends, gross domestic product growth and consumer confidence. The
level of activity in the industrial construction market is linked to the
industrial economic outlook, corporate profitability, interest rates and
capacity utilization. Consequently, the level of activity in the commercial,
residential and industrial construction markets is determined by factors that
are not within the Company's control. Moreover, since such markets are sensitive
to cyclical changes in the economy, future downturns in the economy or lack of
further improvement in the economy could negatively affect the Company's results
of operations, especially in Florida where approximately 43% of the Company's
net sales were derived in fiscal 1996.

UNCERTAINTY OF SUPPLY AND PRICE OF PRODUCTS

The Company distributes construction materials and supplies manufactured by
over 5,500 manufacturers and suppliers, no one of which accounted for more than
6% of the Company's total purchases during fiscal 1996. Although the Company has
a widely diversified base of suppliers, future supply shortages may occur from
time to time as a result of unanticipated demand or production difficulties. In
such cases, suppliers often allocate products among distributors, which could
have a short-term adverse effect on the Company's results of operations.
Although the Company has entered into strategic partnerships with certain
suppliers, if the Company fails to maintain such strategic partnerships or if
such suppliers cease to offer competitive pricing terms, the Company's results
of operations may be adversely affected. Furthermore, the future financial
performance of PVF is directly influenced by the cost of stainless steel which,
as a commodity item, can be volatile. A significant fluctuation in the price of
stainless steel could have a material adverse effect on PVF's future
profitability and could create cyclicality in PVF's operating performance. See
"Business -- Operating Strategy -- Volume Purchasing Power" and "-- Customers
and Suppliers."

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<PAGE> 8

COMPETITION

The building products industry is highly competitive and fragmented. The
principal competitive factors in the Company's business are availability of
materials and supplies, pricing of products, availability of credit, technical
product knowledge as to application and usage, and advisory and other service
capabilities. The Company competes with other wholesalers, manufacturers who
sell certain lines directly to contractors and other of the Company's customers
and, to a limited extent, retailers in the markets for plumbing, electrical
fixtures and supplies, building materials, pool supplies and contractor's tools.
The Company's competition varies by product line, customer classification and
geographic market. No assurance can be given that the Company will be able to
respond effectively to the competitive pressures created by those entities,
especially since certain of those entities have substantially greater financial
and other resources than those of the Company. See "Business -- Competition."

RELIANCE ON EXECUTIVE OFFICERS

The Company is highly dependent upon the skills, experience and efforts of
its executive officers. Loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business and development. The Company's continued growth also depends in part on
its ability to attract and retain qualified managers, salespersons and other key
employees and on its executive officers' ability to manage growth successfully.
No assurance can be given that the Company will be able to attract and retain
such employees or that such executive officers will be able to manage growth
successfully. See "Management."

SUBSTANTIAL INCREASE IN SHARES OUTSTANDING; LIMITATIONS ON PAYMENT OF DIVIDENDS

This offering, the PVF Acquisition and the acquisition of Elasco Inc.
substantially increases the number of shares of Common Stock outstanding. The
amount of future dividends, as well as the decision to pay any dividends, in
respect of the Common Stock will depend on the Company's results of operations,
capital requirements and financial condition and other factors that the Board of
Directors deems relevant. In addition, certain debt instruments and agreements
to which the Company and its subsidiaries are or may in the future become
parties contain or may contain restrictive covenants and provisions that limit
the amount of dividends payable by the Company. See "Price Range of Common Stock
and Dividends" and "Description of Notes."

VOLATILITY OF MARKET PRICE FOR COMMON STOCK

From time to time after this offering, there may be significant volatility
in the market price for the Common Stock. Operating results of the Company or of
other companies participating in the building products industry, changes in
general economic conditions and the financial markets, or other developments
affecting the Company or its competitors could cause the market price for the
Common Stock to fluctuate substantially. See "-- Dependence on Construction
Markets, Especially in Florida" above and "Price Range of Common Stock and
Dividends."

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<PAGE> 9

USE OF PROCEEDS

The net proceeds to the Company from the sale of 1,250,000 shares of Common
Stock offered hereby are estimated to be approximately $40.4 million
(approximately $48.2 million if the Underwriters' over-allotment option is
exercised in full). This assumes expenses payable by the Company estimated at
$425,000. The Company expects to apply the net proceeds from this offering to
reduce indebtedness outstanding under its revolving credit facility and line of
credit agreement. At the end of fiscal 1996, such indebtedness had a weighted
average interest rate of 6.29% per annum and becomes payable on June 30, 1998.

The net proceeds to the Company from the sale of the Notes are estimated to
be approximately $98 million. The Company expects to apply approximately $74.4
million of the net proceeds of the Notes Offering to partially fund the PVF
Acquisition. The remaining net proceeds therefrom will be used to further repay
indebtedness outstanding under the Company's revolving credit facility and line
of credit agreement. See "Business -- The PVF Acquisition" and "Description of
Notes."

If the Company is unable to secure financing through the Notes Offering
(and because the Notes Offering will be consummated after the PVF Acquisition),
the Company has secured interim financing of up to $55 million from its bank
syndication group which, along with interim financing from the sellers in the
PVF Acquisition of $30 million, was utilized to fund the PVF Acquisition. The
Company will not receive any of the proceeds from the sale of Common Stock by
the Selling Shareholders.

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company (i) as of January 26, 1996 and (ii) pro forma as adjusted to give effect
to the following as if each had occurred as of January 26, 1996: the PVF
Acquisition; the Fiscal 1997 Acquisitions; and this offering, the Notes Offering
and the application of the net proceeds therefrom by the Company. See "Use of
Proceeds," "Selected Unaudited Pro Forma Consolidated Financial Data," and the
Company's Consolidated Financial Statements and related notes included in this
Prospectus.

<TABLE>
<CAPTION>
JANUARY 26, 1996
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt....................................... $ 2,551 $ 2,551
-------- -----------
Long-term debt, less current portion:
Unsecured revolving bank notes........................................ 68,300 27,766
Short-term instruments classified as long-term debt................... 35,200 35,200
Other notes payable................................................... 558 558
Capital lease obligations............................................. 2,157 2,157
7.96% Senior Notes.................................................... -- 98,000
-------- -----------
Total long-term debt, less current portion.................... 106,215 163,681
-------- -----------
Shareholders' equity:
Preferred Stock, no par value; 10,000,000 shares authorized; none
issued; preferences, limitations and relative rights to be
established by Board of Directors -- --
Common Stock, par value $1 per share; 20,000,000 shares authorized;
6,798,462 and 9,204,211 issued..................................... 6,798 9,204
Capital in excess of par value........................................ 40,553 97,586
Retained earnings..................................................... 106,792 110,869
-------- -----------
Total shareholders' equity.................................... 154,143 217,659
-------- -----------
Total capitalization..................................... $262,909 $ 381,340
======== =========
</TABLE>

9
<PAGE> 10

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Common Stock is listed on the NYSE under the symbol "HUG." The
following table sets forth the high and low sale prices of the Common Stock, as
reported on the NYSE for, and the dividends per share declared in, the periods
indicated.

<TABLE>
<CAPTION>
PRICE RANGE
-------------- DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
Year Ended January 27, 1995:
1st Quarter.................................................... $32 1/4 $24 $ .05
2nd Quarter.................................................... 28 3/4 17 .05
3rd Quarter.................................................... 21 17 .06
4th Quarter.................................................... 19 3/8 15 7/8 .06
Year Ended January 26, 1996:
1st Quarter.................................................... 20 7/8 17 3/4 .07
2nd Quarter.................................................... 22 3/8 18 7/8 .07
3rd Quarter.................................................... 27 1/4 21 3/8 .07
4th Quarter.................................................... 30 1/2 23 5/8 .09
Year Ending January 31, 1997:
1st Quarter.................................................... 34 1/2 26 5/8 .09
2nd Quarter (through May 16, 1996)............................. 37 1/2 34 1/4 --
</TABLE>

The closing sale price of the Common Stock, as reported on the NYSE, on May
16, 1996 was $35.875 per share. As of May 15, 1996, there were 1,097 holders of
record of the Common Stock.

The amount of future dividends, as well as the decision to pay any
dividends, in respect of the Common Stock will depend on the Company's results
of operations, capital requirements and financial condition and other factors
that the Board of Directors deems relevant. In addition, certain debt
instruments and agreements to which the Company and its subsidiaries are or may
in the future become parties contain or may contain restrictive covenants and
provisions that limit the amount of dividends payable by the Company. See
"Description of Notes."

10
<PAGE> 11

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The unaudited Pro Forma Consolidated Balance Sheet of the Company as of
January 26, 1996 gives effect to the following as if each had occurred as of
January 26, 1996: (i) the PVF Acquisition; (ii) the Fiscal 1997 Acquisitions;
and (iii) this offering, the Notes Offering and the application of the net
proceeds therefrom by the Company. The unaudited Pro Forma Consolidated
Statement of Income of the Company for the fiscal year ended January 26, 1996
gives effect to the following as if each had occurred on January 28, 1995: (i)
the PVF Acquisition; (ii) the Fiscal 1997 Acquisitions; and (iii) this offering,
the Notes Offering and the application of the net proceeds therefrom by the
Company.

The PVF Acquisition was accounted for under the purchase method of
accounting. The total purchase price was allocated to tangible and identifiable
intangible assets and liabilities based on management's estimate of their fair
values with the excess of cost over the fair value of the net assets acquired
allocated to goodwill.

The unaudited Pro Forma Consolidated Balance Sheet and Statement of Income
have been prepared by the Company based on the Consolidated Financial Statements
of the Company and PVF included in this Prospectus. The unaudited Pro Forma
Consolidated Balance Sheet and Statement of Income are presented for
illustration purposes only and do not purport to be indicative of the combined
financial condition or results of operations that actually would have occurred
if the transactions described above had been effected at the dates indicated or
to project future financial condition or results of operations for any future
period. In particular, PVF's gross margin may be adversely affected by
fluctuations in prices for stainless steel and nickel alloy. In addition, the
volatility of prices for stainless steel and nickel alloy may create cyclicality
in PVF's operating performance. Therefore, management believes that the pro
forma consolidated financial data are not necessarily indicative of future
performance. The unaudited Pro Forma Consolidated Balance Sheet and Statement of
Income should be read in conjunction with the Company's Consolidated Financial
Statements and the Consolidated Financial Statements of PVF and related notes
thereto included in this Prospectus.

11
<PAGE> 12
HUGHES SUPPLY, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 26, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
STOCK
PRO FORMA PRO FORMA OFFERING AND
ADJUSTMENTS ADJUSTMENTS NOTES
HUGHES PVF FISCAL 1997 FISCAL 1997 PRO FORMA OFFERING PRO FORMA
SUPPLY PVF ACQUISITION ACQUISITIONS ACQUISITIONS COMBINED ADJUSTMENTS AS ADJUSTED
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
(A) (A) (B) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents... $ 3,432 $ 204 $ -- $ 274 $ -- $ 3,910 $ -- $ 3,910
Accounts
receivable,
net........ 143,354 12,584 -- 8,516 (62)(i) 164,392 -- 164,392
Inventories... 132,524 39,829 -- 8,572 -- 180,925 -- 180,925
Other current
assets..... 18,175 747 (747)(c) 44 (16)(i) 18,203 -- 18,203
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
Total
current
assets... 297,485 53,364 (747) 17,406 (78) 367,430 -- 367,430
Property and
equipment,
net.......... 57,697 1,295 500(d) 3,107 (1,385)(i) 61,214 -- 61,214
Goodwill....... 16,637 -- 58,167(n) -- 4,327(o) 79,131 -- 79,131
Other assets... 7,277 1,270 (132)(e) 597 (500)(i) 8,512 128(l) 8,640
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
$379,096 $55,929 $ 57,788 $ 21,110 $ 2,364 $516,287 $ 128 $ 516,415
======== ======= ========== ========= ========= ======== ========== =========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Current
liabilities:
Accounts
payable.... $ 84,875 $ 8,233 $ -- $ 5,717 $ -- $ 98,825 $ -- $ 98,825
Other current
liabilities... 32,098 8,126 (6,595)(f) 1,062 (206)(i) 34,485 -- 34,485
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
Total
current
liabilities... 116,973 16,359 (6,595) 6,779 (206) 133,310 -- 133,310
Long-term
debt......... 106,215 7,084 78,269(g)(p) 7,405 5,018(j) 203,991 (40,310)(m)(p) 163,681
Other
noncurrent
liabilities... 1,765 -- -- 605 (605)(i) 1,765 -- 1,765
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
Total
liabilities... 224,953 23,443 71,674 14,789 4,207 339,066 (40,310) 298,756
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
Shareholders'
equity:
Capital
stock...... 6,798 10 660(h) 521 (35)(k) 7,954 1,250(m) 9,204
Capital in
excess of
par
value...... 40,553 2,021 15,909(h) 85 (170)(k) 58,398 39,188(m) 97,586
Retained
earnings... 106,792 30,455 (30,455)(h) 5,715 (1,638)(k) 110,869 -- 110,869
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
Total
shareholders'
equity... 154,143 32,486 (13,886) 6,321 (1,843) 177,221 40,438 217,659
-------- ------- ----------- ------------ ------------ --------- ------------ -----------
$379,096 $55,929 $ 57,788 $ 21,110 $ 2,364 $516,287 $ 128 $ 516,415
======== ======= ========== ========= ========= ======== ========== =========
</TABLE>

See notes to unaudited pro forma consolidated balance sheet.

12
<PAGE> 13
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(a) The Company acquired certain assets and liabilities of PVF for cash
consideration of $74,400, Common Stock consideration of $18,600, and the
assumption of $6,500 of debt.

(b) The Company has acquired certain assets and liabilities of two entities
accounted for under the purchase method of accounting and a third entity
accounted for under the pooling of interests method. Cash consideration of
$5,430 has been paid and Common Stock consideration of $13,250 has been
issued for these acquisitions. These acquisitions are immaterial
individually and in the aggregate.

(d) Adjustment to write-up property and equipment acquired in the PVF
Acquisition to its estimated fair value.

(e) Adjustment to record the elimination of $504 of other assets of PVF not
acquired and to record debt issuance costs of $372 incurred on the issuance
of $74,772 of Notes.

(f) Adjustment to accrue for professional fees of $500 associated with the PVF
Acquisition, to eliminate $2,818 of other current liabilities which were
not assumed, and to reclassify $4,277 of the current portion of PVF debt to
long term as it will be replaced by the Company's line of credit.

(g) Adjustment to reflect the issuance of $74,772 of Notes (assuming an
interest rate of 7.96% and debt issuance costs of $372) issued in
connection with the PVF Acquisition, the elimination of $780 of PVF debt
which was not assumed, and the reclassification of $4,277 of the current
portion of PVF debt to long term as it will be replaced by the Company's
line of credit.

(h) Elimination of the shareholders' equity accounts of PVF and to reflect the
issuance of 669,956 shares of Common Stock in connection with the PVF
Acquisition at $27.76 per share, which approximates the estimated fair
value of the Common Stock at the date the terms of the acquisition were
agreed upon.

(i) Elimination of assets/liabilities of the Fiscal 1997 Acquisitions which
were not acquired or assumed.

(j) Adjustment to reflect the borrowing of $5,430 under the Company's line of
credit facility to fund a portion of the purchase price for the Fiscal 1997
Acquisitions and the elimination of $412 of long-term debt of the acquired
companies which was not assumed.

(k) Adjustment to reflect the issuance of 485,793 shares of Common Stock for
one of the Fiscal 1997 Acquisitions to be accounted for under the pooling
of interests method of accounting and the elimination of the capital
accounts of the Fiscal 1997 Acquisitions which have been accounted for
under the purchase method of accounting.

(l) Adjustment to reflect the balance of the debt issue costs to be incurred
upon the issuance of $23,228 of Notes.

(m) Adjustment to reflect the issuance of $23,228 of Notes (assuming an
interest rate of 7.96% and net proceeds to the Company of $23,100) and the
issuance of 1,250,000 shares of Common Stock at a price of $34.50 per
share (net proceeds to the Company of $32.35 per share and $40,438 in the
aggregate) with the net proceeds from these offerings being used to reduce
amounts outstanding under the Company's line of credit facility.

(n) Adjustment to record the excess of the acquisition cost over the fair value
of net assets acquired (goodwill) of PVF of $58,167.

(o) Adjustment to reflect the excess of the acquisition cost over the fair
value of net assets acquired (goodwill) of $4,327.

(p) Included in the adjustment to long-term debt is $74,772 and $23,228 for the
private placement of $98,000 of Notes with an assumed final maturity in
2011. Proceeds from the issuance of the Notes will be used to partially
fund the PVF Acquisition and to provide additional working capital to the
Company. The Notes Offering has not been consummated; therefore, the
Company financed the PVF Acquisition through a bridge loan with the
Company's bank syndication group and issuance of a $30,000 promissory note
to the sellers. The bridge loan carries interest at approximately the same
rate as the Company's line of credit facility (an average rate of 6.29% in
fiscal 1996) for the first six months, and will increase 1% for months six
through nine and increase an additional 1% after nine months. The seller
note bears interest at 6% for the first six months, then will increase to
prime for the next six months. Thereafter, interest on such note will be at
prime plus 1/2%. The seller note will mature on May 31, 1998. See
"Description of Notes."

