HUGHES SUPPLY INC, 424B1, 1998-10-22

HUGHES SUPPLY INC
424B1, 1998-10-22
ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES

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PROSPECTUS

927,219 SHARES

HUGHES SUPPLY, INC.

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

This is an offering of shares of common stock of Hughes Supply, Inc. The
selling shareholders identified in this Prospectus are offering all of the
shares to be sold in the offering. The Company will not receive any proceeds
from the offering.

The Company's common stock is listed on the New York Stock Exchange under
the symbol "HUG."

All expenses relating to the distribution of the shares shall be borne by
the Company, other than selling commissions and fees and expenses of counsel and
other representatives of the selling shareholders.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION
OF THE RISKS THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is October 22, 1998
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TABLE OF CONTENTS

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PAGE
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Information Incorporated by Reference...................................................................... 3
Available Information...................................................................................... 3
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 8
Selling Shareholders....................................................................................... 17
Plan of Distribution....................................................................................... 19
Legal Matters.............................................................................................. 20
Experts.................................................................................................... 20
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>

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INFORMATION INCORPORATED BY REFERENCE

The Securities and Exchange Commission (the "Commission") allows the Company
to "incorporate by reference" information the Company files with the Commission,
which means that the Company can disclose important information to people by
referring them to other documents the Company files with the Commission. The
information incorporated by reference is considered to be part of this
Prospectus. Later information that the Company files with the Commission will
automatically update and supersede the information in this Prospectus. The
Company incorporates by reference into this Prospectus the documents listed
below, and any future filings made with the Commission under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934 (the "Exchange Act"), until the
Selling Shareholders sell all the shares:

(a) The Company's Annual Report on Form 10-K for the year ended January
30, 1998 (File No. 001-08772);

(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1998 (File No. 001-08772);

(d) The Company's Current Report on Form 8-K as filed with the
Commission on May 22, 1998 (File No. 001-08772);

(e) The Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on May 20, 1998, as filed with the Commission on April 15, 1998
(File No. 001-08772);

(f) The description of the Company's common stock contained in the
Company's statement on Form 8-A as filed with the Commission under Section
12 of the Exchange Act (File No. 001-08772); and

(g) The description of the rights ("Rights") contained in the Company's
statement on Form 8-A as filed with the Commission under Section 12 of the
Exchange Act (File No. 001-08772).

The Company will provide to any person who has received this Prospectus,
upon his written or oral request, a free copy of any of the documents mentioned
above (not including exhibits to such documents unless such exhibits are
specifically incorporated by referenced in the documents). All 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.

AVAILABLE INFORMATION

This Prospectus is part of a registration statement (the "Registration
Statement") the Company filed with the Commission (Registration No. 333-65825).
This Prospectus omits certain of the information contained in the Registration
Statement filed by the Company with the Commission. Such information can be
inspected at the public reference room at the offices of the Commission.

The Company files annual, quarterly and special reports, proxy statements,
and other information with the Commission. Any person may read and copy any
document the Company files at the Commission's public reference room at 450
Fifth Street, N.W., Washington, DC 20549. The Commission may be contacted at
1-800-SEC-0330 for further information on the public reference room. The
Company's filings are also available to the public from the Commission's web
site at http://www.sec.gov.

The right to purchase one one-hundredth of a share of the Company's series A
junior participating preferred stock, no par value per share, is attached to
each share of the Company's common stock, including the common stock offered
hereby. Any reference to the Company's common stock in this Prospectus includes
such Rights.

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PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN THE COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING, THE "RISK FACTORS" SECTION AND THE FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS. AS USED IN THIS PROSPECTUS, THE
TERMS "HUGHES SUPPLY" AND "COMPANY" MEAN HUGHES SUPPLY, INC., ITS SUBSIDIARIES
AND ITS PREDECESSORS. HUGHES SUPPLY'S FISCAL YEAR ENDS ON THE LAST FRIDAY IN
JANUARY OF EACH YEAR. THE FINANCIAL STATEMENTS AND INFORMATION CONTAINED IN THIS
PROSPECTUS RETROACTIVELY TAKE INTO ACCOUNT MERGERS ACCOUNTED FOR AS POOLINGS OF
INTERESTS, INCLUDING THE COMPANY'S MERGER WITH WINN-LANGE ELECTRIC, INC. ON JUNE
30, 1998.

THE COMPANY

Hughes Supply is one of the largest diversified wholesale distributors of
materials, equipment and supplies for the construction and industrial markets.
Hughes Supply operates primarily in the southeastern, southwestern and
midwestern United States. The Company, founded in 1928, distributes over 210,000
products through 420 branches located in 27 states, Mexico and Puerto Rico.
Hughes Supply's principal customers are electrical, plumbing and mechanical
contractors, electric utility companies, property management companies,
municipalities and industrial companies. Industrial companies include companies
in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical
and marine industries. Management believes that the Company holds a significant
market share in a majority of its local markets.

The Company focuses on distributing products which leverage its strengths in
inventory management, specialized sales forces, distribution expertise, credit
management and information technology. The Company distributes nine different
product groups which it has classified into three main product categories:

- the electrical and electrical components category, which includes the
Company's electrical and electric utilities product groups;

- the fluid control category, which includes the Company's industrial
pipe, plate, valves and fittings, water and sewer, plumbing and water
systems product groups; and

- the specialty products category, which includes the Company's air
conditioning and heating, building materials and pool equipment and
supplies product groups.

The Company employs a specialized and experienced sales force for each of
its nine product groups. Management believes that no other company competes
against Hughes Supply across all of its product groups.

The Company sells its products to customers in the commercial, residential,
infrastructure and industrial markets. In recent years, the Company has focused
its internal growth and acquisitions on products used in repair, maintenance,
replacement and renovation applications. These products generally offer higher
margins and are less dependent on new construction. Management believes that the
Company's product, market and geographic diversification helps reduce the impact
of economic cycles on its net sales and profitability.

GROWTH AND OPERATING STRATEGIES

GROWTH STRATEGY

Based on estimates available to the Company, industry sales in the United
States of products sold by the Company exceeded $100 billion in 1997, and no
wholesale distributor accounted for more than 5% of the total market. The
Company has established a growth strategy that includes acquisitions and
internal growth. Since January 29, 1993, the Company has completed 55
acquisitions representing 224 branches. In this same time period, the Company
has also grown internally through increases in comparable branch net sales, 73
new branch openings and the addition of new product groups.

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The Company pursues an active acquisition program to capitalize on the
opportunities presented by its industry's substantial size and highly fragmented
ownership structure. Management believes that acquisitions generally represent
the most cost effective way for the Company to enter new geographic markets.
Acquisitions also provide opportunities for the Company to gain market share and
to enhance and diversify its product offerings. Each of the Company's
significant acquisitions has positively impacted the Company's earnings per
share in the first full year following the completion of the acquisition.

The Company's acquisition strategy focuses on acquiring profitable wholesale
distribution businesses with strong management teams and well-developed market
positions and customer relationships. The Company categorizes its acquisitions
as fill-in acquisitions or new market acquisitions.

Fill-in acquisitions are generally smaller in size and represent new
branches that distribute some of the same product groups as the Company in
geographic areas that the Company already services. Since January 29, 1993, the
Company has added 49 branches through fill-in acquisitions, and the Company's
management believes that significant additional fill-in acquisition
opportunities are available.

New market acquisitions represent the addition of new product groups,
primarily within the Company's existing product categories, or the entry into
new geographic markets, or both. During the last five fiscal years, the Company
has increasingly focused on new market acquisitions in order to:

- add products and product groups with higher gross margins;

- increase sales to the replacement and industrial markets (which tend to
be less cyclical than new construction markets);

- achieve greater geographic diversification; and

- develop additional opportunities for future fill-in acquisitions and
new branch openings.