13
<PAGE> 14

HUGHES SUPPLY, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JANUARY 26, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
HUGHES PVF FISCAL 1997 FISCAL 1997
SUPPLY PVF ACQUISITION ACQUISITIONS ACQUISITIONS
------------ ----------- ----------- ------------ ---------------
(A) (A)
<S> <C> <C> <C> <C> <C>
Net sales................ $1,082,179 $ 109,159 $ -- $ 67,690 $ (186)(f)
Cost of sales............ 858,573 66,428 -- 56,261 --
------------ ----------- ----------- ------------ ---------------
Gross profit........... 223,606 42,731 -- 11,429 (186)
Operating expenses....... 183,133 14,349 (3,264)(b) 9,064 (1,036)(g)
Depreciation &
amortization........... 10,585 673 3,878(c) 266 249(h)
------------ ----------- ----------- ------------ ---------------
Total operating
expenses............... 193,718 15,022 614 9,330 (787)
------------ ----------- ----------- ------------ ---------------
Operating income....... 29,888 27,709 (614) 2,099 601
Interest and other
income................. 4,605 175 -- 762 --
Interest expense......... (7,484) (965) (5,694)(d)(j) (615) --
------------ ----------- ----------- ------------ ---------------
Income before taxes.... 27,009 26,919 (6,308) 2,246 601
Income taxes............. 10,959 10,910 (2,542)(e) 23 1,133(e)
------------ ----------- ----------- ------------ ---------------
Net income............. $ 16,050 $ 16,009 $(3,766) $ 2,223 $ (532)
=========== ========== =========== =========== =============
Earnings per share:
Primary................ $ 2.34
===========
Fully diluted.......... $ 2.31
===========
Average shares
outstanding:
Primary................ 6,856
===========
Fully diluted.......... 6,935
===========

<CAPTION>
COMMON
AND NOTES
PRO FORMA OFFERING PRO FORMA
COMBINED ADJUSTMENTS AS ADJUSTED
---------------- ----------- -----------
<S> <C> <C> <C>
Net sales................ $ 1,258,842 $ -- $ 1,258,842
Cost of sales............ 981,262 -- 981,262
---------------- ----------- -----------
Gross profit........... 277,580 -- 277,580
Operating expenses....... 202,246 -- 202,246
Depreciation &
amortization........... 15,651 -- 15,651
---------------- ----------- -----------
Total operating
expenses............... 217,897 -- 217,897
---------------- ----------- -----------
Operating income....... 59,683 -- 59,683
Interest and other
income................. 5,542 -- 5,542
Interest expense......... (14,758) 2,136(i)(j) (12,622)
---------------- ----------- -----------
Income before taxes.... 50,467 2,136 52,603
Income taxes............. 20,483 867(e) 21,350
---------------- ----------- -----------
Net income............. $ 29,984 $ 1,269 $ 31,253
========== =========== ==========
Earnings per share:
Primary................ $ 3.37
==========
Fully diluted.......... $ 3.35
==========
Average shares
outstanding:
Primary................ 9,262
==========
Fully diluted.......... 9,341
==========
</TABLE>

See notes to unaudited pro forma consolidated statement of income.

14
<PAGE> 15

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)

(a) Amounts represent results of acquired companies for the 12 months ended
December 31, 1995.
(b) Adjustments to operating expenses to eliminate overhead allocation from
PVF's parent of $2,341 and personnel costs of $923 which will be
reduced/eliminated as a result of the acquisition.
(c) Adjustment to reflect amortization on goodwill of $58,167 on a
straight-line basis over 15 years.
(d) Adjustment to interest expense as a result of the PVF Acquisition:

<TABLE>
<S> <C>
Interest on $74,772 of Notes (including $372 of debt issuance costs)
to be issued in connection with the PVF Acquisition, assuming an
interest rate of 7.96%............................................ $5,952
Reduction of interest on PVF average borrowings of $10,651 at
average rate of 9.06% replaced by the Company's line of credit
with an average rate of 6.29%..................................... (295)
Amortization of debt issuance costs................................. 37
------
$5,694
======
</TABLE>

(e) Federal income tax adjustments relating to the acquisitions using the
Company's annual effective tax rate of 40.6%. This amount also reflects the
effect on income taxes for earnings on a sub-chapter S corporation.
(f) Elimination of sales generated from assets which were not acquired.
(g) Adjustment to reflect a reduction in personnel costs of $855 as a result of
the acquisitions and the elimination of expenses of $181 associated with
assets which were not acquired.
(h) Adjustment to eliminate depreciation charges of $39 for plant and equipment
which was not acquired and to reflect amortization of $288 on $4,327 of
goodwill recorded on the acquisitions on a straight-line basis over 15
years.
(i) Adjustment to interest expense as a result of this offering and the Notes
Offering:

<TABLE>
<S> <C>
Use of proceeds from this offering to reduce amounts outstanding
under the Company's line of credit facility....................... $2,537
Increase in interest expense resulting from replacing amounts
outstanding under the line of credit facility with the Notes...... (401)
------
$2,136
======
</TABLE>

(j) The Notes Offering will be consummated after the PVF Acquisition;
therefore, the Company has secured interim financing of up to $55,000 from
its bank syndication group which, along with interim financing from the
sellers of $30,000, was utilized to fund the PVF Acquisition. The
alternative financing would have resulted in the Company incurring an
estimated additional $61 of interest expense compared to the amount assumed
with respect to the Notes Offering.

15
<PAGE> 16

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data have been derived from
audited consolidated financial statements of the Company. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and related notes included in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------
JAN. 31, JAN. 29, JAN. 28, JAN. 27, JAN. 26,
1992(1) 1993 1994 1995 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................................. $558,299 $600,185 $734,958 $875,459 $1,082,179
Cost of sales.............................. 451,776 485,074 590,466 699,132 858,573
-------- -------- -------- -------- ----------
Gross profit............................... 106,523 115,111 144,492 176,327 223,606
Operating expenses......................... 107,958 109,352 131,383 154,693 193,718
-------- -------- -------- -------- ----------
Operating income (loss).................... (1,435) 5,759 13,109 21,634 29,888
Interest expense........................... 6,439 5,117 5,055 5,284 7,484
Interest and other income.................. 2,058 3,743 2,981 2,848 4,605
-------- -------- -------- -------- ----------
Income (loss) before income taxes.......... (5,816) 4,385 11,035 19,198 27,009
Income taxes (benefits).................... (1,960) 1,544 4,511 7,713 10,959
-------- -------- -------- -------- ----------
Net income (loss).......................... $ (3,856) $ 2,841 $ 6,524 $ 11,485 $ 16,050
======== ======== ======== ======== =========
Earnings (loss) per share:
Primary.................................. $ (0.76) $ 0.56 $ 1.27 $ 1.83 $ 2.34
======== ======== ======== ======== =========
Fully diluted............................ $ (0.76) $ 0.56 $ 1.19 $ 1.81 $ 2.31
======== ======== ======== ======== =========
Cash dividends per share................... $ 0.24 $ 0.12 $ 0.16 $ 0.22 $ 0.30
======== ======== ======== ======== =========
Shares outstanding:
Primary.................................. 5,046 5,058 5,143 6,259 6,856
Fully diluted............................ 5,046 5,086 6,313 6,443 6,935
OPERATING DATA:
Branches at end of period.................. 124 130 143 173 212
Comparable branch sales increases
(decrease)(2)............................ (14)% 3% 17% 13% 8%
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................ $112,984 $120,522 $142,392 $172,794 $180,512
Total assets............................... 234,723 246,249 279,390 346,116 379,096
Long-term debt, less current portion....... 77,240 86,258 104,692 105,243 106,215
Shareholders' equity....................... 86,829 90,080 98,066 136,104 154,143
</TABLE>

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

(1) Fiscal 1992 represents a 53-week fiscal year.
(2) Comparable branch sales increases are calculated for each period presented
by comparing the net sales results in a fiscal year with the net sales
results for the prior fiscal year (for those branches that were open for
the entire fiscal year and the entire prior fiscal year).

16
<PAGE> 17

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

Hughes Supply is one of the largest diversified wholesale distributors of
materials, equipment and supplies for construction and industrial markets
operating primarily in the southeastern and midwestern United States. The
Company distributes more than 100,000 products, through 240 branches located in
21 states and Puerto Rico. The Company's customers are subcontractors, general
contractors, electric utilities, municipalities and manufacturers. Management
believes that the Company holds significant market share in a majority of its
local markets and is one of the largest distributors of its range of products in
the southeastern and midwestern United States.

Since January 29, 1993, the Company has completed 25 acquisitions
representing 87 branches, including the PVF Acquisition. In addition to
increased geographical penetration, acquisitions often provide opportunities for
the Company to gain market share and to enhance and diversify product offerings.
Management believes that the most cost effective way for the Company to enter
new geographic markets is through acquisitions.

On May 13, 1996, the Company acquired substantially all of the assets,
properties and business of PVF and its subsidiaries and assumed certain of their
liabilities. The aggregate consideration paid in the PVF Acquisition was
approximately $99.5 million, consisting of cash in the amount of $44.4 million,
the issuance of the seller note in the principal amount of $30 million, the
issuance of 669,956 shares of Common Stock and the assumption of $6.5 million of
bank debt.

On February 5, 1996, the Company acquired Waldorf Supply Inc. ("Waldorf"),
a wholesale distributor of plumbing supplies and materials in Waldorf, Maryland.
Waldorf has one location and had annual sales of approximately $6.2 million in
its last fiscal year. Waldorf is a fill-in acquisition.

On March 22, 1996, the Company acquired West Virginia Water and Waste
Supply Co. ("West Virginia Water"), a wholesale distributor of water and sewer
products in Charleston, West Virginia. West Virginia Water has two locations and
had annual sales of approximately $17.9 million in its last fiscal year. West
Virginia Water represents a new market acquisition.

On April 26, 1996, the Company acquired Elasco Inc., a wholesale
distributor of electric utility products in Mattoon, Illinois. Elasco Inc. has
three locations and had annual sales of approximately $43.6 million in its last
fiscal year. Elasco Inc. is a new market acquisition in the Midwest and was
accounted for as a pooling of interests.

The acquisitions of Waldorf, West Virginia Water and Elasco Inc. are
collectively referred to as the "Fiscal 1997 Acquisitions."

As described in Note 2 of the Notes to the Company's Consolidated Financial
Statements, in fiscal 1996 the Company entered into business combinations with
Moore Electric Supply, Inc. and Florida Pipe & Supply Company, and such business
combinations were accounted for as poolings of interests. Accordingly, all
financial data in this discussion and analysis is reported as though the
companies had always been combined.

In addition to the business combinations accounted for as poolings of
interests referred to above, in fiscal 1996 the Company purchased nine wholesale
distributor businesses for an aggregate amount of approximately $13 million ($10
million in cash and $3 million in Common Stock). In fiscal 1995, amounts paid
for acquisitions totaled approximately $21 million ($11 million in cash, $4
million in Common Stock and $6 million in other consideration), and amounts paid
for acquisitions in fiscal 1994 totaled approximately $4 million in cash. The
results of these acquired operations are included in the Company's Consolidated
Financial Statements from their respective dates of acquisition. See
"Business -- Acquisition Strategy."

17
<PAGE> 18

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items in the Company's Consolidated
Statements of Income:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
JAN. 28, JAN. 27, JAN. 26,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net sales..................................................... 100.0% 100.0% 100.0%
Cost of sales................................................. 80.3 79.9 79.3
Gross profit................................................ 19.7 20.1 20.7
Operating expenses............................................ 17.9 17.7 17.9
Operating income............................................ 1.8 2.5 2.8
Interest and other income..................................... 0.4 0.3 0.4
Interest expense.............................................. 0.7 0.6 0.7
Income before income taxes.................................. 1.5 2.2 2.5
Income taxes.................................................. 0.6 0.9 1.0
Net income.................................................. 0.9 1.3 1.5
</TABLE>

NET SALES

Net sales were $1.1 billion in fiscal 1996, representing a 23.6% increase
over fiscal 1995 net sales of $875.5 million. Fiscal 1995 net sales represented
a 19.1% increase over fiscal 1994 net sales of $735.0 million. Newly-opened and
acquired branches accounted for approximately 66% of the increase in net sales
in fiscal 1996 and 40% of the increase in net sales in fiscal 1995. The
remainder of the increase in each period was a result of sales increases in
existing branches.

The Company's strategy of expansion and diversification has contributed to
the above-mentioned sales gains along with growth in comparable branch sales.
Although residential construction activity decreased in fiscal 1995 and fiscal
1996 following a period of substantial residential construction activity in
fiscal 1994, this decrease was offset by an increase in commercial and
industrial construction activity in fiscal 1995 which continued through fiscal
1996.

Construction activity, especially commercial construction activity in the
Southeast, is expected to remain strong during fiscal 1997. Management believes
that the continuing favorable construction markets together with the Company's
acquisition program and growth in comparable branch sales should result in
continued sales growth.

GROSS PROFIT

Gross profit was $223.6 million in fiscal 1996, representing a 26.8%
increase over fiscal 1995 gross profit of $176.3 million. Fiscal 1995 gross
profit increased 22.0% over fiscal 1994 gross profit of $144.5 million. Gross
margins have improved steadily over the past three fiscal years. The improvement
has resulted from several factors, including the introduction of product
offerings with better margins, efficiencies resulting from the Company's use of
central distribution centers, and increased volume and concentration of supply
sources in connection with the implementation of the Company's preferred vendor
program.

OPERATING EXPENSES

Operating expenses were $193.7 million in fiscal 1996, representing a 25.2%
increase over fiscal 1995 operating expenses of $154.7 million. Newly-opened and
acquired branches accounted for approximately 60% of the increase. The remainder
of the increase was due primarily to personnel and transportation costs
associated with growth in the Company's sales. The 17.7% increase in fiscal 1995
operating expenses over fiscal 1994 operating expenses of $131.4 million was
primarily attributable (approximately 45%) to branches opened and acquisitions
made during fiscal 1995, as well as to an increase in costs, such as personnel,

18
<PAGE> 19

transportation and insurance, associated with sales growth. Operating expenses
as a percentage of sales remained relatively constant over the three-year
period.

NON-OPERATING INCOME AND EXPENSES

Interest and other income increased to $4.6 million in fiscal 1996 compared
to $2.8 million in fiscal 1995, representing a 61.7% increase. This increase is
primarily the result of improved collection of service charge income on
delinquent accounts receivable. In fiscal 1995, interest and other income
decreased to $2.8 million compared to $3.0 million in fiscal 1994, representing
a 4.5% decrease.

Interest expense increased to $7.5 million in fiscal 1996, representing a
41.6% increase over fiscal 1995 interest expense of $5.3 million. Higher
interest rates and higher average borrowing levels were equally responsible for
the increase. Fiscal 1995 interest expense was $200,000 higher than fiscal 1994
interest expense of $5.1 million, representing a 4.5% increase. This increase
was attributable to higher interest rates which were partially offset by lower
borrowing levels resulting in part from the conversion of $22.9 million of
subordinated debentures in April, 1994.

NET INCOME

As a result of the foregoing factors, net income in fiscal 1996 increased
by 39.7% to $16.1 million from $11.5 million in fiscal 1995. In fiscal 1996,
fully diluted earnings per share increased 27.6% to $2.31 compared to $1.81 in
fiscal 1995. Net income in fiscal 1995 increased by 76% from $6.5 million in
fiscal 1994. In fiscal 1995, fully diluted earnings per share increased by 52.1%
from $1.19 in fiscal 1994.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at the end of fiscal 1996 amounted to $180.5 million
compared to $172.8 million and $142.4 million at the end of fiscal 1995 and
fiscal 1994, respectively. The Company continues to maintain more than 75% of
total assets as current assets. The working capital ratio was 2.54 to 1, 2.67 to
1 and 2.89 to 1 for fiscal 1996, fiscal 1995 and fiscal 1994, respectively.

During periods of expansion when sales volumes are increasing, the Company
is required to carry higher levels of inventories and receivables to support its
growth. The Company strives to maintain inventories at levels that support, but
not exceed, its current sales activity through (i) increased use of its central
distribution facilities and (ii) investment in resources to improve the
efficiency and service capability of such facilities. As a result, the inventory
turnover rate has been in excess of six turns for each of the last three fiscal
years, ranging from a low of 6.2 turns in fiscal 1995 to a high of 6.7 turns in
fiscal 1996. During the same period, the accounts receivable turnover rate has
been in excess of seven turns, ranging from a low of 7.1 turns in fiscal 1995 to
a high of 7.6 turns in fiscal 1996.

Net cash provided by operations was $20.3 million in fiscal 1996 compared
to $3.7 million in fiscal 1995 and cash used in operations in fiscal 1994 was
$2.2 million. The foregoing changes are due primarily to fluctuations in
accounts receivable, inventories and accounts payable. Because of an increase in
the amount of cash generated in fiscal 1996, net borrowings under short-term
debt instruments decreased to $6.2 million compared to $23.8 million in fiscal
1995 and $16.7 million in fiscal 1994.

The Company invested $11.9 million in property and equipment and $10.0
million in business acquisitions in fiscal 1996. These business acquisitions
added 20 branches to the Company's operations. Capital expenditures, not
including amounts which may be paid for business acquisitions in fiscal 1997,
are expected to be approximately $12 million.

During fiscal 1996, the Company's revolving credit facility and line of
credit agreement with a group of banks was amended in order to expand the
Company's maximum borrowings thereunder from $130 million to $160 million (see
Note 4 of Notes to the Company's Consolidated Financial Statements). After
giving effect to this offering and proceeds of approximately $23.1 million from
the Notes Offering, both of which will be used to reduce bank debt, and a $10
million reduction in the availability under the revolving credit facility and

19
<PAGE> 20

line of credit agreement as a result of the Notes Offering, the Company will
have approximately $106.7 million available under this agreement.

Because the Notes Offering was not consummated concurrently with the PVF
Acquisition, the Company financed the PVF Acquisition through a bridge loan with
the Company's bank syndication group and the issuance of the seller note in the
principal amount of $30 million. The bridge loan carries interest at
approximately the same rate as the Company's line of credit facility (an average
rate of 6.29% in fiscal 1996) for the first six months. The seller note bears
interest at 6% for the first six months, then will increase to prime for the
next six months. Thereafter, interest on such note will be at prime plus 1/2%.
The seller note will mature on May 31, 1998.

Management believes that the Company has sufficient borrowing capacity to
take advantage of growth and business acquisition opportunities and has the
resources necessary (subject to certain covenants related to the Notes and in
the revolving credit facility and line of credit agreement) to fund ongoing
operating requirements and anticipated capital expenditures. Future expansion
will continue to be financed on a project-by-project basis through the
incurrence of additional indebtedness or, as circumstances allow, through the
issuance of Common Stock or equity-linked securities.

INFLATION AND CHANGING PRICES

The Company is aware of the potentially unfavorable effects inflationary
pressures may create as a result of higher asset replacement costs and related
depreciation, higher interest rates and higher material costs. The Company seeks
to minimize these effects by taking advantage of economies of scale in
purchasing and inventory management which result in cost reductions and improved
productivity. In addition, from time to time the Company will also implement
price increases in order to maintain reasonable profit margins. Management
believes, however, that inflation (which has been moderate over the past few
years) and changing prices have not significantly affected the Company's results
of operations or markets in its three most recent fiscal years.

SEASONALITY

The Company experiences some seasonality in its business. The Company's net
sales and net income during the first quarter and, to a lesser extent, the
fourth quarter of its fiscal year are generally lower than the second and third
quarters of its fiscal year. The first and fourth quarter are typically
adversely affected by winter construction cycles and weather patterns as the
level of activity in both the home improvement and new construction markets
decreases. The Company has a concentration of locations in the southeastern
United States, which can offset to some degree the effects of winter weather in
other states. Management closely monitors operating expenses and inventory
levels during seasonally affected periods and, to the extent possible, controls
variable operating costs.

20
<PAGE> 21

BUSINESS

GENERAL

The Company's principal business objective is to achieve profitable growth,
both internally and through selective acquisitions, primarily in existing and
contiguous geographic markets. The Company has grown internally through
increases in comparable branch net sales, new branch openings and the addition
of new product groups. Since January 29, 1993, the Company has opened 25 new
branches. In addition, the Company continues to pursue an active acquisition
program to capitalize on the opportunities presented by the substantial size and
highly fragmented ownership structure of its industry. Since January 29, 1993,
the Company has completed 25 acquisitions representing 87 branches, including
the PVF Acquisition. In addition to increased geographic penetration,
acquisitions often provide opportunities for the Company to gain market share
and to enhance and diversify product offerings. Management believes that the
most cost effective way for the Company to enter new geographic markets is
through acquisitions. All of the Company's significant acquisitions have been
accretive to the Company's earnings per share.

INDUSTRY OVERVIEW

Based on estimates available to the Company, industry sales in the United
States of products sold by the Company exceeded $100 billion in 1995, and no
wholesale distributor of these products accounted for more than 2% of the total
market. As a result of their smaller size, many of the local or regional
distributors generally lack the purchasing power of a larger entity, may lack
the resources to offer broad product lines and multiple brands, and may not
possess sophisticated inventory management and control systems necessary to
operate multiple branches efficiently.

As a result, during the past decade many of the large wholesale
distributors, including the Company, have grown considerably through
acquisitions. However, many independent distributors are still privately owned,
relationship-based companies that emphasize service, delivery and reliability to
their customers. Further, a majority of independent distributors focus on a
particular size or type of customer and a particular product

21
<PAGE> 22

group. In contrast, the Company services various sizes and types of customers
and multiple product groups and diversifies its sales across various types of
construction and users of its products. Due to its strong competitive position,
its size and its management infrastructure, management also believes that the
Company is well-positioned to continue to benefit from consolidation trends
within the wholesale distribution business.

ACQUISITION STRATEGY

New market acquisitions represent the addition of new product groups,
within related commercial construction and industrial products categories, or
the entry into new geographic markets, or both. During the last three fiscal
years, the Company has increasingly focused on new market acquisitions with the
goal of adding products and product groups with higher gross margins, increasing
sales to the replacement and industrial markets (which tend to be less cyclical
than new construction markets), achieving greater geographic diversification and
developing additional opportunities for future fill-in acquisitions and new
branch openings. Recent new market acquisitions completed by the Company include
(i) The Treaty Distribution Group, resulting in a significant increase in the
Company's water and sewer products business in new geographic markets, (ii)
Moore Electric Supply, Inc., resulting in a significant increase in the
Company's electrical products business in new geographic markets, (iii) Florida
Pipe & Supply Company, the Company's initial entry into the industrial pipe,
valve and fitting market, (iv) Elasco Inc., resulting in a significant increase
in the Company's electric utilities business in new geographic markets, and (v)
PVF, resulting in a significant increase in the Company's industrial pipe, valve
and fitting business in new geographic markets.

22
<PAGE> 23

The following table summarizes the fill-in and new market acquisitions
completed by the Company since January 29, 1993:

<TABLE>
<CAPTION>
TYPE OF DATE OF NUMBER OF STATE(S)/TERRITORY MAJOR PRODUCT
ACQUISITION ACQUISITION ACQUISITION BRANCHES OF OPERATION GROUPS
- --------------------- ----------- ---------------- --------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Virginia branch...... Fill-in June, 1993 1 VA Plumbing
Florida and Georgia
branches........... Fill-in June, 1993 3 FL, GA Electrical and
Electric Utilities
Electrical
Distributors,
Inc.*.............. New market June, 1993 1 GA Electrical
Alabama Water Works
Supply, Inc........ New market July, 1993 3 AL Water and Sewer
Florida branches..... Fill-in December, 1993 2 FL Building Materials
Swaim Supply
Company*........... New market January, 1994 8 NC, VA Plumbing, Air
Conditioning and
Heating
Florida and Georgia
branches(1)........ Fill-in February- 4 FL, GA Water and Sewer,
September, 1994 Plumbing and
Electrical
Treaty Distribution
Group branches..... New market January, 1995 16 IN, OH Water and Sewer,
Plumbing, Air
Conditioning and
Heating
Olander & Brophy,
Inc................ New market March, 1995 4 OH, PA Pool Equipment and
Supplies, Water
Systems
Port City Electrical
Supply, Inc........ Fill-in March, 1995 3 GA, SC Electrical
Elec-Tel Supply
Company............ Fill-in April, 1995 1 GA Electric Utilities
Various
branches(1)........ Fill-in July, 1995 9 AL, FL, KY, MD, Electrical, Pool
February, 1996 NC, NJ, SC, TN, Equipment and
VA Supplies, Plumbing
Moore Electric
Supply, Inc.*...... New market August, 1995 5 NC, SC Electrical
Atlantic Pump &
Equipment
Companies.......... Fill-in September, 1995 4 FL, PR Pool Equipment and
Supplies
Florida Pipe & Supply
Company*........... New market December, 1995 1 FL Industrial Pipe,
Valves and Fittings
Waldorf Supply
Inc................ Fill-in February, 1996 1 MD Plumbing
West Virginia Water
and Waste Supply
Co................. New market March, 1996 2 WV Water and Sewer
Elasco Inc.*......... New market April, 1996 3 IL, OH Electric Utilities
PVF.................. New market May, 1996 16 AL, GA, IL, LA, Industrial Pipe,
MO, NC, NJ, TN, Valves and Fittings
TX, UT, WA
--
TOTAL.......
87
==========
</TABLE>

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

* Accounted for as pooling of interests.

(1) Facilities acquired in purchases of assets from four entities.

23
<PAGE> 24

OPERATING STRATEGY

The Company's operating strategy is based on decentralizing customer
related functions at the branch level, such as sales and local inventory
management, and centralizing certain administrative functions at the corporate
level, such as credit, human resources, finance and accounting, and management
information systems. Key elements of the Company's operating strategy include:

Comprehensive and Diversified Product Groups. As part of its emphasis
on superior customer service, the Company offers more than 100,000 products
in nine product groups at competitive prices. Distribution of a wide
variety of products within product groups assists the Company's customers
in managing their inventory, arranging for consolidated delivery
requirements and providing a greater portion of total job specifications.
The depth and breadth of the Company's product groups allows it to make add
on sales of higher margin, non-commodity items.

The Company is diversified across nine product groups and various
sectors of the construction industry (such as commercial, residential,
utility and industrial), which lessens its dependence upon market
conditions applicable to any one of its products groups or any single
sector of the construction industry. Further, the Company's product
diversification allows it to participate in multiple phases of construction
projects.

Superior Customer Service. Substantially all of the Company's sales
are to professional customers with whom the Company has developed long-term
relationships. These relationships are largely based on the Company's
history of providing superior service. Customer services provided by the
Company include credit, design assistance, material specifications,
scheduled job site delivery, job site visits to ensure satisfaction,
technical product services, including blueprint take-off and computerized
order quotes, and assistance with product returns.

Local Market Focus. The Company has organized its branches as
autonomous, decentralized branches capable of meeting local market needs
and offering competitive prices. Each branch handles one or more of the
Company's product groups and operates as a separate profit center with its
own sales force. Each branch manager has the authority and responsibility
to set pricing and tailor the product offering and mix, as well as the
nature of services offered, to meet the local market demand. In addition,
each branch manager is responsible for purchasing, maintenance of adequate
inventory levels, cost controls and customer relations.

The Company has been able to tailor its branch size and product
offerings to perceived market demand. As a result, the Company has
successfully operated branches in secondary cities where management
believes it has achieved significant market share and in larger
metropolitan areas where it has established a sound market presence.

Well-Trained and Experienced Workforce. The Company has implemented
extensive employee training and recruiting programs to ensure that its
employees have the skill levels necessary to compete effectively in today's
marketplace. The Company utilizes in-depth training seminars covering basic
and advanced product knowledge, and selling, purchasing, negotiating and
management skills. The Company has also developed a recruiting and training
program to increase the number of qualified applicants introduced into its
management and sales ranks. The Company has experienced a low rate of
turnover among its employees and, as a result, the Company's corporate
management group, branch managers, outside sales representatives and inside
sales account executives have considerable experience with the Company.

Centralized Administrative Functions. The Company has centralized
certain administrative functions such as credit, human resources, finance
and accounting and management information systems. The Company's credit
function is essential to its success. All credit decisions are researched,
analyzed and approved by a group of regional credit managers to ensure
conformity and quality of credit decisions across the Company's operations.
Management believes that its credit function has enabled it to be
recognized as an industry leader due to its consistently low level of bad
debt expense. Centralization of human resources, finance and accounting
functions ensure conformity in policy and lower overall cost of

24
<PAGE> 25

administration. The Company's comprehensive management information system
is based on point of sale information and provides managers with real time
inventory, receivables, purchasing, pricing, credit and margin information.
This management information system allows the Company's branches to more
effectively manage their inventory and receivables and respond more quickly
and accurately to specific customer needs and local market demand.

Volume Purchasing Power. The Company, as one of the largest
diversified wholesale distributors of construction products in its markets,
is able to achieve significant volume discounts and rebates from its
vendors. The Company established its Preferred Vendor Program in 1991 to
more effectively leverage its purchasing power. This program has reduced
the number of vendors and has resulted in stronger, more strategic
relationships with a more concentrated group of vendors. The concentration
of vendors has also improved the Company's ability to assure more timely
delivery, reduce errors, and to obtain better terms and greater financial
incentives. Other programs currently being employed with vendors include
vendor managed inventory systems, bar coding, and electronic exchange of
purchase orders and invoices, each of which has resulted in a reduction in
transaction costs and an improvement in operating efficiency.

PRODUCTS

The Company distributes products in the following nine major product
groups:

- Electrical: Electrical supplies, including wire, cable, cords, boxes,
covers, wiring devices, conduit, raceway duct, safety switches, motor
controls, breakers, panels, fuses and related supplies and accessories,
residential, commercial and industrial electrical fixtures and other
special use fixtures.

- Plumbing: Plumbing fixtures and related fittings, residential,
commercial and industrial water heaters, and plumbing accessories and
supplies.

- Water and Sewer: Water works and industrial supplies, including large
diameter plastic (PVC) and cast iron pipe, fire hydrants, water meters,
valves, backflow prevention devices and related hardware and accessories.

- Air Conditioning and Heating: Air conditioning and heating equipment,
furnaces, heaters, heat pumps, condensing units, duct, pipe, fittings,
registers, grills, freon, insulation and other refrigeration equipment,
supplies and service parts.

- Industrial Pipe, Valves and Fittings: Mechanical and weld pipe, valves
and related fittings, fire protection systems and supplies, high
performance valves, specialty pipe, stainless steel and other high alloy
pipe, valves and fittings.

- Building Materials: Reinforcing wire, reinforcing steel, plyform,
lumber, concrete chemicals, concrete forming accessories, road and bridge
products, masonry accessories and other building materials, hand tools,
power tools and equipment for all mechanical and building trades.

- Electric Utilities: Transformers, conductor cable, insulators,
prestressed concrete transmission and distribution poles, and other
electric utility supplies and related hardware, accessories and tools.

- Water Systems: Jet and submersible pumps and tanks, residential and
commercial water treatment, well liners, wire, poly pipe, accessories and
environmental products.

- Pool Equipment and Supplies: Above ground and in-ground pool packages,
pumps, filters, heaters, lights, slides, diving boards, skimmers, drains,
chemicals, solar equipment, pool liners and in-ground pool walls, deck
products and cleaning equipment.

25
<PAGE> 26

The following chart shows the Company's fiscal 1996 sales by product
category on a pro forma basis, giving effect to the PVF Acquisition and the
Fiscal 1997 Acquisitions:

[CHART]

SALES AND PURCHASING

The Company employs approximately 400 outside sales representatives who
call on customers and who also work with architects, engineers, and
manufacturers' representatives for major construction projects. For each outside
sales representative there are generally two inside account executives who
expedite orders, deliveries, quotations, and requests for pricing. Most orders
are received by telephone, and materials are delivered by the Company's trucks
to the customer's office or job site.

The Company's purchasing agents in its branches use a computerized
inventory system to monitor stock levels, while central distribution centers in
Orlando, Florida, College Park, Georgia, Hendersonville, North Carolina, Monroe,
North Carolina, Greenville, Ohio and Nashville, Tennessee provide purchasing
assistance as well as a broad stock of inventory which supplements the inventory
of the branches.

CUSTOMERS AND SUPPLIERS

The Company currently serves over 50,000 customers, and no single customer
accounts for more than 1% of total sales annually. Orders for larger
construction projects normally require long-term delivery schedules throughout
the period of construction, which in some cases may continue for several years.
The substantial majority of customer orders are shipped from inventory at the
Company's branches. The Company also accommodates special orders from its
customers and facilitates the shipment of certain large volume orders directly
from the manufacturer to the customer.

The Company regularly purchases from over 5,500 manufacturers and
suppliers, of which 550 are currently part of the Company's Preferred Vendor
Program. No single supplier accounted for more than 6% of the Company's total
purchases during fiscal 1996.

26
<PAGE> 27

COMPETITION

Management believes that the Company is one of the largest wholesale
distributors of its range of products in the southeastern and midwestern United
States. However, there is strong competition in each product group distributed
by the Company. The main sources of competition are other wholesalers,
manufacturers who sell certain lines directly to contractors and, to a limited
extent, retailers in the markets for plumbing, electrical fixtures and supplies,
building materials, pool supplies and contractor's tools. The principal
competitive factors in the Company's business are product availability, pricing,
technical product knowledge as to application and usage, and advisory and other
service capabilities.

EMPLOYEES

As of January 26, 1996, the Company had approximately 3,350 employees
consisting of approximately 15 executives, 550 managers, 950 sales personnel,
and 1,835 other employees, including truck drivers, warehouse personnel, office
and clerical workers. Over the last year, the Company's work force has increased
by approximately 20% compared to the prior year as a result of increased sales
volume and completed business acquisitions. None of the Company's employees is
represented by a union or covered by a collective bargaining agreement; 13 of
Elasco Inc.'s employees are represented by a union and are covered by a
collective bargaining agreement. The Company considers its relationship with its
employees to be excellent.

PROPERTIES

The Company leases approximately 31,000 square feet of an office building
in Orlando, Florida for its headquarters. In addition, the Company owns or
leases 233 facilities in 21 states and Puerto Rico. The typical sales branch
consists of a combined office and warehouse facility ranging in size from 3,000
to 50,000 square feet, with paved parking and storage areas. The Company also
operates a computer center, five central distribution warehouses, and a garage
and trucking terminal.

LEGAL PROCEEDINGS

The Company is involved in various legal proceedings incidental to the
ordinary conduct of its business. Management believes that none of these
proceedings will have a material adverse impact on its financial condition,
results of operations or cash flows.

THE PVF ACQUISITION

General. On May 13, 1996, the Company acquired substantially all of the
assets, properties and business of PVF and its subsidiaries and assumed certain
of their liabilities. The aggregate consideration paid in the PVF Acquisition
was approximately $99.5 million, consisting of cash in the amount of $44.4
million, the issuance of the seller note in the principal amount of $30 million,
the issuance of 669,956 shares of Common Stock and the assumption of $6.5
million of bank debt. The amount of aggregate consideration paid is subject to
increase or decrease (on a dollar for dollar basis) for the difference between
the book value of net assets acquired, adjusted for certain inventory and
accounts receivable items, and the book value of such net assets at December 31,
1995.