Since January 1, 1998, Hughes Supply has acquired several wholesale
distributors including: (i) Mountain Country Supply, Inc., significantly
increasing the Company's plumbing, water and sewer, and air conditioning and
heating business in new geographic markets; (ii) International Supply Company,
Inc. and affiliated operations, significantly increasing the Company's water and
sewer and plumbing business in new geographic markets; (iii) Merex Corporation,
increasing the Company's presence in export markets; (iv) Chad Supply, Inc.
("Chad"), the Company's entry into the distribution of repair and maintenance
products to the multi-family housing industry; (v) San Antonio Plumbing
Distributors, Inc., significantly increasing the Company's plumbing and water
and sewer business in existing geographic markets; (vi) Winn-Lange Electric,
Inc. ("Winn-Lange"), significantly increasing the Company's electrical business
in new geographic markets; and (vii) Douglas Leonhardt and Associates, Inc.,
significantly increasing the fire protection products and services offered by
the Company's water and sewer business in new and existing geographic markets.

OPERATING STRATEGY

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

- comprehensive and diversified product categories and groups;

- superior customer service;

- volume purchasing power;

- well-trained and experienced workforce;

- centralized administrative functions; and

- local market focus.

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Unlike do-it-yourself home center retailers, the Company does not market its
products to retailers or retail end-users. Consequently, Hughes Supply
differentiates itself with respect to its customer base, breadth of products
offered and level of service provided. Management believes that the Company's
customers are typically professionals who choose their 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 repeat buyers because
of their involvement in longer-term projects, and require specialized services
not typically provided by do-it-yourself home center retailers. The Company
provides its customers with credit services, 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 do-it-yourself home center
retailers generally do not cater to.

As a result of the Company's growth and operating strategies, the Company's
net sales increased to $1.9 billion in fiscal 1998 from $881.0 million in fiscal
1994, a compound annual growth rate of 21.9%. In addition, the Company's
operating income increased to $87.2 million in fiscal 1998 from $19.1 million in
fiscal 1994, a compound annual growth rate of 46.3%; and the number of branches
increased to 384 branches at the end of fiscal 1998 from 143 branches at the end
of fiscal year 1994, a compound annual growth rate of 28.0%.

RISK FACTORS

For a discussion of certain risks you should consider before investing in
the common stock, see "Risk Factors."

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Prospectus including under this
"Prospectus Summary", the "Risk Factors" and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section are forward
looking. When used in this Prospectus, the words "believe," "anticipate,"
"estimate," "expect," and similar expressions are intended to identify
forward-looking statements. The Company cannot assure that such forward-looking
statements will prove true. 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". These forward-looking statements speak only as of the
date of this Prospectus.

THE OFFERING

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Common Stock being offered hereby......................................... 927,219 shares
Common Stock outstanding (as of October 9, 1998) (1)...................... 24,068,866
shares
NYSE symbol............................................................... HUG
</TABLE>

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(1) Includes all shares offered in this offering.

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.

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

OPERATING DATA:
Branches at end of period................... 143 173 212 272 384
Comparable branch sales increases (4)....... 18% 14% 8% 8% 6%
Gross margin (2)(5)......................... 20.0% 20.4% 20.7% 21.2% 21.9%
Operating margin (2)(6)..................... 2.2% 3.0% 3.2% 4.0% 4.5%
</TABLE>

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AS OF
JANUARY 30,
1998
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BALANCE SHEET DATA (END OF PERIOD): (2)
Working capital.................................................................................. $ 486,106
Total assets..................................................................................... 965,742
Long-term debt, less current portion............................................................. 343,197
Shareholders' equity............................................................................. 421,769
</TABLE>

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(1) Fiscal 1997 represents a 53-week fiscal year.

(2) Data has been restated for transactions accounted for as poolings of
interests.

(3) Pro forma earnings per share assumes that the earnings of Subchapter S
corporations would have been taxed at the Company's effective rate for each
period presented. See Note 2 to the Company's Consolidated Financial
Statements.

(4) Comparable branch sales increases are calculated for each period presented
by comparing the net sales results in the period with the net sales results
for the comparable prior year period (for branches that were open for the
entire duration of both periods).

(5) Gross margin equals gross profit divided by net sales.

(6) Operating margin equals operating income divided by net sales.

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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE DECIDING TO INVEST IN SHARES OF THE COMPANY'S COMMON
STOCK.

RISK OF ACQUISITION STRATEGY

A significant portion of the Company's growth strategy is based on the
acquisition of other distribution businesses. As part of its regular business
operations, the Company pursues suitable acquisition opportunities in selected
markets. However, the Company may not continue to be successful in identifying
and acquiring appropriate businesses or in obtaining financing for potential
acquisitions on satisfactory terms. In addition, the Company may not be
successful in integrating acquired businesses into its existing operations.
Furthermore, integrating acquired businesses may result in unforeseen
operational difficulties or require a disproportionate amount of the Company's
management's attention. Future acquisitions may be financed by incurring
additional debt or by issuing shares of common stock or other equity-linked
securities. Such issuances may be dilutive to the Company's shareholders.
Competition for acquisition candidates in the building products industry may
increase in which case the cost of completing acquisitions could grow
significantly or the Company could stop acquiring other businesses.

DEPENDENCE ON CONSTRUCTION MARKETS

Demand for the Company's products is highly dependent on the commercial,
residential and industrial construction markets. The level of activity in the
commercial construction market depends largely on vacancy 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. Factors influencing
the demand for new housing starts and residential renovation projects include
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 depends on the
industrial economic outlook, corporate profitability, interest rates and
capacity utilization. The factors influencing each of the Company's market
segments are not within the Company's control. Since each of the Company's
market segments is sensitive to cyclical changes in the economy, future
downturns in the economy or lack of improvement in the economy may adversely
affect the Company's results of operations. The Company is especially
susceptible to economic fluctuations in Florida, which accounted for
approximately 33% of the Company's net sales in fiscal 1998 and 28% of the
Company's net sales in the first six months of fiscal 1999.

UNCERTAINTY OF SUPPLY AND PRICE OF PRODUCTS

The Company distributes construction materials and supplies manufactured by
over 8,500 manufacturers and suppliers, no one of which accounted for more than
5% of the Company's total material and supply purchases during fiscal 1998.
Although the Company has a widely diversified base of manufacturers and
suppliers, the Company may experience product shortages as a result of
unanticipated demand or production difficulties. In such cases, manufacturers
and suppliers often allocate products among distributors. If the Company is
unable to obtain a sufficient allocation of products during a shortage, there
may be a short-term adverse effect on the Company's results of operations. The
Company has entered into strategic partnerships with certain suppliers. However,
if the Company is unable to maintain such strategic partnerships, or if the
suppliers cease to offer competitive pricing terms, the Company's results of
operations could be adversely affected. The cost of steel, aluminum, copper,
nickel alloys and other commodities used in products distributed by the Company
can be volatile. Significant fluctuations in the cost of such commodities may
have an adverse effect on the Company's results of operations and contribute to
cyclicality in the Company's operating performance.

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COMPETITION

The Company operates in the building products industry which 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 or other service capabilities.

The Company competes with other wholesalers, manufacturers who sell certain
products directly to contractors and certain customers of the Company. The
Company also competes, to a limited extent, with retailers in the markets for
plumbing, electrical fixtures and supplies, building materials, pool supplies
and contractors' tools. The Company's competition varies depending on product
line, customer classification and geographic market. The Company may not be
successful in responding effectively to competitive pressures, particularly from
competitors with substantially greater financial and other resources than those
of the Company.

RELIANCE ON EXECUTIVE OFFICERS

The Company is highly dependent upon the skills, experience and efforts of
its executive officers. The loss 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 growth also depends in part on its ability to attract
and retain qualified managers, salespersons and other key employees and on its
ability to manage growth successfully. The Company may not be successful in
attracting and retaining such employees or in managing its growth successfully,
which may in turn have an adverse effect on its results of operations.

LIMITATION ON PAYMENTS OF DIVIDENDS

The decision to pay dividends and the amount of such payments depends on the
Company's results of operations, financial condition, capital requirements and
other factors that its Board of Directors deems relevant. The Company is also
party to certain debt instruments and agreements that contain provisions
limiting the amount of dividends that may be paid by the Company to its
shareholders. In the future, the Company may become a party to debt instruments
or agreements that may further restrict its ability to pay dividends.

VOLATILITY OF MARKET PRICE FOR COMMON STOCK

The market price for the Company's common stock may fluctuate substantially
based on:

- the Company's operating results;

- the operating results of other companies in the building products
industry;

- changes in general economic conditions;

- changes in the financial markets; and

- other developments affecting the Company or its competitors.