PVF, a privately owned company headquartered in Houston, Texas, is a
specialty distributor of stainless steel and nickel alloy based pipe, valve and
fitting products to industrial customers, and conducts its business through its
principal subsidiaries Southwest Stainless, Inc., Multalloy, Inc., a Texas
corporation, and Multalloy, Inc., a New Jersey corporation. PVF is one of the
leading providers of pipe, valve and fitting products for use by industrial
companies that operate manufacturing processes involving highly corrosive or
high temperature fluids, such as those of the petrochemical, food and beverage,
and paper industries. Management of the Company believes that PVF carries one of
the country's broadest and deepest inventories of such products, consisting of
more than 15,000 different items sold to approximately 4,000 active accounts.
PVF sells both directly to end-users and to supply houses that sell to end-users
through 16 regional branch locations concentrated in the southeastern and
southwestern United States.

27
<PAGE> 28

For the 12 months ended December 31, 1995, PVF had net sales of $109.2
million and operating income of $27.7 million. On a pro forma basis, giving
effect to the PVF Acquisition, the Company's fiscal 1996 net sales were $1.2
billion, operating income was $57.0 million and, as of the end of fiscal 1996,
the Company had 228 branches located in 19 states and Puerto Rico. See
"Unaudited Pro Forma Consolidated Financial Data."

Products. PVF carries over 15,000 different items in its inventory of
pipe, valve and fitting products. These products are differentiated on the basis
of size, material content, performance specifications and manufacturer.
Industrial pipe, valve and fitting products generally do not grow obsolete over
time, allowing PVF to maintain an extensive inventory of such products. The
substantial majority of PVF's products are used in the replacement market,
including a significant number in emergency applications.

The majority of PVF's products are made of stainless steel. Other nickel
alloy based products, however, represent a growing share of PVF's sales. PVF
entered the specialty alloy products market in 1993 to take advantage of a
market opportunity created by the limited number of sources of these products.
These specialty alloy products typically offer performance standards superior to
stainless steel products, sell at higher prices and higher margins and are
offered by a limited number of distributors. Management of the Company believes
that PVF's sales of specialty alloy products should continue to grow if, as in
the past, an increasing number of customers move from stainless steel products
to specialty alloy products and as PVF extends its product line to include new
specialty alloy products.

Sales. PVF's sales force includes 19 outside salespeople and 31 inside
salespeople. Outside salespeople visit end-users and supply house customers at
their offices and work to develop good business relationships. The inside sales
force works on-site at PVF and handles the bulk of PVF's orders, as most of
PVF's sales come from a customer calling an inside salesperson directly with an
order.

PVF sells its products through its 50-person sales force and through 16
branches in 11 states. PVF's salespeople have substantial authority to set
prices within guidelines established by senior management. PVF is
well-represented in Texas, the largest end-user market for stainless steel pipe,
valve and fitting products. PVF has a single branch location in New Jersey,
which is the second largest end-user market in the United States and which
management of the Company believes represents an opportunity for increased
distribution of PVF's products.

Customers and Suppliers. The end-users of products sold by PVF generally
are manufacturers that operate plants involving the use of highly corrosive or
high temperature fluids. PVF sells both to supply houses that resell to
end-users and directly to end-users. Supply houses typically carry narrower
inventory than PVF in any particular PVF product group. Many of PVF's end-user
customers are Fortune 500 companies that have highly structured purchasing
organizations that typically prefer large, professional suppliers, such as PVF
or the Company. PVF has approximately 4,000 active accounts, and for its most
recent fiscal year ended June 30, 1995 the largest customer accounted for less
than 4% of PVF's sales, while its top ten customers accounted for less than 15%
of sales.

Many of the 15,000 products sold by PVF require long manufacturing lead
times. Consequently, a large investment in inventory is often required. PVF's
financial strength combined with its product experience allows it to purchase
products in large volumes at favorable terms and maintain the large investment
in inventory required to be competitive. For its most recent fiscal year ended
June 30, 1995, PVF purchased from approximately 400 vendors, and no single
vendor accounted for more than 7% of PVF's purchases in such period.

28
<PAGE> 29

The future financial performance of PVF will be directly influenced by the
cost of stainless steel and nickel alloy which, as a commodity item, can be
volatile. Significant fluctuations in the prices of stainless steel and nickel
alloy could have an effect on PVF's future profitability and could create
cyclicality in PVF's operating performance. In addition, while PVF has not
experienced difficulty in obtaining specialty alloy products, PVF currently
purchases certain specialty alloy products from one of only two available
sources worldwide.

Properties. Headquartered in Houston, Texas, PVF has 17 facilities,
including 16 distribution centers located in 11 states. PVF owns two of its
facilities and leases 15 facilities. Ten of these leases are for properties
owned by third parties and five are leased from affiliates of PVF.

29
<PAGE> 30

MANAGEMENT

The following table sets forth certain information as of April 1, 1996
concerning executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------------- --- --------------------------------------------------
<S> <C> <C>
David H. Hughes(1)................ 52 Chairman of the Board and Chief Executive Officer
A. Stewart Hall, Jr.(1)........... 53 President, Chief Operating Officer and Director
Russell V. Hughes(1).............. 70 Vice President and Director
Vincent S. Hughes(1).............. 55 Vice President and Director
Jasper L. Holland, Jr............. 54 Regional Vice President
Clyde E. Hughes, III.............. 48 Regional Vice President
James C. Plyler, Jr............... 52 Regional Vice President
Kenneth H. Stephens............... 55 Regional Vice President
Sidney J. Strickland, Jr.......... 46 Regional Vice President
Gradie E. Winstead, Jr............ 46 Regional Vice President
Peter J. Zabaski.................. 47 Regional Vice President
J. Stephen Zepf................... 46 Treasurer and Chief Financial Officer
John D. Baker, II(2).............. 47 Director
Robert N. Blackford(1)(3)......... 59 Secretary and Director
John B. Ellis(2).................. 71 Director
Clifford M. Hames(3).............. 70 Director
Donald C. Martin(2)............... 59 Director
Herman B. McManaway(3)............ 70 Director
</TABLE>

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

(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee

David H. Hughes has served as the Company's Chairman of the Board and Chief
Executive Officer since November, 1986, as a director since August, 1968, and
has been employed with the Company since June, 1959. Mr. Hughes served as
President of the Company from June, 1972 until March, 1994. Mr. Hughes is also a
director of SunTrust Banks, Inc. and Lithium Technologies Corp.

A. Stewart Hall, Jr. has served as President, Chief Operating Officer and a
director since March, 1994, and has been employed with the Company since August,
1973. Mr. Hall served as Executive Vice President of the Company from January,
1988 until March, 1994.

Russell V. Hughes has served as Vice President since February, 1971, as a
director since May, 1964, and has been employed with the Company since March,
1949.

Vincent S. Hughes has served as Vice President since April, 1972, as a
director since April, 1966, and has been employed with the Company since June,
1957.

Jasper L. Holland, Jr. has served as Regional Vice President since June,
1994, and as a Vice President since February, 1980. Mr. Holland has been
employed by the Company since March, 1965.

Clyde E. Hughes, III has served as Regional Vice President since June,
1994. Previously, Mr. Hughes served as Regional Manager from December, 1990 to
June, 1994. Mr. Hughes has been employed by the Company since June, 1966.

James C. Plyler, Jr. has served as Regional Vice President since February,
1996. Prior to serving in this capacity, Mr. Plyler served as President of USCO
Incorporated, one of the Company's subsidiaries, from January, 1973 to February,
1996. Mr. Plyler has been employed by the Company since May, 1972.

Kenneth H. Stephens has served as Regional Vice President, since June,
1994, and as a Vice President since February, 1983. Mr. Stephens has been
employed by the Company since June, 1961.

30
<PAGE> 31

Sidney J. Strickland, Jr. has served as Vice President of Purchasing and
Administration since August, 1994. Previously, Mr. Strickland served as Director
of Corporate Services from February, 1994 to August, 1994. Prior to serving as
Director of Corporate Services, Mr. Strickland served as Director of Human
Resources from September, 1989 to August 1994. Mr. Strickland has been employed
by the Company since October, 1979.

Gradie E. Winstead, Jr. has served as Regional Vice President since June,
1994. Previously, Mr. Winstead served as Regional Manager from March, 1990 to
June, 1994. Mr. Winstead has been employed by the Company since September, 1975.

Peter J. Zabaski has served as Regional Vice President since June, 1994.
Previously, Mr. Zabaski served as President of One Stop Supply, Inc., a
subsidiary of the Company, from January, 1990 to June, 1994. Mr. Zabaski has
been employed by the Company since June, 1982.

J. Stephen Zepf has served as Treasurer and Chief Financial Officer since
April, 1984, and has been employed by the Company since May, 1983.

John D. Baker, II has served as a director since March, 1994. Mr. Baker
currently serves as President, Chief Executive Officer and director of Florida
Rock Industries, Inc. Mr. Baker is also a director of FRP Properties, Inc.

Robert N. Blackford was elected Secretary of the Company in February, 1974,
and has served as a director since December, 1970. Mr. Blackford is an attorney
with the firm of Maguire, Voorhis & Wells, P.A., in Orlando, Florida, where he
has practiced since 1968.

John B. Ellis has been a director since November, 1986. Mr. Ellis is
retired. Prior to retiring in January, 1986, Mr. Ellis served as Senior Vice
President Finance and Treasurer of Genuine Parts Company for a period of 11
years. Mr. Ellis is also a director of Interstate/Johnson Lane Corporation,
Flowers Industries, Inc., Oxford Industries, Inc., Scotty's, Inc., Intermet
Corporation and Integrity Music, Inc., and is a director emeritus of Genuine
Parts Company.

Clifford M. Hames has been a director since February, 1972. He has been
retired from Sun Bank, N.A., in Orlando, Florida since 1989 where he served as
Vice Chairman of the Board for a period of 14 years.

Donald C. Martin has been a director since August, 1993. Mr. Martin
provides consulting services to the Company and has done so since July, 1993.
Prior to July, 1993, Mr. Martin served as President of Electrical Distributors,
Inc. ("EDI") from April, 1963 until June, 1993. EDI was acquired by the Company
in June, 1993.

Herman B. McManaway has been a director since October, 1985. Prior to
retiring in January, 1987, Mr. McManaway served as Vice President of Ruddick
Corporation for a period of 13 years and as President of Ruddick Investment Co.
for a period of 13 years. Mr. McManaway is also a director of Versa
Technologies, Inc.

The following family relationships exist between directors of the Company:
David H. Hughes and Vincent S. Hughes are brothers; and Russell V. Hughes is a
first cousin of David H. Hughes and Vincent S. Hughes. Clyde E. Hughes, III is
not related to any of the Hughes family members named above.

31
<PAGE> 32

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth, as of March 15, 1996, certain information
regarding the ownership of the Common Stock by (i) each of the Selling
Shareholders, (ii) each person known by the Company who is, or may be deemed to
be, the beneficial owner of more than 5% of the outstanding shares of Common
Stock, and (iii) all officers and directors of the Company as a group. Except as
otherwise indicated, each of the following shareholders has sole voting and
investment power with respect to shares beneficially owned by such shareholder.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
--------------------------- -----------------------
PERCENT OF PERCENT OF
NUMBER OF OUTSTANDING SHARES NUMBER OF OUTSTANDING
NAME OF BENEFICIAL OWNER SHARES SHARES OFFERED SHARES SHARES(10)
- ------------------------------------ --------- ----------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
The Employees' Retirement Plan of
Consolidated Electrical
Distributors, Inc.(1)............. 1,012,438 14.9 214,926 272,512 3.0
Edmundson International, Inc.(2).... 754,901 11.1 525,000 229,901 2.5
John V. Moore(3).................... 251,703 3.7 20,000 231,703 2.5
Russell V. Hughes(4)................ 229,460 3.4 20,000 209,460 2.3
Donald C. Martin(5)................. 259,397 3.8 30,000 229,397 2.5
John E. Petterson(6)................ 96,148 1.4 25,000 71,148 *
John F. Caswell, Jr.(7)............. 64,099 * 20,000 44,099 *
All directors and officers as a
group (18 persons)(8)............. 1,293,171 18.2(9) 1,243,171 13.0
</TABLE>

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

* Indicates less than one percent ownership.
(1) In Amendment No. 14 to Schedule 13D dated March 3, 1995 and filed with the
Securities and Exchange Commission (the "Commission"), The Employees'
Retirement Plan of Consolidated Electrical Distributors, Inc. (the "Plan")
reported aggregate beneficial ownership of 1,012,438 shares. Of the shares
reported as beneficially owned, 214,926 were reported as held with sole
voting and investment power, and 797,512 were reported as held by
affiliated entities with shared voting and investment power. The address of
the Plan is 1516 Pontius Avenue, No. 201, Los Angeles, California 90025.
(2) Edmundson International, Inc. ("Edmundson") is an affiliate of the Plan.
Edmundson has shared voting and investment power with respect to 754,901
shares. The shares held by Edmundson are included in the shares shown in
the table as owned by the Plan. The address of Edmundson is 1516 Pontius
Avenue, Los Angeles, California 90025.
(3) The address of Mr. Moore is 3531 Castellaine Drive, Charlotte, North
Carolina 28226.
(4) Mr. Hughes has shared voting power with respect to 189,033 shares and
shared investment power with respect to 190,033 shares. The ownership
figure reported for Mr. Hughes includes options exercisable within 60 days.
The address of Mr. Hughes is 20 North Orange Avenue, Suite 200, Orlando,
Florida 32801.
(5) Mr. Martin has shared voting and investment power with respect to 56,569
shares. The ownership figure reported for Mr. Martin includes options
exercisable within 60 days. The address of Mr. Martin is 1303 Henderson
Mill Road, Mansfield, Georgia 30255.
(6) The address of Mr. Petterson is 71 Shadow Lane, Lakeland, Florida 33813.
(7) The address of Mr. Caswell is 510 Goldenrod Court, Lakeland, Florida 33813.
(8) Includes an aggregate of 305,441 shares subject to options under the Hughes
Supply, Inc. 1988 Stock Option Plan which are exercisable within 60 days,
84,000 shares subject to options under the Directors' Stock Option Plan,
and 19,377 shares credited to the accounts of directors and officers under
the Hughes Supply, Inc. Employee Stock Ownership Plan. All officers and
directors as a group hold sole voting power with respect to 937,060 shares,
shared voting power with respect to 356,111 shares, sole investment power
with respect to 917,683 shares and shared investment power with respect to
375,488 shares.
(9) Calculated on the basis of 7,122,456 shares, including 6,817,015
outstanding shares and 305,441 shares subject to options exercisable within
60 days.
(10) Calculated on the basis of 9,222,864 shares of Common Stock outstanding,
including an estimated aggregate of 1,155,749 shares of Common Stock issued
or issuable in the PVF Acquisition and acquisition of Elasco Inc. and, with
respect to the share ownership of officers and directors as a group,
includes options exercisable within 60 days.

32
<PAGE> 33

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, $1.00 par value per share, and 10,000,000 shares of Preferred
Stock, no par value (the "Preferred Stock").

COMMON STOCK

All holders of Common Stock have the right to cast one vote for each share
held of record on matters coming before the shareholders for a vote. Holders of
Common Stock have no cumulative voting rights with respect to the election of
directors and have no preemptive or other rights to purchase additional
securities of the Company. The holders of Common Stock are entitled to receive
dividends, if any, as and if declared from time to time by the Board of
Directors in its discretion out of assets legally available therefore and
subject to the prior dividend rights of holders of any Preferred Stock then
outstanding. In the event of the liquidation, dissolution or winding up of the
Company, holders of Common Stock will be entitled to share equally and ratably
in the assets available for distribution after the payment of the liabilities,
subject to any prior rights of holders of any Preferred Stock then outstanding.
All outstanding shares of Common Stock are, and the shares offered hereby upon
payment therefor will be, validly issued, fully paid and non-assessable.

PREFERRED STOCK

The Board of Directors has the authority to issue up to 10,000,000 shares
of Preferred Stock in one or more series, and to fix the number of shares
constituting such series and the rights and preferences thereof, including
dividend rights, voting rights, terms of redemption and liquidation preferences,
without further vote or action by the shareholders. The Board of Directors has
established a Series A Junior Participating Preferred Stock, no par value per
share (the "Series A Stock"), consisting of 300,000 shares. No shares of Series
A Stock or any other shares of Preferred Stock have been issued or are presently
outstanding. The issuance of Preferred Stock with voting and conversion rights
may adversely affect the voting power of the holders of Common Stock.

SHAREHOLDER RIGHTS PLAN

The Company has a shareholder rights plan. Under the plan, the Company
distributed to shareholders a dividend of one right per share of the Common
Stock. When exercisable, each right will permit the holder to purchase from the
Company a unit consisting of one one-hundredth of a share of Series A Stock at a
purchase price of $65 per unit (the "Rights"). The Rights generally become
exercisable if a person or group acquires 20% or more of the Common Stock or
commences a tender offer that could result in such person or group owning 30% or
more of the Common Stock. If certain subsequent events occur after the Rights
first become exercisable, the Rights may become exercisable for the purchase of
shares of Common Stock of the Company, or of an acquiring company, having a
value equal to two times the exercise price of the Right. The Rights may be
redeemed by the Company at $.01 per Right at any time prior to ten days after
20% or more of the Common Stock is acquired by a person or group. The Rights
expire on June 2, 1998 unless sooner terminated in accordance with the rights
plan.

CERTAIN PROVISIONS OF THE RESTATED ARTICLES OF INCORPORATION

Under the Restated Articles of Incorporation of the Company (the
"Articles"), directors are classified with respect to the time for which they
severally hold office by being divided into three classes, each consisting of as
near to one-third of the whole number of directors as practicable, with
directors in each class being elected every third year. The provisions of the
Florida Business Corporation Act (the "Florida Act") permit any vacancy
occurring on the Board of Directors, including any vacancy created by reason of
an increase in the number of directors, to be filled by a director elected by
the affirmative vote of a majority of the remaining directors. Any such director
elected by the remaining directors shall hold office until the next meeting of
the shareholders at which directors are elected.

The Articles also provide that no plan of consolidation or merger in which
the Company is a constituent corporation but not the surviving corporation shall
be deemed approved by the shareholders unless such plan

33
<PAGE> 34

of consolidation or merger shall have been approved by the affirmative vote of
the holders of two-thirds of the total number of shares of voting stock of the
Company entitled to vote. The Articles also require the affirmative vote of
two-thirds of the outstanding shares of the Company's voting stock to approve
certain business combinations involving Company and any 10% shareholder unless
approved by a majority of the directors not affiliated with such shareholder or
unless certain price and procedural requirements are met; to require the
affirmative vote of at least 80% of the outstanding shares to remove directors
without cause; to provide that the size of the Board of Directors may be
determined by the affirmative vote of 80% or more of the outstanding shares; to
require the affirmative vote of at least 80% of the outstanding shares to alter
the provisions of the Articles in relating to the number, classification and
terms of office of directors; to require that special meetings called by the
shareholders be called by an 80% vote of shareholders; and to prohibit the
shareholders of the Company from taking action by means of a written consent.

These provisions may have the effect of delaying or preventing transactions
involving a change of control of the Company, including transactions in which
shareholders might otherwise receive a substantial premium for their shares over
then current market prices, and may limit the ability of shareholders to approve
transactions that they may deem to be in their best interests.

CERTAIN PROVISIONS OF FLORIDA LAW

The Company is subject to several anti-takeover provisions under the
Florida Act that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its Articles
or (depending on the provision in question) its Bylaws. The Company has not
elected to opt out of these provisions. The Florida Act contains a provision
that prohibits the voting of shares in a publicly-held Florida corporation which
are acquired in a "control share acquisition" unless the holders of a majority
of the corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
control share acquisition is defined as an acquisition that immediately
thereafter entitled the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more but
less than one-third of such voting power; (ii) one-third or more but less than a
majority of such voting power and (iii) more than a majority of such voting
power.

The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder or
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares other than those owned by the interested shareholder.
An interested shareholder is defined as a person who together with affiliates
and associates beneficially owns more than 10% of the corporation's outstanding
voting shares.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.

34
<PAGE> 35

DESCRIPTION OF NOTES

Concurrently with this offering, the Company is offering privately the
Notes in an aggregate principal amount of $98 million. The Notes will be issued
pursuant to a Note Agreement between the Company and SunTrust Capital Markets,
Inc., as agent for the participating lenders (the "Note Agreement"). The
following is a summary of the assumed terms of the Notes, but there can be no
assurance that the Notes will be issued on such terms, or that the Notes
Offering will be consummated. This offering is not contingent upon consummation
of the Notes Offering.

General. The Notes will mature on or around May 30, 2011, will be limited
to $98 million aggregate principal amount, and will be pari passu to the
Company's revolving credit facility and line of credit agreement. The Notes will
bear interest at 7.96%, payable in cash semi-annually in arrears, and will be
amortized in 20 equal semi-annual payments beginning May, 2001.

Sinking Fund. The Note Agreement will not provide for a sinking fund.

Optional Redemption. The Notes may be redeemed at the Company's option, in
whole or in part, on a pro rata basis, on any interest payment date for the sum
of (i) the greater of par or the present value of all, remaining interest and
principal payments, such present value to be determined using a discount rate
equal to the sum of (a) 50 basis points and (b) the yield on a U.S. Treasury
obligation having a maturity date corresponding with the remaining average life
of the Notes being prepaid, and (ii) accrued interest at the date of redemption.

Certain Covenants. The Note Agreement will contain a number of covenants
restricting the operations of the Company and its subsidiaries, including
covenants with respect to the following matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments (in the form of the declaration or
payment of certain dividends or distributions, the purchase, redemption or other
acquisition of any capital stock of the Company (or any affiliate thereof);
(iii) limitation on transactions with affiliates; (iv) limitation on liens and
subsidiary debt; (v) limitation on sales of assets; (vi) limitation on issuance
of guarantees of and pledges for indebtedness; and (vii) limitation on
consolidations, mergers and sale of all or substantially all assets of the
Company.

Events of Default. The events of default ("Events of Default") under the
Note Agreement will include provisions that are typical of senior debt
financing, including a default by the Company or any subsidiary on any
indebtedness that has an aggregate principal amount of not less than $5 million
resulting in such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise become due and payable.

Upon the occurrence of an Event of Default, the holders of not less than
50% in principal amount of the outstanding Notes may immediately accelerate the
maturity of all the Notes as provided in the Note Agreement.

Interim Financing. The Notes Offering was not consummated concurrently
with the PVF Acquisition; therefore, the Company financed the PVF Acquisition
through a bridge loan with the Company's bank syndication group and the issuance
of the seller note in the principal amount of $30 million. The bridge loan
carries interest at approximately the same rate as the Company's line of credit
facility (an average rate of 6.29% in fiscal 1996) for the first six months. The
seller note bears interest at 6% for the first six months, then will increase to
prime for the next six months. Thereafter, interest on such note will be at
prime plus 1/2%. The seller note will mature on May 31, 1998.

35
<PAGE> 36

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), each of the
underwriters named below (the "Underwriters"), for whom Smith Barney Inc. and
Robert W. Baird & Co. Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase, and the Company and the
Selling Shareholders have agreed to sell to such Underwriter, the number of
shares of Common Stock set forth opposite the name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc.................................................................. 1,052,463
Robert W. Baird & Co. Incorporated................................................ 1,052,463
---------
Total................................................................... 2,104,926
========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all of the shares of Common Stock offered hereby (other than those covered by
the over-allotment option described below) if any such shares are taken.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page of this Prospectus and part of such shares to certain dealers at a price
which represents a concession not in excess of $1.08 per share below the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
offering, the public offering price and such concessions may be changed by the
Underwriters.

The Company and one of the Selling Shareholders have granted the
Underwriters options, exercisable for 30 days from the date of this Prospectus,
to purchase up to 236,989 and 78,750 additional shares of Common Stock,
respectively, at the public offering price set forth on the cover page of this
Prospectus less the underwriting discounts and commissions. The Underwriters may
exercise such options solely for the purpose of covering over-allotments, if
any, in connection with the offering of the shares of Common Stock offered
hereby. To the extent such options are exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company and its officers and directors have agreed that, for a period
of 180 days from the date of this Prospectus, they will not, without the prior
written consent of Smith Barney Inc., offer, sell, contract to sell, or
otherwise dispose of, any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock, or grant any options or
warrants to purchase Common Stock, except for the shares of Common Stock offered
hereby, the grant of options and the issuance shares of Common Stock pursuant to
the Company's existing stock option plans and the surrender of Common Stock in
payment of the exercise price of stock options. Further, the Selling
Shareholders and certain other shareholders of the Company designated by the
Representatives have agreed that, for a period of 90 days from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, Common Stock, or grant any options or warrants to purchase Common Stock,
except for the shares of Common Stock offered hereby.

The Company, the Selling Shareholders, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

36
<PAGE> 37

LEGAL MATTERS

The validity, authorization and issuance of the shares of Common Stock
offered hereby will be passed upon for the Company by Maguire, Voorhis & Wells,
P.A., Orlando, Florida. Robert N. Blackford, a member of Maguire, Voorhis &
Wells, P.A., is Secretary and a director of the Company. As of April 1, 1996,
certain members of Maguire, Voorhis & Wells, P.A. beneficially owned 24,237
shares of the Company's Common Stock.

Certain legal matters will be passed upon for the Underwriters by Powell,
Goldstein, Frazer & Murphy, Atlanta, Georgia. Powell, Goldstein, Frazer & Murphy
will rely upon the opinion of Maguire, Voorhis & Wells, P.A., as to all matters
of Florida law.

EXPERTS

The Consolidated Balance Sheets as of January 26, 1996 and January 27,
1995, and the Consolidated Statements of Income, Shareholders' Equity and Cash
Flows of the Company for each of the two years in the period ended January 26,
1996, included in this Prospectus and incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended January
26, 1996, have been so included and incorporated in reliance on the report of
Price Waterhouse LLP, independent certified public accountants, given on the
authority of said firm as experts in auditing and accounting.

The Company's Consolidated Statements of Income, Shareholders' Equity and
Cash Flows for the year ended January 28, 1994, included in this Prospectus and
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K for the year ended January 26, 1996, have been so included and
incorporated in reliance on the reports of Price Waterhouse LLP, independent
certified public accountants, and Coopers & Lybrand, independent accountants,
given on the authority of said firms as experts in auditing and accounting.

The Consolidated Balance Sheets of PVF as of June 30, 1994 and June 30,
1995 and the Consolidated Statements of Income, Stockholders' Equity and Cash
Flows of PVF for each of the three years in the period ended June 30, 1995 have
been included herein in reliance upon the report of Deloitte & Touche LLP,
independent certified public accountants, given on the authority of that firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected without charge at, and copies thereof may be
obtained at prescribed costs from, the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. In addition, the aforementioned materials may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.

This Prospectus, which constitutes part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto. Reference is
hereby made to the Registration Statement and to the exhibits and schedules
relating thereto for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission. The Rights are attached to each
share of Common Stock currently outstanding and each share

37
<PAGE> 38

of Common Stock to be sold pursuant to this offering. Any reference herein made
to the Common Stock shall include the Rights.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's (i) Annual Report on Form 10-K for the fiscal year ended
January 26, 1996, (ii) Proxy Statement for the 1996 Annual Meeting of
Shareholders and (iii) Current Report on Form 8-K dated March 27, 1996 have been
filed with the Commission and are incorporated in this Prospectus by reference
and made a part hereof.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the respective dates
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.

The Company undertakes to provide without charge to each person, including
any beneficial owner of Common Stock, to whom a copy of this Prospectus has been
delivered, upon written or oral request, a copy of any or all information
incorporated by reference in this Prospectus (not including exhibits to such
information, unless such exhibits are specifically incorporated by reference
into such information). Such requests should be directed to Hughes Supply, Inc.,
Attention: J. Stephen Zepf, Treasurer and Chief Financial Officer, at 20 North
Orange Avenue, Suite 200, Orlando, Florida 32801, telephone number (407)
841-4755.

38
<PAGE> 39

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HUGHES SUPPLY, INC.
Report of Price Waterhouse LLP, Independent Certified Public Accountants.............. F-2
Report of Coopers and Lybrand L.L.P., Independent Accountants......................... F-3
Consolidated Balance Sheets as of January 27, 1995 and January 26, 1996............... F-4
Consolidated Statements of Income for the fiscal years ended January 28, 1994, January
27, 1995 and January 26, 1996....................................................... F-5
Consolidated Statements of Shareholders' Equity for the fiscal years ended January 28,
1994, January 27, 1995 and January 26, 1996......................................... F-6
Consolidated Statements of Cash Flows for the fiscal years ended January 28, 1994,
January 27, 1995 and January 26, 1996............................................... F-7
Notes to Consolidated Financial Statements............................................ F-8
PVF HOLDINGS, INC.
Report of Deloitte & Touche LLP, Independent Auditors................................. F-20
Consolidated Balance Sheets as of June 30, 1994, June 30, 1995 and March 31, 1996
(unaudited)......................................................................... F-21
Consolidated Statements of Income for the fiscal years ended June 30, 1993, 1994 and
1995, and for the nine months ended March 31, 1995 and 1996 (unaudited)............. F-22
Consolidated Statements of Stockholders' Equity for the fiscal years ended June 30,
1993, 1994 and 1995, and for the nine months ended March 31, 1996 (unaudited)....... F-23
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 1993, 1994
and 1995, and for the nine months ended March 31, 1995 and 1996 (unaudited)......... F-24
Notes to Consolidated Financial Statements............................................ F-25
</TABLE>

F-1
<PAGE> 40

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Hughes Supply, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of Hughes
Supply, Inc. and its subsidiaries at January 26, 1996 and January 27, 1995, and
the results of their operations and their cash flows for the years ended January
26, 1996 and January 27, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above. The consolidated financial statements of Hughes Supply, Inc. and its
subsidiaries for the year ended January 28, 1994, prior to restatement, were
audited by other independent accountants whose report dated March 17, 1994
expressed an unqualified opinion on those financial statements.

The financial statements for 1994 have been restated to reflect the
poolings of interests described in Note 2. We have audited the restatement
adjustments described in Note 2 that were applied to restate the 1994 financial
statements. In our opinion, such adjustments are appropriate and have been
properly applied to the 1994 financial statements.

PRICE WATERHOUSE LLP

Orlando, Florida
March 14, 1996

F-2
<PAGE> 41

REPORT OF INDEPENDENT ACCOUNTANTS

Shareholders and Board of Directors
Hughes Supply, Inc.

We have audited the consolidated statements of income, shareholders'
equity, and cash flows of Hughes Supply, Inc. and subsidiaries for the fiscal
year ended January 28, 1994 (not presented herein). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Hughes Supply, Inc. and subsidiaries for the fiscal year ended January 28,
1994 (prior to the retroactive restatement to account for the poolings of
interests), in conformity with generally accepted accounting principles.

COOPERS & LYBRAND

Orlando, Florida
March 17, 1994

F-3
<PAGE> 42

HUGHES SUPPLY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
JANUARY 27, JANUARY 26,
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 3,485 $ 3,432
Accounts receivable, less allowance for losses of $5,042 and $4,671... 131,907 143,354
Inventories........................................................... 125,159 132,524
Deferred income taxes................................................. 8,921 10,397
Other current assets.................................................. 6,551 7,778
----------- -----------
Total current assets.......................................... 276,023 297,485
Property and Equipment, Net............................................. 54,618 57,697
Deferred Income Taxes................................................... 2,095 2,430
Other Assets............................................................ 13,380 21,484
----------- -----------
$ 346,116 $ 379,096
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt..................................... $ 1,393 $ 2,551
Accounts payable...................................................... 78,275 84,875
Accrued compensation and benefits..................................... 9,823 12,622
Other current liabilities............................................. 13,738 16,925
----------- -----------
Total current liabilities..................................... 103,229 116,973
Long-Term Debt.......................................................... 105,243 106,215
Other Noncurrent Liabilities............................................ 1,540 1,765
----------- -----------
Total liabilities............................................. 210,012 224,953
----------- -----------
Commitments and Contingencies (Note 7)
Shareholders' Equity:
Preferred stock, no par value; 10,000,000 shares authorized; none
issued; preferences, limitations and relative rights to be
established by the Board of Directors.............................. -- --
Common stock, par value $1 per share; 20,000,000 shares authorized;
6,613,757 and 6,798,462 shares issued.............................. 6,614 6,798
Capital in excess of par value........................................ 37,653 40,553
Retained earnings..................................................... 93,525 106,792
----------- -----------
137,792 154,143
Less treasury stock, 108,988 shares and no shares, at cost............ (1,688) --
----------- -----------
Total shareholders' equity.................................... 136,104 154,143
----------- -----------
$ 346,116 $ 379,096
======== ========
</TABLE>

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

F-4
<PAGE> 43

HUGHES SUPPLY, INC.