See "Dependence on Construction Markets" above.

CONCENTRATION OF CREDIT RISK

The Company distributes materials, equipment and supplies for the
construction and industrial markets primarily in the southeastern (especially
Florida), southwestern and midwestern United States. Approximately 90% of the
Company's sales are credit sales made primarily to customers whose ability to

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pay depends on the economic strength of the construction industry in such
regions. Cyclical changes in the economy, future downturns in the economy, or
lack of improvement in the economy in such regions could adversely affect the
Company's ability to collect its trade accounts receivable and in turn the
Company's results of operations.

SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS

The Company's sales and net income are seasonal. The Company has
historically experienced lower operating results in the first and fourth
quarters than in the second and third quarters of its fiscal year. Seasonal
variations in operating results may also be significantly increased by weather
conditions such as cold and/or wet weather which can delay construction
projects. Political and economic events can also affect the Company's revenues.
If sales fall below the Company's expectations, its operating results may be
adversely affected.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Restated Articles of Incorporation, as
amended (the "Restated Articles") and Florida law may make it more difficult for
a third party to acquire control of the Company, even if such change in control
would benefit shareholders. These provisions may delay or prevent transactions
in which shareholders would receive a substantial premium for their shares over
then prevailing market prices. These provisions may also limit shareholders'
ability to approve transactions they may otherwise believe are in their best
interests. Such provisions include:

- a provision dividing the Board of Directors into three classes of
directors elected for staggered three-year terms;

- a provision authorizing the issuance of preferred stock without
shareholder approval; and

- a provision requiring that certain business combinations receive
approval by two-thirds of the Company's voting stock.

SHARES ELIGIBLE FOR FUTURE SALE

The market price of the Company's common stock could drop if a large number
of shares of common stock are sold at any one time, or if a perception that such
sales could occur exists.

There will be 24,068,866 shares of common stock outstanding immediately
after the offering. The shares sold in the offering will be freely transferable
without restriction or further registration under the Securities Act, except for
any shares purchased by "affiliates" of the Company, as defined in Rule 144
under the Securities Act.

The Company has registration statements in effect with respect to all shares
issued in connection with acquisitions. Such shares are freely tradable during
the effectiveness of the registration statements, unless subject to other
restrictions.

YEAR 2000 ISSUE

Many existing computer programs use only two digits to identify a year in
the date field. As the century date change occurs, such programs may recognize
the year 2000 as 1900, or not at all. If not corrected, many computer systems
and applications could fail or create erroneous results by or at the year 2000
(the "Year 2000 Issue"). The Company is implementing a plan to make its computer
systems year 2000 compliant or have its non-compliant systems converted to
systems that are expected to be year 2000 compliant. The Company may not be
successful in implementing its year 2000 compliance plan. Furthermore, the
Company's suppliers, customers and service providers may not sufficiently
address their Year 2000 Issues. The failure of such suppliers, customers and
service providers to make their systems year 2000 compliant could result in
disruptions in the Company's supply of materials, disruptions in its customers'
ability to conduct business and interruptions to the Company's daily operations.
These events could in turn adversely affect the Company's results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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

The financial data set forth below for fiscal years ended 1994 through 1998
have been derived from the audited consolidated financial statements of the
Company. The selected financial 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 elsewhere in this Prospectus.

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FISCAL YEARS ENDED
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JANUARY 28, JANUARY 27, JANUARY 26, JANUARY 31, JANUARY 30,
1994 1995 1996 1997 (1) 1998
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STATEMENTS OF INCOME DATA: (2)
Net sales........................................... $ 880,977 $ 1,065,549 $ 1,326,978 $ 1,619,362 $ 1,945,446
Cost of sales....................................... 704,907 848,698 1,052,120 1,276,481 1,519,323
----------- ------------ ------------ ------------ ------------
Gross profit........................................ 176,070 216,851 274,858 342,881 426,123
Operating expenses.................................. 157,018 184,460 232,155 277,944 338,879
----------- ------------ ------------ ------------ ------------
Operating income.................................... 19,052 32,391 42,703 64,937 87,244
Interest and other income........................... 3,677 3,206 5,111 6,241 5,837
Interest expense.................................... 6,456 6,813 10,440 14,842 19,257
----------- ------------ ------------ ------------ ------------
Income before income taxes.......................... 16,273 28,784 37,374 56,336 73,824
Income taxes........................................ 4,710 7,984 11,728 19,282 26,254
----------- ------------ ------------ ------------ ------------
Net income.......................................... $ 11,563 $ 20,800 $ 25,646 $ 37,054 $ 47,570
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
Earnings per share:
Basic............................................. $ 0.97 $ 1.54 $ 1.78 $ 2.13 $ 2.37
Diluted........................................... $ 0.92 $ 1.50 $ 1.75 $ 2.09 $ 2.33
Average shares outstanding:
Basic............................................. 11,900 13,504 14,418 17,384 20,108
Diluted........................................... 13,675 13,992 14,647 17,719 20,432
Cash dividends per share............................ $ 0.11 $ 0.15 $ 0.20 $ 0.25 $ 0.31
Pro forma earnings per share: (3)
Basic............................................. $ 0.82 $ 1.29 $ 1.54 $ 1.99 $ 2.25
Diluted........................................... $ 0.78 $ 1.25 $ 1.52 $ 1.95 $ 2.21
OPERATING DATA:
Branches at end of period........................... 143 173 212 272 384
Comparable branch sales increases (4)............... 18% 14% 8% 8% 6%
Gross margin (2) (5)................................ 20.0% 20.4% 20.7% 21.2% 21.9%
Operating margin (2) (6)............................ 2.2% 3.0% 3.2% 4.0% 4.5%
BALANCE SHEET DATA (END OF PERIOD): (2)
Working capital..................................... $ 171,702 $ 212,573 $ 235,113 $ 350,975 $ 486,106
Total assets........................................ 330,526 418,717 474,574 684,056 965,742
Long-term debt, less current portion................ 121,292 127,166 139,165 228,351 343,197
Shareholders' equity................................ 116,918 165,427 188,926 299,233 421,769
</TABLE>

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(1) Fiscal 1997 represents a 53-week fiscal year.

(2) Data has been restated for transactions accounted for as poolings of
interests.

(3) Pro forma earnings per share assume that the earnings of Subchapter S
corporations would have been taxed at the Company's effective rate for each
period presented. See Note 2 to the Company's Consolidated Financial
Statements.

(4) Comparable branch sales increases are calculated for each period presented
by comparing the net sales results in the period with the net sales results
for the comparable prior year period (for those branches that were open for
the entire duration of both periods).

(5) Gross margin equals gross profit divided by net sales.

(6) Operating margin equals operating income divided by net sales.

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

GENERAL

As used in Management's Discussion and Analysis of Financial Condition and
Results of Operations the term (i) "Company" means Hughes Supply, Inc., its
subsidiaries and its predecessors, (ii) "Chad" means Chad Supply, Inc. and (iii)
"Winn-Lange" means Winn-Lange Electric, Inc.

As described in Note 2 of the Notes to Consolidated Financial Statements, in
fiscal 1998 and in the first six months of fiscal 1999, the Company entered into
business combinations with Chad and Winn-Lange which were accounted for as
poolings of interests. Accordingly, all financial data in Management's
Discussion and Analysis of Financial Condition and Results of Operations are
reported as though the companies have always been one entity. The Company has
completed several other acquisitions accounted for as purchases or immaterial
poolings. Results of operations of these acquired companies from their
respective dates of acquisition have been included in the Company's results of
operations. Results of operations for different periods are not necessarily
comparable as a result of the Company's acquisition program. Historical and
interim results are not necessarily indicative of future performance.

Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including, but not limited to
certain statements made regarding the Year 2000 Issue (as defined below),
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbor created by such
sections. When used in this report, the words "believe," "anticipate,"
"estimate," "expect," and similar expressions are intended to identify
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. The Company's actual
results may differ significantly from the results discussed in such
forward-looking statements. When appropriate, certain factors that could cause
results to differ materially from those projected in the forward-looking
statements are enumerated. This Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Company's consolidated financial statements and the notes thereto contained
herein and in the Company's Form 10-K for the fiscal year ended January 30,
1998.