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

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
JANUARY 28, JANUARY 27, JANUARY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales.................................................... $ 734,958 $ 875,459 $ 1,082,179
Cost of Sales................................................ 590,466 699,132 858,573
----------- ----------- -----------
Gross Profit................................................. 144,492 176,327 223,606
----------- ----------- -----------
Operating Expenses:
Selling, general and administrative........................ 121,645 144,256 181,284
Depreciation and amortization.............................. 7,800 9,056 10,585
Provision for doubtful accounts............................ 1,938 1,381 1,849
----------- ----------- -----------
Total operating expenses........................... 131,383 154,693 193,718
----------- ----------- -----------
Operating Income............................................. 13,109 21,634 29,888
----------- ----------- -----------
Non-Operating Income and (Expenses):
Interest and other income.................................. 2,981 2,848 4,605
Interest expense........................................... (5,055) (5,284) (7,484)
----------- ----------- -----------
(2,074) (2,436) (2,879)
----------- ----------- -----------
Income Before Income Taxes................................... 11,035 19,198 27,009
Income Taxes................................................. 4,511 7,713 10,959
----------- ----------- -----------
Net Income................................................... $ 6,524 $ 11,485 $ 16,050
======== ======== =========
Earnings Per Share:
Primary.................................................... $ 1.27 $ 1.83 $ 2.34
======== ======== =========
Fully diluted.............................................. $ 1.19 $ 1.81 $ 2.31
======== ======== =========
Average Shares Outstanding:
Primary.................................................... 5,143 6,259 6,856
======== ======== =========
Fully diluted.............................................. 6,313 6,443 6,935
======== ======== =========
</TABLE>

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

F-5
<PAGE> 44

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN TREASURY STOCK
------------------ EXCESS OF RETAINED -------------------
SHARES AMOUNT PAR VALUE EARNINGS SHARES AMOUNT
--------- ------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 29, 1993, as
previously reported............... 5,453,249 $5,453 $ 22,410 $ 72,761 901,055 $(13,958)
Adjustment for poolings of
interests....................... 439,057 439 (276) 3,251 -- --
--------- ------ ---------- -------- -------- --------
Balance, January 29, 1993, as
restated........................... 5,892,306 5,892 22,134 76,012 901,055 (13,958)
Net income......................... -- -- -- 6,524 -- --
Cash dividends --
$.16 per share.................. -- -- -- (724) -- --
Pooled company.................. -- -- -- (13) -- --
Issuance of treasury shares for EDI
merger.......................... (374,998) (375) (5,434) -- (374,998) 5,809
Other acquisition.................. -- -- (1,557) 2,158 (101,368) 1,570
Treasury shares issued under stock
option plans.................... -- -- -- (18) (6,123) 95
Purchase and retirement of common
shares.......................... (2,581) (2) (9) (38) -- --
--------- ------ ---------- -------- -------- --------
Balance, January 28, 1994............ 5,514,727 5,515 15,134 83,901 418,566 (6,484)
Net income......................... -- -- -- 11,485 -- --
Cash dividends --
$.22 per share.................. -- -- -- (1,290) -- --
Pooled company.................. -- -- -- (27) -- --
Treasury shares contributed to
employee benefit plan........... -- -- 243 -- (16,597) 257
Conversion of subordinated
convertible debentures into
common stock.................... 1,081,146 1,081 21,670 -- -- --
Stock dividend by pooled company... 26,101 26 207 (233) -- --
Treasury shares issued under stock
option plans.................... -- -- -- (141) (44,341) 687
Purchase and retirement of common
shares.......................... (8,217) (8) (35) (170) -- --
Other acquisitions................. -- -- 434 -- (248,640) 3,852
--------- ------ ---------- -------- -------- --------
Balance, January 27, 1995............ 6,613,757 6,614 37,653 93,525 108,988 (1,688)
Net income......................... -- -- -- 16,050 -- --
Cash dividends --
$.30 per share.................. -- -- -- (1,971) -- --
Pooled company.................. -- -- -- (15) -- --
Stock dividend by pooled company... 28,710 29 260 (289) -- --
Shares issued under stock option
plans........................... 6,657 6 74 (154) (86,984) 1,347
Purchase and retirement of common
shares.......................... (19,642) (20) (146) (354) -- --
Other acquisitions................. 168,980 169 2,712 -- (22,004) 341
--------- ------ ---------- -------- -------- --------
Balance, January 26, 1996............ 6,798,462 $6,798 $ 40,553 $106,792 -- $ --
======== ====== ======= ======== ======== ========
</TABLE>

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

F-6
<PAGE> 45

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
JANUARY 28, JANUARY 27, JANUARY 26,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers.......................... $ 718,603 $ 861,732 $ 1,073,951
Cash paid to suppliers and employees.................. (712,125) (846,357) (1,034,589)
Interest received..................................... 2,001 2,323 3,454
Interest paid......................................... (5,134) (4,825) (7,273)
Income taxes paid..................................... (5,544) (9,181) (15,230)
----------- ----------- -----------
Net cash provided by (used in) operating
activities....................................... (2,199) 3,692 20,313
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures.................................. (8,885) (11,915) (11,853)
Proceeds from sale of property and equipment.......... 709 743 1,228
Business acquisitions, net of cash.................... (3,934) (11,099) (10,009)
----------- ----------- -----------
Net cash used in investing activities............... (12,110) (22,271) (20,634)
----------- ----------- -----------
Cash flows from financing activities:
Net borrowings under short-term debt arrangements..... 16,733 23,832 6,245
Proceeds from issuance of long-term debt.............. 580 -- --
Principal payments on:
Long-term notes..................................... (2,918) (1,266) (4,150)
Capital lease obligations........................... (660) (725) (844)
Proceeds from issuance of common shares under stock
option plans........................................ 77 546 1,273
Purchase of common shares............................. (49) (213) (520)
Dividends paid........................................ (629) (1,188) (1,736)
----------- ----------- -----------
Net cash provided by financing activities........... 13,134 20,986 268
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents....... (1,175) 2,407 (53)
Cash and Cash Equivalents, beginning of year............... 2,253 1,078 3,485
----------- ----------- -----------
Cash and Cash Equivalents, end of year..................... $ 1,078 $ 3,485 $ 3,432
========= ========= ==========
</TABLE>

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

F-7
<PAGE> 46

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INDUSTRY

Hughes Supply, Inc. and its subsidiaries (the "Company") are engaged in the
wholesale distribution of a broad range of materials, equipment and supplies
primarily to the construction industry. Major product lines distributed by the
Company include electrical, plumbing and electric utility equipment, building
materials, pool equipment and supplies, water and sewer products, heating and
air conditioning equipment and supplies, water systems and industrial pipe,
valves and fittings. The Company's principal customers are electrical, plumbing
and mechanical contractors, electric utility companies, municipal and industrial
accounts.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the Company and its
wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated. Prior period financial statements have been
restated to include the accounts of companies acquired and accounted for as
poolings of interests. Results of operations of companies purchased and
immaterial poolings are included from dates of acquisition. The Company's
minority investment in affiliate is accounted for by the equity method.

FISCAL YEAR

The Company's fiscal year ends on the last Friday in January. Fiscal years
1994, 1995 and 1996 each contained 52 weeks.

CASH EQUIVALENTS

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

INVENTORIES

Inventories are carried at the lower of cost or market. The cost of
substantially all inventories is determined by the average cost method.

PROPERTY AND EQUIPMENT

Buildings and equipment are depreciated using both straight-line and
declining-balance methods based on the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements................................... 5-40 years
Transportation equipment..................................... 2-7 years
Furniture, fixtures and equipment............................ 3-10 years
Property under capital leases................................ 20-40 years
</TABLE>

Maintenance and repairs are charged to expense as incurred and major
renewals and betterments are capitalized. Gains or losses are credited or
charged to earnings upon disposition.

OTHER ASSETS

The excess of cost over the fair value of net assets of purchased companies
($8,806 and $16,637 at January 27, 1995 and January 26, 1996, respectively, net
of accumulated amortization) is being amortized by the straight-line method over
15 to 25 years.

F-8
<PAGE> 47

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and circumstances indicate that the excess of cost
over the fair value of net assets of purchased companies or other assets may be
impaired, an evaluation of recoverability would be performed. If an evaluation
is required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow is required.

REVENUE RECOGNITION

The Company recognizes revenue from product sales when goods are received
by customers.

INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
resulting from temporary differences. Such temporary differences result from
differences in the carrying value of assets and liabilities for tax and
financial reporting purposes. The deferred tax assets and liabilities represent
the future tax consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or settled. Deferred
taxes are also recognized for operating losses that are available to offset
future taxable income.

EARNINGS PER COMMON SHARE

Primary earnings per share are based on the weighted average number of
shares outstanding during each year plus the common stock equivalents issuable
upon the exercise of stock options. Fully diluted earnings per share assumes the
conversion of 7% convertible subordinated debentures (after elimination of
related interest expense, net of income tax effect) and exercise of stock
options.

DEFERRED EMPLOYEE BENEFITS

The present value of amounts estimated to be payable under unfunded
supplemental retirement agreements with certain officers is being accrued over
the remaining years of active employment of the officers and is included in
other noncurrent liabilities.

ESTIMATES

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

NOTE 2 -- BUSINESS COMBINATIONS

On August 1, 1995, the Company acquired all the common stock of Moore
Electric Supply, Inc. ("Moore") in exchange for 316,000 shares of the Company's
common stock. Moore is a wholesale distributor of electrical products with five
outlets in North Carolina and South Carolina.

On December 18, 1995, the Company acquired all the common stock of Florida
Pipe & Supply Company ("FPS") in exchange for 178,000 shares of the Company's
common stock. FPS is a wholesale distributor of industrial pipe, valves and
fittings with one outlet in Florida.

F-9
<PAGE> 48

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The above transactions have been accounted for as poolings of interests
and, accordingly, the consolidated financial statements for the periods
presented have been restated to include the accounts of Moore and FPS. Moore's
and FPS's fiscal year ends have been changed to the last Friday in January to
conform to the Company's fiscal year end.

Net sales and net income of the separate companies for the periods
preceding the acquisitions were as follows:

<TABLE>
<CAPTION>
NET NET
SALES INCOME
-------- -------
<S> <C> <C>
Six months ended July 31, 1995 (unaudited):
Hughes, as previously reported.................................. $494,239 $ 6,681
Moore........................................................... 32,297 1,023
-------- -------
Combined........................................................ $526,536 $ 7,704
======== =======
Nine months ended October 31, 1995 (unaudited):
Hughes, as previously reported.................................. $805,575 $11,732
FPS............................................................. 14,762 520
-------- -------
Combined........................................................ $820,337 $12,252
======== =======
Fiscal year ended January 27, 1995:
Hughes, as previously reported.................................. $802,445 $10,328
Moore........................................................... 54,115 423
FPS............................................................. 18,899 734
-------- -------
Combined........................................................ $875,459 $11,485
======== =======
Fiscal year ended January 28, 1994:
Hughes, as previously reported.................................. $660,938 $ 6,286
Moore........................................................... 54,854 358
FPS............................................................. 19,166 (120)
-------- -------
Combined........................................................ $734,958 $ 6,524
======== =======
</TABLE>

During fiscal years 1994, 1995 and 1996, the Company acquired several
wholesale distributors of materials to the construction industry that were
accounted for as purchases. These acquisitions, individually or in the
aggregate, did not have a material effect on the consolidated financial
statements. Results of operations of these companies from their respective dates
of acquisition have been included in the consolidated financial statements.

F-10
<PAGE> 49

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 3 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land........................................................... $ 13,415 $ 14,380
Buildings and improvements..................................... 42,850 45,996
Transportation equipment....................................... 19,930 20,265
Furniture, fixtures and equipment.............................. 21,045 24,129
Property under capital leases.................................. 10,794 10,551
-------- --------
108,034 115,321
Less accumulated depreciation and amortization................. (53,416) (57,624)
-------- --------
$ 54,618 $ 57,697
======== ========
</TABLE>

NOTE 4 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Unsecured revolving bank notes under $160,000 credit agreement,
payable June 30, 1998, fluctuating interest (6.3% to 6.4% at
January 26, 1996)............................................ $ 61,025 $ 68,300
Short-term instruments classified as long-term debt............ 34,803 35,200
Other notes payable............................................ 6,950 2,252
Capital lease obligations...................................... 3,858 3,014
-------- --------
106,636 108,766
Less current portion........................................... (1,393) (2,551)
-------- --------
$105,243 $106,215
======== ========
</TABLE>

On July 31, 1995, the Company's revolving credit and line of credit
agreement with a group of banks was amended. The agreement, as amended, now
permits the Company to borrow up to $160,000 (subject to borrowing limitations
under the agreement) -- $125,000 long-term, expiring June 30, 1998, and $35,000
line of credit convertible to a term note due two years from conversion date.
The $35,000 line of credit backs commercial paper. Under the credit facility,
interest is payable at market rates plus applicable margins. Commitment fees of
.25% and .125% are paid on the unused portions of the revolving and line of
credit facilities, respectively.

Loan covenants require the Company to maintain consolidated working capital
of not less than $75,000 and a maximum ratio of funded debt to total capital, as
defined, of .55 to 1.0. The covenants also restrict the Company's activities
regarding investments, liens, borrowing and leasing, and payment of dividends
other than stock. Under the dividend covenant, approximately $13,480 is
available at January 26, 1996 for payment of dividends.

The Company has a bank line of credit for short-term borrowing aggregating
$6,000 (subject to borrowing limitations under the long-term debt covenants)
under which $200 was outstanding at January 26, 1996. There were no amounts
outstanding at January 27, 1995. The line provides for interest at market rates.
The interest rate on short-term borrowings as of January 26, 1996 was 5.9%. In
addition, the Company has a commercial paper program backed by its revolving
credit facility. The weighted average interest rate on

F-11
<PAGE> 50

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

outstanding commercial paper borrowings of $34,803 and $35,000 as of January 27,
1995 and January 26, 1996 was 6.0% and 5.9%, respectively.

The Company's credit facility enables the Company to refinance short-term
borrowings on a long-term basis to the extent that the credit facility is
unused. Accordingly, $34,803 and $35,200 of short-term borrowings at January 27,
1995 and January 26, 1996, respectively, have been classified as long-term debt.

The carrying value of notes payable is a reasonable estimate of fair value
since interest rates are based on prevailing market rates.

Maturities of long-term debt, excluding capital lease obligations, for each
of the five years subsequent to January 26, 1996 and in the aggregate are as
follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDING
------------------------------------------------------------------
<S> <C>
1997......................................................... $ 1,694
1998......................................................... 408
1999......................................................... 103,615
2000......................................................... 31
2001......................................................... 4
Later years.................................................. --
--------
$105,752
========
</TABLE>

NOTE 5 -- INCOME TAXES

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................................ $ 1,854 $ 1,809
Inventories.................................................... 2,866 1,757
Capital leases................................................. 590 503
Property and equipment......................................... 744 1,148
Accrued vacation............................................... 667 911
Deferred compensation.......................................... 597 681
Environmental clean-up costs................................... 216 268
Operating leases............................................... -- 276
Other accrued liabilities...................................... 3,222 5,106
Other.......................................................... 310 389
------- -------
Total deferred tax assets.............................. 11,066 12,848
------- -------
Deferred tax liabilities:
Operating leases............................................... 42 --
Intangible assets.............................................. 8 21
------- -------
Total deferred tax liabilities......................... 50 21
------- -------
Net deferred tax asset........................................... $11,016 $12,827
======= =======
</TABLE>

No valuation allowance has been provided for these deferred tax assets at
January 27, 1995 and January 26, 1996 as full realization of these assets is
expected.

F-12
<PAGE> 51

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The consolidated provision for income taxes consists of the following:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Currently payable:
Federal.............................................. $4,567 $ 9,927 $11,091
State................................................ 645 1,635 1,679
------ ------- -------
5,212 11,562 12,770
------ ------- -------
Deferred:
Federal.............................................. (906) (3,650) (1,555)
State................................................ 205 (199) (256)
------ ------- -------
(701) (3,849) (1,811)
------ ------- -------
$4,511 $ 7,713 $10,959
====== ======= =======
</TABLE>

The following is a reconciliation of tax computed at the statutory Federal
rate to the income tax expense in the consolidated statements of income:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------
1994 1995 1996
------------- ------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Tax computed at statutory Federal rate...... $3,862 35.0 $6,719 35.0 $ 9,453 35.0
Effect of:
State income tax, net of Federal income
tax benefit............................ 552 5.0 933 4.9 925 3.4
Nondeductible purchase adjustments........ 24 .2 38 .2 43 .2
Nondeductible expenses.................... 117 1.1 330 1.7 396 1.5
Other, net................................ (44) (.4) (307) (1.6) 142 .5
------ ---- ------ ---- ------- ----
Income tax expense.......................... $4,511 40.9 $7,713 40.2 $10,959 40.6
====== ==== ====== ==== ======= ====
</TABLE>

NOTE 6 -- EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP PLANS

The Company has a 401(k) profit sharing plan which provides benefits for
substantially all employees of the Company who meet minimum age and length of
service requirements. Under the plan, employee contributions of not less than 2%
to not more than 3% of each eligible employee's compensation are matched (in
cash or stock) 50% by the Company. Additional annual contributions may be made
at the discretion of the Board of Directors.

The Company has an employee stock ownership plan (ESOP) covering
substantially all employees of the Company who meet minimum age and length of
service requirements. The plan is designed to enable eligible employees to
acquire a proprietary interest in the Company. Company contributions (whether in
cash or stock) are determined annually by the Board of Directors in an amount
not to exceed the maximum allowable as an income tax deduction. At January 27,
1995 and January 26, 1996, the plan owned approximately 172,000 and 184,000
shares, respectively, of the Company's common stock, all of which were allocated
to participants.

Amounts charged to expense for these and other similar plans during the
fiscal years ended in 1994, 1995 and 1996 were $1,000, $1,157 and $1,710,
respectively.

F-13
<PAGE> 52
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

BONUS PLANS

The Company has bonus plans, based on profitability formulas, which provide
incentive compensation for key employees. Amounts charged to expense for bonuses
to executive officers were $533, $935 and $1,354 for the fiscal years ended in
1994, 1995 and 1996, respectively.

STOCK OPTION PLANS

The Company's stock option plans authorize the granting of both incentive
and non-incentive stock options for an aggregate of 1,635,000 shares of common
stock to key executive, management, and sales employees, and, with respect to
135,000 shares, to non-employee directors. Under the plans, options are granted
at prices not less than market value on the date of grant, and the maximum term
of an option may not exceed ten years. Prices for incentive stock options
granted to employees who own 10% or more of the Company's stock are at least
110% of market value at date of grant. Options may be granted from time to time
to May 1998, or May 2003 with regard to directors. An option becomes exercisable
at such times and in such installments as set by the Board of Directors.

The employee plan also permits the granting of stock appreciation rights
(SARs) to holders of options. Such rights permit the optionee to surrender an
exercisable option, in whole or in part, on any date that the fair market value
of the Company's common stock exceeds the option price for the stock and receive
payment in common stock, or, if the Board of Directors approves, in cash or any
combination of cash and common stock. Such payment would be equal to the excess
of the fair market value of the shares under the surrendered option over the
option price for such shares. The change in value of SARs would be reflected in
income based upon the market value of the stock. No SARs have been granted or
issued through January 26, 1996.

A summary of option transactions during each of the three fiscal years in
the period ended January 26, 1996 is shown below:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES RANGE
--------- -------------
<S> <C> <C>
Under option, January 29, 1993
(253,442 shares exercisable)............................ 406,442 $12.00 - $17.63
Granted................................................ 12,000 $16.25
Exercised.............................................. (6,023) $12.25 - $12.87
Cancelled.............................................. (12,835) $12.00 - $12.63
---------
Under option, January 28, 1994
(297,584 shares exercisable)............................ 399,584 $12.25 - $17.63
Granted................................................ 115,000 $18.13 - $25.37
Exercised.............................................. (44,241) $12.25 - $12.63
---------
Under option, January 27, 1995
(339,343 shares exercisable)............................ 470,343 $12.25 - $25.37
Granted................................................ 15,000 $19.25
Exercised.............................................. (93,541) $12.25 - $20.25
Cancelled.............................................. (1,861) $12.25 - $12.63
---------
Under option, January 26, 1996
(329,941 shares exercisable)............................ 389,941 $12.25 - $25.37
========
</TABLE>

There were 640,658 and 627,519 shares available for the granting of options
at January 27, 1995 and January 26, 1996, respectively.

F-14
<PAGE> 53

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

STOCK-BASED COMPENSATION

The Company accounts for compensation cost related to employee stock
options and other forms of employee stock-based compensation plans in accordance
with the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB
25 requires compensation cost for stock-based compensation plans to be
recognized based on the difference, if any, between the fair market value of the
stock on the date of grant and the option exercise price. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS
123 established a fair value-based method of accounting for compensation cost
related to stock options and other forms of stock-based compensation plans.
However, SFAS 123 allows an entity to continue to measure compensation costs
using the principles of APB 25 if certain pro forma disclosures are made. SFAS
123 is effective for fiscal years beginning after December 15, 1995. The Company
intends to adopt the provisions for pro forma disclosure requirements of SFAS
123 in fiscal 1997.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The Company has entered into agreements with certain key executive officers
providing for supplemental payments, generally for periods up to 15 years, upon
retirement, disability or death. The obligations are not funded apart from the
Company's general assets. Amounts charged to expense under the agreements were
$166, $390 and $238 in fiscal years ended 1994, 1995 and 1996, respectively.

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

A portion of the Company's operations are conducted from locations leased
under capital leases from a corporation which is owned by three of the directors
of Hughes Supply, Inc. The leases generally provide that all expenses related to
the properties are to be paid by the lessee. The leases also generally provide
for rental increases at specified intervals. The leases all expire within ten
years; however, it is expected that they will be renewed. Rents under these
agreements amounted to $1,165 for fiscal years ended 1994 and 1995 and $1,149 in
fiscal year ended 1996. Property under capital leases is included in the
consolidated balance sheets as follows:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Property under capital leases (consisting of land and
buildings)................................................... $10,794 $10,551
Accumulated amortization....................................... (8,458) (8,840)
------- -------
$ 2,336 $ 1,711
======= =======
</TABLE>

In addition, rents under operating leases paid to this related corporation
were $396, $400 and $358 in 1994, 1995 and 1996, respectively.

F-15
<PAGE> 54

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Future minimum payments, by year and in the aggregate, under the
aforementioned leases and other noncancellable operating leases with initial or
remaining terms in excess of one year as of January 26, 1996, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEARS ENDING LEASES LEASES
--------------------------------------------------------------- ------- ---------
<S> <C> <C>
1997...................................................... $ 1,141 $ 9,122
1998...................................................... 1,141 8,238
1999...................................................... 558 6,540
2000...................................................... 360 4,755
2001...................................................... 325 3,201
Later years............................................... 258 5,221
------- ---------
Total minimum lease payments................................... 3,783 $37,077
=======
Less amount representing interest.............................. (769)
-------
Present value of net minimum lease payments.................... 3,014
Less current portion........................................... (857)
-------
$ 2,157
======
</TABLE>

Lease-related expenses are as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Capital lease amortization...................................... $ 594 $ 594 $ 584
Capital lease interest expense.................................. 505 440 364
Operating lease rentals (excluding month-to-month rents)........ 6,397 7,412 12,090
</TABLE>

GUARANTEES OF AFFILIATE DEBT

A wholly-owned subsidiary of the Company owns a 20% interest in Accord
Industries Company ("Accord"), a joint venture formed from the Company's sale of
its manufacturing operations in 1990. As partial consideration for the sale, the
Company received $2,750 in notes receivable, part of which is convertible into
an additional partnership interest in Accord of up to 29%.

In connection with the investment in Accord, the Company guaranteed $500 of
Accord's indebtedness to a bank and the Company's subsidiary as a joint venturer
is contingently liable for the remaining bank debt of approximately $1,100 as of
January 26, 1996.

LEGAL MATTERS

The Company is involved in various legal proceedings incident to the
conduct of its business. In the opinion of management, none of the proceedings
are material in relation to the Company's consolidated operations or financial
position.

NOTE 8 -- CAPITAL STOCK

COMMON STOCK

On May 24, 1994, the shareholders approved an amendment to the articles of
incorporation of the Company increasing the number of authorized shares of
common stock to 20,000,000 shares, $1.00 par value per share.

F-16
<PAGE> 55

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

On March 8, 1994, the Company issued a call for redemption of its
outstanding 7% convertible subordinated debentures to take place on April 7,
1994. Of the $22,960 debentures outstanding at January 28, 1994, $22,889, or
99.7%, were converted into the Company's common stock at $21.17 per share or
47.2 common shares for each $1 face amount of debentures. This conversion
resulted in the issuance of 1,081,146 common shares.

PREFERRED STOCK

The Company's Board of Directors established Series A Junior Participating
Preferred Stock (Series A Stock) consisting of 300,000 shares. Each share of
Series A Stock will be entitled to one vote on all matters submitted to a vote
of shareholders. Series A Stock is not redeemable or convertible into any other
security. Each share of Series A Stock shall have a minimum cumulative
preferential quarterly dividend rate equal to the greater of $1.25 per share or
100 times the aggregate per share amount of the dividend declared on common
stock. In the event of liquidation, shares of Series A Stock will be entitled to
the greater of $100 per share plus any accrued and unpaid dividend or 100 times
the payment to be made per share of common stock. No shares of Series A Stock
are presently outstanding, and no shares are expected to be issued except in
connection with the shareholder rights plan referred to below.

The Company has a shareholder rights plan. Under the plan, the Company
distributed to shareholders a dividend of one right per share of the Company's
common stock. When exercisable, each right will permit the holder to purchase
from the Company a unit consisting of one one-hundredth of a share of Series A
Stock at a purchase price of $65 per unit. The rights generally become
exercisable if a person or group acquires 20% or more of the Company's common
stock or commences a tender offer that could result in such person or group
owning 30% or more of the Company's common stock. If certain subsequent events
occur after the rights first become exercisable, the rights may become
exercisable for the purchase of shares of common stock of the Company, or of an
acquiring company, having a value equal to two times the exercise price of the
right. The rights may be redeemed by the Company at $.01 per right at any time
prior to ten days after 20% or more of the Company's stock is acquired by a
person or group. The rights expire on June 2, 1998 unless sooner terminated in
accordance with the rights plan.

NOTE 9 -- CONCENTRATION OF CREDIT RISK

The Company sells its products in the major areas of construction markets
in certain states of the eastern half of the United States. Approximately 90% of
the Company's sales are credit sales which are primarily to customers whose
ability to pay is dependent upon the construction industry economics prevailing
in these areas; however, concentration of credit risk with respect to trade
accounts receivable is limited due to the large number of customers comprising
the Company's customer base and no one customer comprises more than 1% of annual
sales. The Company performs ongoing credit evaluations of its customers and in
certain situations obtains collateral sufficient to protect its credit position.
The Company maintains reserves for potential credit losses, and such losses have
been within management's expectations.

F-17
<PAGE> 56

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 10 -- SUPPLEMENTAL CASH FLOWS INFORMATION

The following is a reconciliation of net income to net cash provided by
(used in) operating activities:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1995 1996
-------- -------- -------
<S> <C> <C> <C>
Net income............................................ $ 6,524 $ 11,485 $16,050
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation..................................... 7,038 8,217 8,669
Amortization..................................... 762 839 1,916
Provision for doubtful accounts.................. 1,938 1,381 1,849
Gain on sale of property and equipment........... (270) (294) (621)
Undistributed (earnings) losses of affiliate..... (171) (139) 115
Treasury shares contributed to employee benefit
plan........................................... -- 500 --
Changes in assets and liabilities, net of effects
of business acquisitions:
(Increase) decrease in --
Accounts receivable......................... (16,894) (13,819) (8,872)
Inventories................................. (4,688) (16,539) 1,129
Other current assets........................ (81) (835) (1,119)
Other assets................................ 178 (262) (1,063)
Increase (decrease) in --
Accounts payable and accrued expenses....... 4,399 13,770 6,095
Accrued interest and income taxes........... (487) 2,840 (2,249)
Other noncurrent liabilities................ 178 397 225
Increase in deferred income taxes.............. (625) (3,849) (1,811)
-------- -------- -------
Net cash provided by (used in) operating activities... $ (2,199) $ 3,692 $20,313
======== ======== =======
</TABLE>

NONCASH INVESTING AND FINANCING ACTIVITIES

The net assets acquired and consideration for acquisitions accounted for as
purchases are summarized below:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1995 1996
-------- -------- -------
<S> <C> <C> <C>
Fair value of:
Assets acquired..................................... $ 8,421 $ 28,396 $22,600
Liabilities assumed................................. (4,487) (7,269) (9,369)
-------- -------- -------
Purchase price........................................ $ 3,934 $ 21,127 $13,231
======== ======== =======
</TABLE>

Consideration in fiscal 1995 included 249,000 shares of common stock (fair
value $4,286), a note for $1,525 and amounts payable of $4,217. Consideration in
fiscal 1996 included 191,000 shares of common stock (fair value $3,222).

Additional common stock was issued in fiscal year 1995 upon the conversion
of $22,889 convertible subordinated debentures.

F-18
<PAGE> 57

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 11 -- SUBSEQUENT EVENT (UNAUDITED)

On March 27, 1996, the Company entered into an asset purchase agreement to
acquire substantially all of the assets, properties and business of PVF
Holdings, Inc. and its subsidiaries and to assume certain of their liabilities.
The aggregate consideration to be paid is approximately $99.5 million,
consisting of cash in the amount of $44.4 million, the issuance of a
subordinated note to the sellers in the principal amount of $30 million, the
issuance of 669,956 shares of common stock and the assumption of bank debt of
$6.5 million.

F-19
<PAGE> 58

INDEPENDENT AUDITORS' REPORT

To The Board of Directors of PVF Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of PVF Holdings,
Inc. and subsidiaries as of June 30, 1994 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of PVF Holdings, Inc. and subsidiaries
as of June 30, 1994 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1995 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Birmingham, Alabama
September 25, 1995 (October 25, 1995 and
May 13, 1996 as to Note 9)

F-20
<PAGE> 59

PVF HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1994 1995 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 4)
CURRENT ASSETS:
Cash.................................................. $ 197,118 $ 183,182 $ 655,780
Accounts receivable, less allowance for doubtful
accounts of $75,000 (June 30, 1994), $110,000 (June
30, 1995) and $120,000 (March 31, 1996)............ 8,590,232 12,346,105 12,474,805
Inventories........................................... 23,006,950 37,487,362 41,237,537
Prepaid expenses...................................... 33,457 21,020 42,884
Deferred income taxes (Note 5)........................ 231,468 576,000 712,000
----------- ----------- ------------
Total current assets.......................... 32,059,225 50,613,669 55,123,006
PROPERTY, PLANT AND EQUIPMENT -- NET (Note 2)........... 1,426,187 1,278,274 1,238,845
INVESTMENT IN AND LOANS TO AFFILIATE (Note 3)........... 183,740 636,108 708,328
GOODWILL, NET........................................... 530,400 494,560 467,669
OTHER ASSETS............................................ 163,189 121,244 80,203
----------- ----------- ------------
TOTAL......................................... $34,362,741 $53,143,855 $ 57,618,051
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit -- bank (Note 4)............. $ 6,738,000 $ 3,583,000 $ --
Accounts payable...................................... 8,191,188 10,852,719 9,362,311
Accrued management fees (Note 3)...................... 265,466 1,866,118 1,061,240
Other accrued expenses (Note 3)....................... 745,836 1,887,870 2,147,902
Income taxes payable.................................. 82,269 2,456,746 965,605
Current portion of long-term debt (Note 4)............ 3,193,549 1,058,540 1,063,556
Current portion of subordinated debt (Note 4)......... 175,000 -- --
----------- ----------- ------------
Total current liabilities..................... 19,391,308 21,704,993 14,600,614
LONG-TERM DEBT (Note 4)................................. 462,660 6,719,230 6,187,432
SUBORDINATED DEBT (Notes 3 and 4)....................... 700,000 700,000 700,000
COMMITMENTS (Note 6)
STOCKHOLDER'S EQUITY (Notes 4 and 8):
Series A preferred stock; nonvoting and cumulative;
par value $1 per share; 9,500 shares authorized,
issued and outstanding............................. 9,500 9,500 9,500
Series B preferred stock; nonvoting, cumulative and
convertible; par value $1 per share; 310 shares
authorized; 310 (June 30, 1994 and 1995) and -0-
(March 31, 1996) shares issued and outstanding..... 310 310 --
Common Stock; par value $.01 per share; 100,000 shares
authorized; 19,000 (June 30, 1994 and 1995) and
50,000 (March 31, 1996) shares issued and
outstanding........................................ 190 190 500
Additional paid-in-capital............................ 2,021,000 2,021,000 2,021,000
Retained earnings..................................... 12,013,447 21,988,632 34,099,005
Unearned compensation relating to stock award......... (235,674) -- --
----------- ----------- ------------
Total stockholders' equity.................... 13,808,773 24,019,632 36,130,005
----------- ----------- ------------
TOTAL......................................... $34,362,741 $53,143,855 $ 57,618,051
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-21
<PAGE> 60

PVF HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES....................... $48,297,228 $60,930,776 $92,790,481 $66,099,307 $85,941,743
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of goods sold............ 37,105,439 46,211,087 60,423,904 45,207,008 54,709,408
Operating expenses (Notes 3,
6, 7 and 8)................ 8,514,457 9,878,622 14,339,683 9,804,801 10,692,034
Interest expense (Note 3)..... 730,858 830,638 997,709 779,374 628,928
----------- ----------- ----------- ----------- -----------
Total costs and
expenses............ 46,350,754 56,920,347 75,761,296 55,791,183 66,030,370
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES...... 1,946,474 4,010,429 17,029,185 10,308,124 19,911,373
INCOME TAXES (Note 5)........... 706,000 1,419,000 7,054,000 4,075,000 7,801,000
----------- ----------- ----------- ----------- -----------
NET INCOME...................... $ 1,240,474 $ 2,591,429 $ 9,975,185 $ 6,233,124 $12,110,373
========== ========== ========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-22
<PAGE> 61

PVF HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
SERIES A SERIES B UNEARNED
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL COMPENSATION
--------------- --------------- --------------- PAID-IN RETAINED RELATING TO
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK AWARD TOTAL
------ ------ ------ ------ ------ ------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1,
1992.............. 9,500 $9,500 310 $ 310 19,000 $190 $2,021,000 $ 8,181,544 $ (471,567) $ 9,740,977
Net income........ 1,240,474 1,240,474
Amortization of
shares vested
under stock
award (Note
8)............. 117,923 117,923
------ ------ ------ ------ ------ ------ ---------- ----------- ------------ -----------
BALANCE, JUNE 30,
1993.............. 9,500 9,500 310 310 19,000 190 2,021,000 9,422,018 (353,644) 11,099,374
Net income........ 2,591,429 2,591,429
Amortization of
shares vested
under stock
award (Note
8)............. 117,970 117,970
------ ------ ------ ------ ------ ------ ---------- ----------- ------------ -----------
BALANCE, JUNE 30,
1994.............. 9,500 9,500 310 310 19,000 190 2,021,000 12,013,447 (235,674) 13,808,773
Net income........ 9,975,185 9,975,185
Amortization of
shares vested
under stock
award (Note
8)............. 235,674 235,674
------ ------ ------ ------ ------ ------ ---------- ----------- ------------ -----------
BALANCE, JUNE 30,
1995.............. 9,500 9,500 310 310 19,000 190 2,021,000 21,988,632 -- 24,019,632
Conversion of
Series B
preferred stock
into common
stock (Note
8)............. (310) (310 ) 31,000 310
Net income
(unaudited).... 12,110,373 12,110,373
------ ------ ------ ------ ------ ------ ---------- ----------- ------------ -----------
BALANCE, MARCH 31,
1996
(unaudited)....... 9,500 $9,500 -- $ -- 50,000 $500 $2,021,000 $34,099,005 $ -- $36,130,005
===== ====== ===== ====== ====== ====== ========= ========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-23
<PAGE> 62

PVF HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $ 1,240,474 $ 2,591,429 $ 9,975,185 $ 6,233,124 $12,110,373
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation.................................... 332,387 385,457 414,770 334,800 280,142
Amortization.................................... 259,684 148,459 98,512 162,254 47,743
Compensation expense relating to stock award and
performance stock plan........................ 117,923 117,970 418,916 345,380 277,000
Provision for losses on accounts receivable..... 59,119 73,228 97,630 63,812 18,935
Equity in net income of affiliate............... (104,143) (21,486) (72,220)
(Gain) loss on disposal of fixed
assets........................................ (8,478) 1,377
Changes in assets and liabilities provided
(used) cash:
Accounts receivable............................. (1,624,606) (2,425,405) (3,853,503) (4,249,904) (147,634)
Inventories..................................... (5,734,882) (1,385,973) (14,480,412) (11,507,392) (3,750,175)
Prepaid expenses................................ (12,232) 29,695 12,437 (7,839) (21,864)
Deferred income taxes........................... (75,000) 1,000 (344,532) (285,532) (136,000)
Accounts payable and accrued expenses........... 2,131,773 1,124,603 5,220,975 4,293,180 (2,312,255)
Income taxes payable............................ 7,084 73,282 2,374,477 1,915,097 (1,491,141)
Other........................................... (18,271) (11,856) (20,727) (102,902) 20,189
----------- ----------- ------------ ------------ -----------
Net cash provided by (used in) operating
activities.................................... (3,316,547) 721,889 (198,893) (2,827,408) 4,824,470
----------- ----------- ------------ ------------ -----------
INVESTING ACTIVITIES:
Capital expenditures.............................. (596,967) (165,801) (271,779) (266,028) (242,090)
Investment in and loans to affiliates............. (183,740) (348,225) (348,226)
Proceeds from the sale of fixed assets............ 13,400
----------- ----------- ------------ ------------ -----------
Net cash used in investing activities........... (596,967) (349,541) (606,604) (614,254) (242,090)
----------- ----------- ------------ ------------ -----------
FINANCING ACTIVITIES:
Net borrowings (payments) under line of credit.... 4,934,000 772,000 (3,155,000) (738,523) (3,583,000)
Proceeds from issuance of long-term debt.......... 28,412 7,500,000 7,500,000 149,353
Payments on long-term debt........................ (1,270,393) (1,187,364) (3,553,439) (3,321,287) (676,135)
----------- ----------- ------------ ------------ -----------
Net cash provided by (used in) financing
activities.................................... 3,692,019 (415,364) 791,561 3,440,190 (4,109,782)
----------- ----------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH..................... (221,495) (43,016) (13,936) (1,472) 472,598
CASH, BEGINNING OF PERIOD........................... 461,629 240,134 197,118 197,118 183,182
----------- ----------- ------------ ------------ -----------
CASH, END OF PERIOD................................. $ 240,134 $ 197,118 $ 183,182 $ 195,646 $ 655,780
========== ========== =========== =========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for:
Interest........................................ $ 782,082 $ 882,922 $ 967,059 $ 685,286 $ 696,285
========== ========== =========== =========== ==========
Income taxes.................................... $ 828,735 $ 1,346,059 $ 5,113,069 $ 2,429,866 $ 9,007,144
========== ========== =========== =========== ==========
</TABLE>

See notes to consolidated financial statements.