COMPARISON OF FISCAL YEARS 1996, 1997 AND 1998.

NET SALES. In fiscal 1998, the Company generated net sales of $1.95
billion, a 20% increase over fiscal 1997 net sales of $1.62 billion. Fiscal 1997
net sales of $1.62 billion increased 22% over fiscal 1996 net sales of $1.33
billion. On a basis comparable to the prior year, the Company experienced
same-store sales increases of 6% and 8% for fiscal 1998 and 1997, respectively.
The remaining increase in net sales is attributable to newly-opened and acquired
branches.

The same-store sales increase of 6% for fiscal 1998 was below the high
single-digit increases the Company has achieved in recent years. This was
primarily due to the adverse impact that mild and wet weather had on air
conditioning and pool product sales, partially offset by double-digit same-store
sales increases in two of the Company's newest product groups, water and sewer
and industrial pipe, plate, valves and fittings.

GROSS MARGIN. Gross margins have been improving steadily over the past
three years. Gross margins were 21.9%, 21.2% and 20.7% for fiscal 1998, 1997 and
1996, respectively. The improvement is the result of several factors, including
the expansion of product offerings to lines with better margins, efficiencies
created with central distribution centers and enhanced purchasing power.
Enhanced purchasing power is attributable to increased volume and concentration
of supply sources as part of the Company's Preferred Vendor Program.

12
<PAGE>
OPERATING EXPENSES. Operating expenses in fiscal 1998 were $339 million (or
17.4% of net sales), a 22% increase over fiscal 1997 operating expenses of $278
million (or 17.2% of net sales). Newly-opened branches and recent acquisitions
accounted for approximately 20 percentage points of the 22% increase. The
remainder of the increase is primarily due to higher personnel expenses,
including health care costs, and higher transportation costs associated with the
same-store sales growth. The increase in operating expenses as a percentage of
sales from 17.2% in fiscal 1997 to 17.4% in fiscal 1998 is primarily the result
of unrealized synergies associated with the acquisitions completed in the fourth
quarter of fiscal 1998.

Similarly, approximately 80% of the $46 million increase in fiscal 1997
compared to fiscal 1996, which had operating expenses of $232 million (or 17.5%
of net sales), is attributed to newly-opened branches and acquisitions. The
remainder of the increase is primarily due to personnel and transportation costs
associated with same-store sales growth.

NON-OPERATING INCOME AND EXPENSES. Interest and other income was $5.8
million in fiscal 1998 compared to $6.2 million in fiscal 1997 and $5.1 million
in fiscal 1996. This decrease of $.4 million in fiscal 1998 is primarily due to
non-recurring gains recognized on the sale of property and equipment in fiscal
1997. The increase of $1.1 million from fiscal 1996 to fiscal 1997 is primarily
the result of improved collection of service charge income on delinquent
accounts receivable.

Interest expense for fiscal 1998, 1997 and 1996 was $19.3 million, $14.8
million and $10.4 million, respectively. The $4.5 million increase in fiscal
1998 is primarily the result of higher borrowing levels, partially offset by
lower interest rates, as expansion through business acquisitions has been
partially funded by debt financing. Higher borrowing levels were primarily
responsible for the $4.4 million increase in interest expense from fiscal 1996
to 1997. Interest rates were relatively stable in fiscal 1997.

INCOME TAXES. The effective tax rates for fiscal 1998, 1997 and 1996 were
35.6%, 34.2% and 31.4%, respectively. Prior to the mergers with Electric
Laboratories and Sales Corporation and ELASCO Agency Sales, Inc. (collectively,
"ELASCO") on April 26, 1996, Metals, Incorporated and Stainless Tubular
Products, Inc. (collectively, the "Metals Group") on January 24, 1997, Chad on
January 30, 1998 and Winn-Lange on June 30, 1998, all of these entities were
Subchapter S corporations and, therefore, not subject to corporate income tax.
Each entity's Subchapter S corporation status terminated upon the merger with
the Company. As a result, the Company's effective tax rate is higher for fiscal
1998 and 1997 than for fiscal 1996. The Company's effective tax rate for fiscal
1998, 1997 and 1996 would have been approximately 38.7%, 38.6% and 40.6%,
respectively, assuming ELASCO, the Metals Group, Chad and Winn-Lange were tax
paying entities.

NET INCOME. Net income in fiscal 1998 increased 28% to $47.6 million from
$37.1 million in fiscal 1997. Diluted earnings per share increased 11% to $2.33
in fiscal 1998 compared to $2.09 in fiscal 1997 on 15% more average shares
outstanding. These results followed fiscal 1997 increases of 44% and 19% in net
income and diluted earnings per share, respectively. Net income and diluted
earnings per share in fiscal 1996 were $25.6 million and $1.75, respectively.

These improved results reflect operating leverage that has been achieved
through (i) the Company's acquisition program and the resulting purchasing and
administrative synergies and (ii) internal growth. Operating margins (operating
income as a percentage of net sales) have steadily improved to 4.5% in fiscal
1998, compared to 4.0% and 3.2% in fiscal 1997 and 1996, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Working capital in fiscal 1998 amounted to $486 million compared to $351
million and $235 million in fiscal 1997 and 1996, respectively. The working
capital ratio was 3.5 to 1, 3.3 to 1 and 2.6 to 1 for fiscal 1998, 1997 and
1996, respectively. During expansionary periods when sales volumes are
increasing, the Company is required to carry higher levels of inventories and
receivables to support such growth. The Company strives to maintain inventories
at levels that support current sales activity but that are not at

13
<PAGE>
excessive levels. The Company believes this is accomplished through increased
use of central distribution facilities and by investing in resources to improve
the efficiency and service capability of its facilities.

Net cash used in operations was $4.8 million in fiscal 1998 compared to net
cash provided by operations of $6.8 million in fiscal 1997 and $20.6 million in
fiscal 1996. These changes are primarily due to increases in accounts receivable
and inventories resulting from the Company's growth.

The Company's expenditures for property and equipment were $28.2 million in
fiscal 1998, including approximately $11 million for computer and communications
hardware and related software and approximately $7 million for new warehouse
facilities to support its internal growth. Capital expenditures for property and
equipment, not including amounts for business acquisitions, are expected to be
approximately $24 million in fiscal 1999.

Principal reductions on long-term debt were $27.5 million for fiscal 1998
compared to $20.0 million and $6.0 million for fiscal 1997 and 1996,
respectively. These amounts are attributed primarily to the repayment of debt
assumed as a result of certain business acquisitions. Dividend payments of $8.1
million, $8.5 million and $6.1 million during fiscal 1998, 1997 and 1996
included cash dividends of pooled companies totaling $2.8 million, $5.4 million
and $4.3 million, respectively.

As discussed in Note 4 of the Notes to Consolidated Financial Statements, in
August 1997 the Company issued $80 million of senior notes in a private
placement. The proceeds of this offering were used to reduce indebtedness
outstanding under the Company's credit agreement.

In August 1997, the Company amended its revolving credit agreement with a
group of banks. The credit agreement now permits the Company to borrow up to
$180 million ($150 million previously). Management believes that the Company has
sufficient borrowing capacity, with approximately $30 million available under
its existing credit facilities (subject to borrowing limitations under long-term
debt covenants) as of January 30, 1998, to fund ongoing operating requirements
and anticipated capital expenditures. Future growth and business acquisition
opportunities will continue to be financed on a project-by-project basis through
additional borrowing or, as circumstances allow, through the issuance of common
stock.

BUSINESS ACQUISITIONS

In addition to the business combination with Chad accounted for as a pooling
of interests, during fiscal 1998 the Company acquired several wholesale
distributors for approximately $144 million ($48 million in cash and $96 million
in stock). In fiscal 1997, consideration paid by the Company for acquisitions
(excluding poolings of interests) was approximately $144 million ($100 million
in cash and $44 million in stock). Outlays for acquisitions of wholesale
distributors in fiscal 1996 (excluding poolings of interests) totaled $15
million ($12 million in cash and $3 million in stock). These acquisitions were
accounted for as either purchases or immaterial poolings and the results of
operations of these businesses from their respective dates of acquisition are
included in the Company's consolidated financial statements. These acquisitions,
along with Chad, were primarily responsible for the Company's increase in the
number of its facilities to 384 branches in 27 states as of the end of fiscal
1998, compared to 272 branches in 25 states as of the end of fiscal 1997.

INFLATION AND CHANGING PRICES

The Company is aware of the potentially unfavorable effects inflationary
pressures may create through higher asset replacement costs and related
depreciation, higher interest rates and higher material costs. In addition, the
Company's operating performance is affected by price fluctuations in the cost of
steel, aluminum, copper, nickel alloys and other commodities. These commodity
price fluctuations have from time to time created cyclicality in the financial
performance of the Company and could continue to do so in the future.

14
<PAGE>
The Company seeks to minimize the effects of inflation and changing prices
through economies of purchasing and inventory management resulting in cost
reductions and productivity improvements as well as price increases 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 operating results or markets in the three
most recent fiscal years.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 established standards for reporting and display of comprehensive
income and its components in the financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. The adoption of this standard
did not affect the Company's financial reporting.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also established standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997; however, it is not required to be applied for interim
reporting in the initial year of application. The Company is currently
evaluating the impact of this statement on the disclosures included in its
annual and interim period financial statements.

YEAR 2000 ISSUE

Many existing computer programs use only two digits to identify a year in
the date field. As the century date change occurs, these programs may recognize
the year 2000 as 1900, or not at all. If not corrected, many computer systems
and applications could fail or create erroneous results by or at the year 2000
(the "Year 2000 Issue").

The Company has developed plans to address its possible exposures related to
the impact of the Year 2000 Issue on each of its internal systems and those of
third parties. These plans are expected to be implemented primarily with the use
of internal personnel.

The Company's internal systems consist of its central operating and
accounting systems, which handle the majority of its business transactions, and
other remote operating systems, which have resulted from the Company's
acquisition program. Plans to address the Year 2000 Issue with respect to the
Company's internal systems include an assessment phase, a remediation phase and
a testing phase.

The Company has completed an assessment of its central operating and
accounting systems. This assessment has resulted in the identification of
certain modifications which were necessary to bring these systems into year 2000
compliance. These modifications have been made and are in the final testing
phase. Final testing, along with any further remediation efforts necessary to
ensure year 2000 compliance, is scheduled for completion in fiscal 1999. Based
on the results of initial testing, with respect to these two systems, the
Company does not anticipate that the Year 2000 Issue will materially impact its
operations or operating results.

An assessment of the Company's 18 remote operating systems in place as of
July 31, 1998 is also complete. These systems are not year 2000 compliant. All
such systems are, however, expected to be converted to the Company's central
operating and accounting systems or to be modified to ensure year 2000
compliance using vendor-supplied software. The remediation and testing phases
for the remote operating systems currently in place are expected to be completed
by July 31, 1999. All additional remote

15
<PAGE>
operating systems added after July 31, 1998 as a result of the Company's
acquisition program will be assessed, remediated and tested to the extent that
is necessary to ensure year 2000 compliance.

Management believes that total pretax costs incurred to date in connection
with the Year 2000 Issue have not materially impacted the Company's operating
results. Future total pretax costs are estimated to be approximately $2 million
through March 2000. This estimate excludes the costs of converting remote
operating systems to the Company's central operating and accounting systems
because such costs are not expected to be material or the conversion is
scheduled to be performed as part of the Company's normal integration
activities. Approximately $1 million of the estimated total pretax costs of $2
million are personnel and other expenses related to the Company's Year 2000
Project Team, which is expected to remain intact through the turn of the
century. The remaining estimated cost of $1 million is expected to be incurred
primarily in connection with the remediation and testing of the Company's remote
operating systems.

The Company believes its planning efforts are adequate to address the Year
2000 Issue and that its greatest risks in this area are primarily those that it
cannot directly control, including the readiness of its major suppliers,
customers and service providers. Failure on the part of any of these entities to
timely remediate their Year 2000 Issues could result in disruptions in the
Company's supply of materials, disruptions in its customers' ability to conduct
business and interruptions to the Company's daily operations. Management
believes that its exposure to third party risk may be minimized to some extent
because it does not rely significantly on any one supplier or customer. There
can be no guarantee, however, that the systems of other third parties on which
the Company's systems and operations rely will be corrected on a timely basis
and will not have a material adverse effect on the Company.

The Company is in the preliminary stages of contacting its major suppliers,
customers and service providers regarding their Year 2000 Issues and therefore
does not currently have adequate information to assess the risk of these
entities not being able to provide goods and services to the Company. However,
because the Company believes this area is among its greatest risks, as
information is received and evaluated, contingency plans will be established, as
the Company deems necessary, to safeguard its ongoing operations. Such
contingency plans would include identifying alternative suppliers or service
providers, stockpiling certain inventories if alternative sources of supply are
not available, evaluating the impact and credit worthiness of non-compliant
customers and the addition of lending capacity if deemed necessary to finance
higher levels of working capital on an interim basis.

16
<PAGE>
SELLING SHAREHOLDERS

The following table sets forth certain information regarding the ownership
of the common stock of the Company by each of the Shareholders listed below (the
"Selling Shareholders"). Each of the Selling Shareholders has sole voting and
investment power with respect to such shares.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NUMBER OF SHARES OWNED AFTER THE
BENEFICIALLY OWNED NUMBER OF SHARES OFFERING (1)
NAME OF SELLING AS REGISTERED FOR ------------------------
SHAREHOLDER OF OCTOBER 15, 1998 SALE HEREBY (1) NUMBER PERCENT
- ------------------------------------------------------ -------------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
David E. Rozier (2)................................... 47,647 47,647 0 *
3811 Lake Larouge Drive
Baton Rouge, Louisiana 70816

Raelyn Guy Lewis (2).................................. 31,765 31,765 0 *
15311 Seven Pines Avenue
Baton Rouge, Louisiana 70816

Griffin D. Winn (3)................................... 403,069 403,069 0 *
4545 Langfield Road
Houston, Texas 77040

Lawrence M. Lange (3)................................. 403,069 403,069 0 *
4545 Langfield Road
Houston, Texas 77040

Milton H. Cooper, Jr. (3)............................. 175 175 0 *
4545 Langfield Road
Houston, Texas 77040

John D. Roberts (3)................................... 175 175 0 *
4703 New Park
Houston, Texas 77041

Arthur P. Brown (3)................................... 175 175 0 *
14619 Townsend Court
Cypress, Texas 77429

W. Mark Patterson (3)................................. 175 175 0 *
18160 FM 1484
Conroe, Texas

Daniel R. Ferrari (3)................................. 40,269 40,269 0 *
5507 Three Oaks Circle
Houston, Texas 77069

Randy Lafferty (3).................................... 175 175 0 *
22311 Coriander Drive
Katy, Texas 77450

James L. Killen (3)................................... 175 175 0 *
16310 Jast
Cypress, Texas 77429

Ted Beyert (3)........................................ 175 175 0 *
22803 Bucktrout
Katy, Texas 77449

Teresa Van Sandt (3).................................. 175 175 0 *
8118 Coolshire
Houston, Texas 77070
</TABLE>

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

* Less than 1%

17
<PAGE>
(1) Assumes all shares offered hereby have been sold. Because the Selling
Shareholders may sell all, some or none of their respective shares pursuant
to this Prospectus, no actual estimate can be made of the aggregate number
of shares that each Selling Shareholder will own upon completion of the
offering to which this Prospectus relates.

(2) Pursuant to an Acquisition Agreement (the "U.S. Fusion Agreement") dated
September 16, 1998 by and among the Company, U.S. Fusion Services, Inc.
("U.S. Fusion"), a Louisiana corporation, David E. Rozier and Raelyn Guy
Lewis, the Company exchanged 88,235 shares of common stock of the Company
for all of the outstanding shares of U.S. Fusion, subject to adjustment, if
necessary, to reflect any change in the net asset value of U.S. Fusion from
the assumed value at the date of the U.S. Fusion Agreement to the value
determined under the U.S. Fusion Agreement at the closing date. At closing,
8,823 shares of common stock of the Company were delivered under the terms
of the Escrow Agreement (as defined in the U.S. Fusion Agreement) and may be
returned to the Company or additional shares may be issued to the U.S.
Fusion shareholders based upon the finalization of the net asset value of
U.S. Fusion on the closing date. See Note (4) below.