F-24
<PAGE> 63

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

a. Principles of Consolidation -- The consolidated financial statements
include the accounts of PVF Holdings, Inc. ("PVF"), Southwest Stainless, Inc.
("SWS"), Coastline Products, Inc. ("Coastline"), Houston Products and Machine
("HPM"), and Multalloy, Inc., ("Multalloy") (hereinafter collectively referred
to as the "Company"). The Company's investment in C. F. Fluid Controls Inc.
("C.F. Fluid") a 50% owned unconsolidated investee, is accounted for on the
equity method (see Note 3). All significant intercompany accounts and
transactions have been eliminated in consolidation.

b. Description of the Company -- PVF was incorporated in Delaware on
November 30, 1989. At that time, it issued 19,000 shares of common stock, 9,500
shares of Series A preferred stock and 310 shares of Series B convertible
preferred stock for all of the similar shares of SWS, of which Coastline was a
wholly-owned subsidiary, in a non-taxable exchange. SWS and Coastline were
surviving companies from a purchase acquisition in 1988. In 1992, the Company
acquired the assets of HPM and, in 1994, it incorporated its Multalloy division.

The Company is a wholesale distributor, selling to customers located
primarily in the Southeastern and Southwestern United States, of stainless and
special-alloy pipe, valves and accessories for use primarily in the chemical,
paper and textile industries. Effective June 30, 1992, Jemison industries, Inc.
("Industries"), a majority-owned subsidiary of Jemison Investment Co., Inc.
("Investment"), transferred its interest in PVF to Investment. The stockholders
of the Company at June 30, 1995 include, among others, Investment, which is a
49% shareholder, and certain management members and shareholders of Investment
and Industries. As of July 1, 1995, Investment increased its ownership of the
Company to 80.5% by converting all of its Series B preferred stock (see Note 8).

c. Inventories -- Inventories, which consist of purchased materials, are
valued at average cost (using the weighted average method) and are stated at the
lower of cost or market.

d. Property, Plant and Equipment -- Property, plant and equipment is stated
at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets.

e. Goodwill -- Goodwill is being amortized on a straight-line basis
primarily over 40 years. Accumulated amortization of goodwill was $179,000 and
$215,000 at June 30, 1994 and 1995, respectively.

f. Income Taxes -- Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
SFAS No. 109 requires that deferred income taxes be determined under an asset
and liability method. Under this method, deferred tax assets and liabilities are
based on the expected future tax consequences of temporary differences between
the book and tax bases of assets and liabilities. Previously, deferred income
taxes were determined under Accounting Principles Board Opinion No. 11,
Accounting for Income Taxes ("APB No. 11"). Under APB No. 11, deferred income
taxes were based on the historical tax effects of timing differences between
book and taxable income. The impact of adopting SFAS No. 109 was immaterial to
the Company's consolidated financial statements. Deferred income taxes are
provided for temporary differences between financial and tax reporting,
primarily attributable to capitalization of inventory costs under uniform
capitalization regulations.

g. Interim Period Presentation -- The unaudited consolidated financial
statements for the nine months ended March 31, 1995 and 1996 have been prepared
on a basis substantially consistent with that of the audited financial
statements included herein. In the opinion of management, such unaudited
financial statements include all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the results of
operations and cash flows. The results of operations for the nine months ended
March 31, 1996 are not necessarily indicative of results that may be expected
for the year ending June 30, 1996.

h. Reclassifications -- Certain reclassifications have been made to the
1994 balance sheet amounts to conform to the 1995 presentation.

F-25
<PAGE> 64

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

i. New Accounting Standards Not Yet Adopted -- In December 1991, SFAS No.
107, Disclosures About Fair Value of Financial Instruments was issued by the
Financial Accounting Standards Board ("FASB"). In October 1994, SFAS No. 107 was
amended by SFAS No. 119, Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments. SFAS Nos. 107 and 119 require various
disclosures relating to nonderivative financial instruments and derivative
financial instruments. These statements are effective for fiscal years ending
after December 15, 1995 for entities with less than $150 million in total
assets. The adoption of these statements will impact the Company's financial
statements only in terms of increased disclosures regarding the affected
instruments.

The FASB has also issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. This statement is effective for fiscal years beginning after
December 15, 1995. Management believes there would be no impact on the Company's
consolidated financial statements if this Statement were adopted currently.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings............................. $ 278,040 $ 278,040 $ 278,040
Furniture and fixtures......................... 149,918 167,610 175,360
Machinery and equipment........................ 1,720,451 1,914,347 2,019,152
Transportation equipment....................... 203,055 210,985 209,937
Leasehold improvements......................... 110,180 136,260 154,431
---------- ---------- ----------
2,461,644 2,707,242 2,836,920
Less accumulated depreciation and
amortization................................. 1,035,457 1,428,968 1,598,075
---------- ---------- ----------
Total................................ $1,426,187 $1,278,274 $1,238,845
========= ========= =========
</TABLE>

3. RELATED PARTY TRANSACTIONS

The Company owes $700,000 to Investment, which until November 3, 1994 was
guaranteeing certain of the Company's other debt. Interest of $70,000 was
incurred on this obligation in 1993, 1994 and 1995. In exchange for these
guarantees and certain management services, the Company paid Investment an
annual consultant and guarantee fee based upon 5% of the Company's adjusted
pre-tax income. For the years ended June 30, 1993, 1994 and 1995, the Company
incurred approximately $160,000, $265,000 and $1,866,000, respectively, of these
fees, including in 1995 a special management fee of $900,000.

The Company leases certain branch facilities from related parties
consisting of its President, the Chairman of Investment and Investment. Related
party rents of approximately $266,000, $370,000 and $384,000 were incurred in
1993, 1994 and 1995, respectively.

At June 30, 1995, the Company has $348,000 in notes receivable from C. F.
Fluid plus $20,000 accrued interest on these notes. During 1995, the Company
purchased inventory from C.F. Fluid totaling $634,000, and as of June 30, 1995
had related accounts payable of $200,000.

F-26
<PAGE> 65

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

The Company's long-term debt consists of:

<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to bank, refinanced in 1995 to
include additional borrowings, bearing
interest at prime (9% at June 30, 1995) due
in quarterly principal installments of
$187,500 through October 1, 1999 and a final
payment of $3,750,000 due January 1, 2000.... $2,873,864 $7,125,000 $6,562,500
Two notes payable to former owners of
Coastline, due in annual installments of
$100,650 (including 14% interest) through
November 30, 1998............................ 345,538 293,264 233,672
Note payable to Investment in monthly
installments of $2,492 (including 11.5%
interest) through December 1, 1999........... 121,476 104,673 95,733
Dividends payable to stockholders,
due June 30, 1996............................ 210,107 210,107 210,107
Other.......................................... 105,224 44,726 148,976
---------- ---------- ----------
3,656,209 7,777,770 7,250,988
Less current portion........................... 3,193,549 1,058,540 1,063,556
---------- ---------- ----------
Total................................ $ 462,660 $6,719,230 $6,187,432
========= ========= =========
</TABLE>

The short-term revolving line of credit (under which the Company may borrow
up to $10,000,000 as of June 30, 1995, with interest payable at the prime rate)
and long-term note payable agreements with the bank contain various restrictive
covenants which among others, require the Company to maintain a net working
capital of not less than $8,000,000, a tangible net worth of not less than
$10,000,000, and a debt-to-equity ratio of not more than 1.5:1. The Company must
also maintain a current ratio of not less than 1.5:1 and no dividends in excess
of 10% of the prior fiscal year's net income may be paid. The Company is also
limited on acquisitions of capital assets and its incurrence of additional debt.
At June 30, 1994, the Company was in violation of certain of these covenants
and, accordingly, $2,173,864 of long-term obligations were classified as current
liabilities in the accompanying 1994 consolidated balance sheet. The Company was
in compliance with these covenants as of June 30, 1995.

Substantially all of the Company's assets are pledged as collateral on this
indebtedness.

At June 30, 1995, the future maturities of long-term debt were as follows:

<TABLE>
<S> <C>
1996............................................................. $1,058,540
1997............................................................. 863,804
1998............................................................. 851,132
1999............................................................. 864,848
2000............................................................. 4,139,446
----------
Total.................................................. $7,777,770
=========
</TABLE>

F-27
<PAGE> 66

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Subordinated Debt

The Company is obligated under an unsecured $700,000 note payable to
Investment, with 10% interest payable quarterly. The entire principal amount is
due on January 1, 2009. At June 30, 1994 the Company was also obligated under 8%
notes payable to former stockholders totaling $175,000 which matured in December
1994.

All principal payments relating to these notes are subordinate to the bank
debt.

5. INCOME TAXES

Provision (benefit) for income taxes consist of:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal........................................... $726,000 $1,338,000 $6,684,532
State............................................. 55,000 80,000 714,000
-------- ---------- ----------
781,000 1,418,000 7,398,532
-------- ---------- ----------
Deferred:
Federal........................................... (70,000) 1,000 (321,532)
State............................................. (5,000) -- (23,000)
-------- ---------- ----------
(75,000) 1,000 (344,532)
-------- ---------- ----------
$706,000 $1,419,000 $7,054,000
======== ========= =========
</TABLE>

Provision (benefit) for income taxes differ from the amounts computed by
applying the statutory federal income tax rate to income before income taxes as
follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
<S> <C> <C> <C>
Federal income tax at statutory rate................ $681,000 $1,404,000 $6,471,000
Effect of graduated rates........................... (19,000) (40,000) (171,000)
State income taxes, net of federal taxes............ 32,000 53,000 449,000
Nondeductible expenses.............................. 35,000 24,000 66,000
Other............................................... (23,000) (22,000) 239,000
-------- ---------- ----------
$706,000 $1,419,000 $7,054,000
======== ========= =========
</TABLE>

F-28
<PAGE> 67

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The approximate tax effects of temporary differences that give rise to the
deferred tax assets and liabilities at June 30, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventory valuation............................................ $356,000 $581,000
Performance stock plan expense................................. -- 70,000
Provision for bad debts........................................ 27,000 42,000
Other.......................................................... 16,468 29,000
-------- --------
Gross deferred tax assets...................................... 399,468 722,000
-------- --------
Deferred tax liabilities:
Depreciation................................................... 97,000 106,000
Compensation expense related to stock award.................... 65,000 --
Other.......................................................... 6,000 40,000
-------- --------
Gross deferred tax liabilities................................. 168,000 146,000
-------- --------
Net deferred tax asset......................................... $231,468 $576,000
======== ========
</TABLE>

6. LEASE ARRANGEMENTS

The Company leases its branch facilities and offices under operating lease
agreements. Several leases provide for multiple renewal options covering periods
of up to nine years.

In most cases, management expects that in the normal course of business,
leases will be renewed or replaced by other leases.

Minimum lease commitments at June 30, 1995 for all noncancelable operating
leases, excluding renewal periods, are as follows:

<TABLE>
<S> <C>
1996........................................................... $288,000
1997........................................................... 201,000
1998........................................................... 66,000
1999........................................................... 55,000
2000........................................................... 27,000
--------
Total................................................ $637,000
========
</TABLE>

Total rent expense was $557,000 (1993), $670,000 (1994) and $821,000
(1995).

7. EMPLOYEE BENEFIT PROGRAMS

401(k) Plan

The Company has elected to participate in the Jemison Multi-Company 401(k)
Plan (the "Plan"). Under the Plan, the Company has the option to contribute up
to 6% of a participant's earnings. Contributions by the Company for the years
ended June 30, 1993, 1994, and 1995 totaled $216,000, $250,000 and $288,000,
respectively.

Performance Stock Plan

Effective July 1, 1994 the Company established the PVF Holdings, Inc.
Performance Stock Plan under which certain designated employees are granted
performance shares to provide long-term incentives. The performance shares are
valued based on the greater of the Company's common stock book value (or sale
price

F-29
<PAGE> 68

PVF HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the event of a change in control as defined) per share or six times the
average of the previous five years' net income per share. Participants vest 50%
upon seven years of employment and continue to vest 10% annually, becoming fully
vested at twelve years of employment or upon a change of control. Participants
are paid their vested balance upon termination of employment; however, if the
award exceeds $50,000 the Company may elect to pay $50,000 upon termination and
the balance in annual or quarterly installments, plus interest of 7% per annum.
Compensation expense related to this plan is recognized over the vesting period
and was $183,000 for the year ended June 30, 1995 and $277,000 (unaudited) for
the nine-months ended March 31, 1996.

8. CAPITAL STOCK

The Company has three types of preferred stock authorized at June 30, 1995:

(a) Series A preferred stock has a dividend rate of $16 per share per
year as declared by the board of directors, a liquidation preference of
$200 per share ($1,900,000 total) held plus any unpaid accumulated
dividends whether or not declared, and is redeemable at the option of the
Company for the liquidation preference. Dividend arrearages were $848,667
(1995) and $696,667 (1994).

(b) Series B preferred stock has a dividend rate of $18 per share per
year as declared by the board of directors, a liquidation preference of
$300 per share ($93,000 total) held plus any unpaid accumulated dividends
(whether or not declared) but subject to the preferential rights of holders
of Series A preferred stock, and is redeemable at the option of the Company
for the liquidation preference. Dividend arrearages were $31,155 (1995) and
$25,575 (1994). Effective July 1, 1995, the Series B preferred stock was
converted into 31,000 shares of the Company's common stock.

(c) Other preferred stock, par $1.00, 10,190 shares authorized (none
of which have been issued), which the Board of Directors of the Company has
the authority to divide into series and to fix and determine the relative
rights and preferences of any series so established.

Pursuant to a stock restriction agreement, unless a shareholder obtains
written consent from Investment to sell his or her stock, Investment has first
option to purchase any or all of the preferred or common shares offered.

Stock Award

In December 1991, the Company issued 5,000 shares of common stock to a key
officer of the Company to satisfy a deferred compensation liability of
approximately $152,000 and to provide the officer additional compensation for
past and future services. Compensation expense related to this stock award was
recognized in accordance with the vesting schedule specified in the agreement,
which was 40% vested at June 30, 1992 (including the deferred compensation
amount) with an additional 15% vesting occurring annually through June 30, 1996.
In connection with the adoption of the Performance Stock Plan (see Note 7), the
key officer was deemed 100% vested as of August 15, 1994 and the remaining
unearned portion ($235,674) was charged to operations in 1995. Related
compensation expense of approximately $118,000 was charged to operations in 1993
and 1994.

9. SUBSEQUENT EVENTS

On October 25, 1995, the Company renewed its bank line of credit to provide
for maximum borrowings of $12 million.

On May 13, 1996, the Company sold substantially all of its assets,
properties and business and conveyed certain of its liabilities to Hughes
Supply, Inc. ("Hughes"). The aggregate consideration received was approximately
$99.5 million, consisting of cash of $44.4 million, the issuance by Hughes of a
$30.0 million subordinated note and 669,956 shares of its common stock, and the
assumption by Hughes of $6.5 million of the Company's bank debt.

F-30
<PAGE> 69
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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 OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING SHAREHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY THE COMMON STOCK OFFERED HEREBY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, 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 THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 9
Capitalization........................ 9
Price Range of Common Stock and
Dividends........................... 10
Selected Unaudited Pro Forma
Consolidated Financial Data......... 11
Selected Consolidated Financial and
Operating Data...................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 21
Management............................ 30
Principal and Selling Shareholders.... 32
Description of Capital Stock.......... 33
Description of Notes.................. 35
Underwriting.......................... 36
Legal Matters......................... 37
Experts............................... 37
Available Information................. 37
Incorporation of Certain Documents by
Reference........................... 38
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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2,104,926 SHARES

[HUGHES SUPPLY, INC. LOGO]

COMMON STOCK
------------
PROSPECTUS

MAY 16, 1996
------------
SMITH BARNEY INC.

ROBERT W. BAIRD & CO.
INCORPORATED
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