(3) Pursuant to an Acquisition Agreement (the "Winn-Lange Agreement") dated June
30, 1998 by and among the Company, Winn-Lange Electric, Inc., ("Winn-Lange")
a Texas corporation, Griffin D. Winn, Lawrence M. Lange and Daniel R.
Ferrari, the Company exchanged 936,904 shares of common stock of the Company
for (i) all of the outstanding shares of Winn-Lange, (ii) the acquisition of
certain real estate from the Winn-Lange shareholders (and related parties)
and (iii) the assumption and satisfaction of certain debt owed to the
Winn-Lange shareholders, subject to adjustment, if necessary, to reflect any
change in the net asset value of Winn-Lange from the assumed value at the
date of the Winn-Lange Agreement to the value determined under the
Winn-Lange Agreement at the closing date. At closing, 89,097 shares of
common stock of the Company were delivered in escrow under the terms of the
Escrow Agreement (as defined in the Winn-Lange Agreement) and may be
returned to the Company or additional shares may be issued to the Winn-Lange
shareholders based upon the finalization of the net asset value of
Winn-Lange on the closing date. See Note (4) below.

(4) The registration under the Securities Act of the shares offered hereby to
permit resale of the shares by the respective Selling Shareholders after the
closing of the share exchange was, in each case, a condition of the share
exchange under the applicable agreement.

18
<PAGE>
PLAN OF DISTRIBUTION

The Company is registering the Shares on behalf of the Selling Shareholders.
As used herein, "Selling Shareholders" includes donees and pledgees selling
shares received from a named Selling Shareholder after the date of this
Prospectus. All costs, expenses and fees in connection with the registration of
the Shares offered hereby will be borne by the Company. Brokerage commissions
and similar selling expenses, if any, attributable to the sale of Shares will be
borne by the Selling Shareholders. Sales of Shares may be effected by Selling
Shareholders from time to time in one or more types of transactions (which may
include block transactions) on the New York Stock Exchange (the "NYSE"), in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the Shares, through short sales of Shares, or a
combination of such methods of sale, or market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers. The Selling Shareholders have advised the Company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of Shares by the Selling Shareholders.

The Selling Shareholders may effect such transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders and/or the
purchasers of Shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).

The Selling Shareholders and any broker-dealers that act in connection with
the sale of Shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the Shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The Company has agreed to indemnify each Selling
Shareholder against certain liabilities, including liabilities arising under the
Securities Act. The Selling Shareholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
Shares against certain liabilities, including liabilities arising under the
Securities Act.

Because Selling Shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Shareholders will be
subject to the Prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of the NYSE pursuant to Rule 153 under
the Securities Act. The Company has informed the Selling Shareholders that the
anti-manipulative provisions of the Regulation M promulgated under the Exchange
Act may apply to their sales in the market.

Selling Shareholders also may resell all or a portion of the Shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such Rule.

Upon the Company being notified by a Selling Shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a block trade, or dealer, a supplement to this Prospectus will be filed,
if required, pursuant to Rule 424(b) under the Act, disclosing (i) the name of
each such Selling Shareholder and of the participating broker-dealer(s), (ii)
the number of shares involved, (iii) the price at which such shares were sold,
(iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (vi) other facts material to the transaction.
No sales of more than 500 shares may be made by a donee or pledgee under this
Registration Statement unless a supplement to this Prospectus is filed.

19
<PAGE>
LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
Shares offered hereby will be passed upon for the Company by its General
Counsel, Benjamin P. Butterfield, Esq.

EXPERTS

The Company's Consolidated Balance Sheets as of January 30, 1998 and January
31, 1997 and the Consolidated Statements of Income, Shareholders' Equity and
Cash Flows of the Company for each of the three years in the period ended
January 30, 1998 included in this Prospectus and the Company's Consolidated
Balance Sheets as of January 30, 1998 and January 31, 1997 and the Consolidated
Statements of Income, Shareholders' Equity and Cash Flows of the Company for
each of the three years in the period ended January 30, 1998 incorporated in
this Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended January 30, 1998 (which financial statements have not been restated
for the pooling of interests with Winn-Lange Electric, Inc.), have been so
included and incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.

20
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent Certified Public Accountants............................. F-2
Consolidated Balance Sheets as of January 31, 1997 and January 30, 1998.................................... F-3
Consolidated Statements of Income for the fiscal years ended January 26, 1996, January 31, 1997 and January
30, 1998................................................................................................. F-4
Consolidated Statements of Shareholders' Equity for the fiscal years ended January 26, 1996, January 31,
1997 and January 30, 1998................................................................................ F-5
Consolidated Statements of Cash Flows for the fiscal years ended January 26, 1996, January 31, 1997 and
January 30, 1998......................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>
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 30, 1998 and January 31, 1997, and
the results of their operations and their cash flows for the years ended January
30, 1998, January 31, 1997 and January 26, 1996, 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.

/s/ PricewaterhouseCoopers LLP
Orlando, Florida
March 27, 1998, except as to the
pooling of interests with Winn-Lange
Electric, Inc. which is as of June 30, 1998.

F-2
<PAGE>
HUGHES SUPPLY, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30,
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................. $ 6,619 $ 8,204
Accounts receivable, less allowance for losses of $4,117 and $3,522................... 209,277 293,837
Inventories........................................................................... 263,119 353,846
Deferred income taxes................................................................. 12,761 9,708
Other current assets.................................................................. 13,472 18,625
----------- -----------
Total current assets............................................................ 505,248 684,220
Property and Equipment, Net............................................................. 78,409 108,068
Excess of Cost over Net Assets Acquired................................................. 89,932 153,775
Deferred Income Taxes................................................................... 2,204 3,438
Other Assets............................................................................ 8,263 16,241
----------- -----------
$ 684,056 $ 965,742
----------- -----------
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt..................................................... $ 3,108 $ 674
Accounts payable...................................................................... 118,078 156,209
Accrued compensation and benefits..................................................... 17,345 21,272
Other current liabilities............................................................. 15,742 19,959
----------- -----------
Total current liabilities....................................................... 154,273 198,114
Long-Term Debt.......................................................................... 228,351 343,197
Other Noncurrent Liabilities............................................................ 2,199 2,662
----------- -----------
Total liabilities............................................................... 384,823 543,973
----------- -----------
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; 100,000,000 shares authorized; 19,575,724 and
23,437,039 shares issued............................................................ 19,576 23,437
Capital in excess of par value........................................................ 110,328 202,210
Retained earnings..................................................................... 169,329 197,364
Unearned compensation related to outstanding restricted stock......................... -- (1,242)
----------- -----------
Total shareholders' equity...................................................... 299,233 421,769
----------- -----------
$ 684,056 $ 965,742
----------- -----------
----------- -----------
</TABLE>

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

F-3
<PAGE>
HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
JANUARY 26, JANUARY 31, JANUARY 30,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales............................................................... $ 1,326,978 $ 1,619,362 $ 1,945,446
Cost of Sales........................................................... 1,052,120 1,276,481 1,519,323
------------ ------------ ------------
Gross Profit............................................................ 274,858 342,881 426,123
------------ ------------ ------------
Operating Expenses:
Selling, general and administrative................................... 218,093 261,355 318,923
Depreciation and amortization......................................... 11,859 15,566 18,727
Provision for doubtful accounts....................................... 2,203 1,023 1,229
------------ ------------ ------------
Total operating expenses........................................ 232,155 277,944 338,879
------------ ------------ ------------
Operating Income........................................................ 42,703 64,937 87,244
------------ ------------ ------------
Non-Operating Income and (Expenses):
Interest and other income............................................. 5,111 6,241 5,837
Interest expense...................................................... (10,440) (14,842) (19,257)
------------ ------------ ------------
(5,329) (8,601) (13,420)
------------ ------------ ------------
Income Before Income Taxes.............................................. 37,374 56,336 73,824
Income Taxes............................................................ 11,728 19,282 26,254
------------ ------------ ------------
Net Income.............................................................. $ 25,646 $ 37,054 $ 47,570
------------ ------------ ------------
------------ ------------ ------------
Earnings Per Share:
Basic................................................................. $ 1.78 $ 2.13 $ 2.37
------------ ------------ ------------
------------ ------------ ------------
Diluted............................................................... $ 1.75 $ 2.09 $ 2.33
------------ ------------ ------------
------------ ------------ ------------
Average Shares Outstanding:
Basic................................................................. 14,418 17,384 20,108
------------ ------------ ------------
------------ ------------ ------------
Diluted............................................................... 14,647 17,719 20,432
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

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

F-4
<PAGE>
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 27, 1995, as previously
reported........................................ 13,829,688 $ 13,830 $ 34,789 $ 115,087 163,482 $ (1,688)
Adjustment for pooling of interests............. 843,146 843 (841) 3,407 -- --
------------ --------- ---------- ---------- ---------- ---------
Balance, January 27, 1995 as restated............. 14,672,834 14,673 33,948 118,494 163,482 (1,688)
Net Income...................................... -- -- -- 25,646 -- --
Cash dividends--
$.20 per share................................ -- -- -- (1,971) -- --
Pooled companies.............................. -- -- -- (4,348) -- --
Stock dividend by pooled company................ 43,065 43 246 (289) -- --
Shares issued under stock option plans.......... 9,985 10 267 (154) (130,476) 1,347
Purchase and retirement of common shares........ (29,463) (29) (137) (354) -- --
Other acquisitions.............................. 253,470 253 2,628 -- (33,006) 341
------------ --------- ---------- ---------- ---------- ---------
Balance, January 26, 1996......................... 14,949,891 14,950 36,952 137,024 -- --
Net Income...................................... -- -- -- 37,054 -- --
Cash dividends--
$.25 per share................................ -- -- -- (3,712) -- --
Pooled companies.............................. -- -- -- (5,376) -- --
Shares issued under stock option and bonus
plans......................................... 146,350 146 977 -- -- --
Issuance of shares in public offering........... 2,230,483 2,231 45,962 -- -- --
Purchase and retirement of common shares........ (21,948) (22) (202) (329) -- --
Other acquisitions.............................. 2,270,948 2,271 26,639 4,668 -- --
------------ --------- ---------- ---------- ---------- ---------
Balance, January 31, 1997......................... 19,575,724 19,576 110,328 169,329 -- --
Net Income...................................... -- -- -- 47,570 -- --
Cash dividends--
$.31 per share................................ -- -- -- (5,966) -- --
Pooled companies.............................. -- -- -- (2,794) -- --
Shares issued under stock option and bonus
plans......................................... 172,455 172 1,494 -- -- --
Purchase and retirement of common shares........ (19,476) (19) (234) (325) -- --
Issuance of restricted stock.................... 50,000 50 1,250 -- -- --
Capitalization of undistributed earnings of
Subchapter S corporation...................... -- -- 12,999 (12,999) -- --
Other acquisitions.............................. 3,658,336 3,658 76,373 2,549 -- --
------------ --------- ---------- ---------- ---------- ---------
Balance, January 30, 1998......................... 23,437,039 $ 23,437 $ 202,210 $ 197,364 -- $ --
------------ --------- ---------- ---------- ---------- ---------
------------ --------- ---------- ---------- ---------- ---------
</TABLE>

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

F-5
<PAGE>
HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------
JANUARY 26, JANUARY 31, JANUARY 30,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................................................... $ 25,646 $ 37,054 $ 47,570
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization.......................................... 11,859 15,566 18,727
Provision for doubtful accounts........................................ 2,203 1,023 1,229
Other, net............................................................. (474) (708) (626)
Changes in assets and liabilities, net of effects of business
acquisitions:
(Increase) in accounts receivable...................................... (13,689) (14,143) (30,443)
(Increase) in inventories.............................................. (10,223) (23,894) (39,136)
(Increase) decrease in other current assets............................ (3,775) 4,922 (3,865)
(Increase) in other assets............................................. (871) (67) (9,061)
Increase (decrease) in accounts payable and accrued liabilities........ 13,341 (10,577) 6,102
Increase (decrease) in accrued interest and income taxes............... (1,816) (839) 1,880
Increase in other noncurrent liabilities............................... 225 421 408
(Increase) decrease in deferred income taxes........................... (1,843) (1,988) 2,425
----------- ----------- -----------
Net cash provided by (used in) operating activities.................. 20,583 6,770 (4,790)
----------- ----------- -----------
Cash Flows from Investing Activities:
Capital expenditures..................................................... (14,713) (16,898) (28,185)
Proceeds from sale of property and equipment............................. 1,292 1,838 1,184
Business acquisitions, net of cash....................................... (11,871) (100,078) (47,725)
----------- ----------- -----------
Net cash used in investing activities................................ (25,292) (115,138) (74,726)
----------- ----------- -----------
Cash Flows from Financing Activities:
Net borrowings (payments) under short-term debt arrangements............. 17,268 (6,808) 36,921
Principal payments on:
Long-term notes........................................................ (6,038) (19,985) (27,481)
Capital lease obligations.............................................. (844) (777) (1,022)
Proceeds from issuance of long-term debt................................. -- 98,000 80,000
Proceeds from sale of common stock....................................... -- 48,193 --
Proceeds from stock options exercised.................................... 1,470 1,123 1,373
Purchase of common shares................................................ (520) (553) (578)
Dividends paid........................................................... (6,124) (8,548) (8,112)
----------- ----------- -----------
Net cash provided by financing activities............................ 5,212 110,645 81,101
----------- ----------- -----------
Net Increase in Cash and Cash Equivalents.................................. 503 2,277 1,585
Cash and Cash Equivalents, beginning of period............................. 3,839 4,342 6,619
----------- ----------- -----------
Cash and Cash Equivalents, end of period................................... $ 4,342 $ 6,619 $ 8,204
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

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

F-6
<PAGE>
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 and industrial markets. Major product lines
distributed by the Company include electrical; plumbing; water and sewer; air
conditioning and heating; industrial pipe, plate, valves and fittings; building
materials; electric utilities; water systems; and pool equipment and supplies.
The Company's principal customers are electrical, plumbing and mechanical
contractors, electric utility companies, property management companies,
municipalities and industrial companies. Industrial companies include companies
in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical
and marine industries.

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 acquired and accounted
for as purchases and immaterial poolings are included from their respective
dates of acquisition.

FISCAL YEAR

The Company's fiscal year ends on the last Friday in January. Fiscal 1998,
1997 and 1996 contained 52 weeks, 53 weeks and 52 weeks, respectively.

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 recorded at cost and 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....................................... 2-12 years
20-40
Property under capital leases........................................... 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.

F-7
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

EXCESS OF COST OVER NET ASSETS ACQUIRED

The excess of cost over the fair value of net assets of purchased companies
(goodwill) is being amortized by the straight-line method over 15 to 40 years.
At January 30, 1998 and January 31, 1997, goodwill was $153,775 and $89,932,
respectively, net of accumulated amortization of $11,098 and $6,045,
respectively.

OTHER ASSETS

The Company capitalizes certain internal software development costs which
are amortized by the straight-line method over the estimated useful lives of the
software, not to exceed five years. At January 30, 1998 and January 31, 1997,
unamortized software development costs were $8,357 and $1,500, respectively, net
of accumulated amortization of $394 and $78, respectively. Amortization of
capitalized internal software development costs was $316 and $78 in fiscal 1998
and 1997, respectively. In fiscal 1996, internal software development costs were
not material.

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and circumstances indicate that the carrying value
of a long-lived asset, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow is
required. Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS 121"), was issued in March 1995 and was implemented by the Company in
fiscal 1997. However, as the Company's previous accounting policy was consistent
with the provisions of SFAS 121, there was no impact as a result of adopting the
new standard.

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.

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 No. 25, Accounting for
Stock Issued to Employees ("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

F-8
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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. SFAS
123 allows an entity to continue to measure compensation cost using the
principles of APB 25 if certain pro forma disclosures are made. SFAS 123 was
effective for fiscal years beginning after December 15, 1995. The Company
adopted the provisions for the pro forma disclosure requirements of SFAS 123 in
fiscal 1997.

EARNINGS PER COMMON SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). SFAS
128 became effective for reporting periods ending after December 15, 1997 and,
accordingly, was adopted by the Company commencing in the period ended January
30, 1998. Under the provisions of SFAS 128, primary and fully diluted earnings
per share were replaced with basic and diluted earnings per share. Basic
earnings per share is calculated by dividing net income by the weighted-average
number of shares outstanding. Diluted earnings per share is calculated by
dividing net income by the weighted-average number of shares outstanding,
adjusted for dilutive potential common shares. The weighted-average number of
shares used in calculating basic earnings per share were 20,108,000, 17,384,000
and 14,418,000 for fiscal 1998, 1997 and 1996, respectively. In calculating
diluted earnings per share, these amounts were adjusted to include 324,000,
335,000 and 229,000 of dilutive potential common shares for fiscal 1998, 1997
and 1996, respectively. The Company's dilutive potential common shares consist
of stock options and restricted stock. Earnings per share data for prior periods
was restated to give effect to the Company's adoption of SFAS 128 and the stock
split described in Note 8.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate their fair values because
of the short maturity of these instruments. The fair value of the Company's
long-term debt is estimated based on quoted market prices for the same or
similar issues or on current rates offered to the Company for debt of the same
remaining maturities. The fair value of long-term debt, excluding capital lease
obligations, approximated $346,320 at January 30, 1998 and the related carrying
value was $342,629.

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.

RECLASSIFICATIONS

The Company changed the format of its statements of cash flows from the
direct method to the indirect method for purposes of reporting cash flows from
operating activities. Accordingly, the statements of cash flows for fiscal 1998,
1997 and 1996 contain certain reclassifications which were made to conform to
the Company's current financial statement format.

ESTIMATES

F-9
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 January 30, 1998, the Company exchanged 1,408,530 shares of the Company's
common stock for all of the common stock of Chad Supply, Inc. ("Chad"). Chad is
a wholesale distributor of repair and maintenance products to the multi-family
housing industry with 18 branches in nine states. Chad was a Subchapter S
corporation for federal income tax purposes and accordingly, did not pay U.S.
federal income taxes. Chad was included in the Company's U.S. federal income tax
return commencing January 30, 1998.

On June 30, 1998, the Company exchanged 936,904 shares of the Company's
common stock for all of the common stock of Winn-Lange Electric, Inc.
("Winn-Lange"). Winn-Lange is a wholesale distributor of electrical supplies and
equipment with three branches in Texas. Winn-Lange was a Subchapter S
corporation for federal income tax purposes and accordingly, did not pay U.S.
federal income taxes. Winn-Lange will be included in the Company's U.S. federal
income tax return commencing June 30, 1998.

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 Chad and Winn-Lange. Chad's and
Winn-Lange'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 Chad and Winn-Lange mergers were as follows:

<TABLE>
<CAPTION>
UNAUDITED
PRO
FORMA
NET NET NET
SALES INCOME INCOME
------------ --------- -----------
<S> <C> <C> <C>
Fiscal year ended January 26, 1996:
Hughes, as previously reported................................... $ 1,242,446 $ 23,206 $ 20,749
Chad............................................................. 42,882 1,247 741
Winn-Lange....................................................... 41,650 1,193 748
------------ --------- -----------
Combined......................................................... $ 1,326,978 $ 25,646 $ 22,238
------------ --------- -----------
------------ --------- -----------
Fiscal year ended January 31, 1997:
Hughes, as previously reported................................... $ 1,516,088 $ 32,528 $ 31,747
Chad............................................................. 51,483 2,786 1,711
Winn-Lange....................................................... 51,791 1,740 1,132
------------ --------- -----------
Combined......................................................... $ 1,619,362 $ 37,054 $ 34,590
------------ --------- -----------
------------ --------- -----------
Nine months ended October 31, 1997 (unaudited):
Hughes, as previously reported................................... $ 1,369,125 $ 33,198 $ 33,198
Chad............................................................. 49,124 2,715 1,643
------------ --------- -----------
Combined......................................................... $ 1,418,249 $ 35,913 $ 34,841
------------ --------- -----------
------------ --------- -----------
</TABLE>

F-10
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
UNAUDITED
PRO
FORMA
NET NET NET
SALES INCOME INCOME
------------ --------- -----------
<S> <C> <C> <C>
Fiscal year ended January 30, 1998:
Hughes, as previously reported................................... $ 1,878,739 $ 44,824 $ 43,472
Winn-Lange....................................................... 66,707 2,746 1,782
------------ --------- -----------
Combined......................................................... $ 1,945,446 $ 47,570 $ 45,254
------------ --------- -----------
------------ --------- -----------
</TABLE>

Unaudited pro forma net income reflects adjustments to net income to record
an estimated provision for income taxes for each period presented assuming Chad
and Winn-Lange were tax paying entities. Additionally, in fiscal 1997, the
Company merged with certain other Subchapter S corporations, including Electric
Laboratories and Sales Corporation and ELASCO Agency Sales, Inc. (collectively,
"ELASCO") and Metals, Incorporated and Stainless Tubular Products, Inc. (the
"Metals Group"). As Subchapter S corporations, ELASCO and the Metals Group did
not pay U.S. federal income taxes in periods prior to the mergers. ELASCO and
the Metals Group were included in the Company's U.S. federal income tax return
commencing with their mergers with the Company on April 26, 1996 and January 24,
1997, respectively. For purposes of calculating unaudited pro forma net income,
ELASCO and the Metals Group were also assumed to be tax paying entities.

On January 8, 1998, the Company acquired all of the common stock of Mountain
Country Supply, Inc. ("Mountain Country"). Mountain Country is a wholesale
distributor of plumbing supplies; water and sewer equipment and supplies; and
air conditioning and heating equipment and supplies with 10 locations in
Arizona. On January 13, 1998, the Company acquired all of the common stock of
International Supply Company, Inc. and all of its affiliated operations
("International"). International is a wholesale distributor of water and sewer
equipment and supplies, plumbing supplies and industrial pipe, valves and
fittings with 38 locations in Texas. The aggregate consideration paid for the
Mountain Country and International acquisitions was $96,000, consisting of cash
in the amount of $36,870 and the issuance of 2,111,789 shares of common stock.
These transactions were accounted for as purchases and the results of operations
of Mountain Country and International from their respective dates of acquisition
are included in the consolidated financial statements. The excess of cost over
net assets acquired for Mountain Country and International is being amortized
over 40 years by the straight-line method.

On May 13, 1996, the Company acquired substantially all of the assets,
properties and business of PVF Holdings, Inc. and its subsidiaries ("PVF"), a
wholesale distributor of stainless steel pipe, valves and fittings with 16
locations nationwide. The aggregate consideration paid was $108,984, consisting
of cash in the amount of $82,069, the issuance of 1,106,468 shares of common
stock and the assumption of $6,436 of bank debt. The transaction was accounted
for as a purchase and the results of operations of PVF from the date of
acquisition are included in the consolidated financial statements. The excess of
cost over net assets acquired is being amortized over 40 years by the
straight-line method.

F-11
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table reflects the unaudited pro forma combined results of
operations, assuming the Mountain Country, International and PVF acquisitions
had occurred at the beginning of each year presented:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Net Sales................................................................... $ 1,892,371 $ 2,180,227
Net Income.................................................................. 44,800 53,214
Earnings Per Share:
Basic..................................................................... 2.26 2.41
Diluted................................................................... 2.22 2.37
</TABLE>

The past and future financial performance of PVF will be directly influenced
by the cost of stainless steel and nickel alloy which as a commodity item can
and does fluctuate. As a result of these commodity price fluctuations and the
fact that significant price fluctuations could continue to create cyclicality in
PVF's future operating performance, management believes that the pro forma
information is not necessarily indicative of future performance.

During fiscal 1998, 1997 and 1996, the Company acquired several other
wholesale distributors of materials to the construction and industrial markets
that were accounted for as purchases or immaterial poolings. 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.

NOTE 3 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Land............................................................................ $ 16,430 $ 19,738
Buildings and improvements...................................................... 61,448 85,309
Transportation equipment........................................................ 25,215 28,719
Furniture, fixtures and equipment............................................... 35,291 43,799
Assets under capital leases..................................................... 9,696 9,407
---------- ----------
148,080 186,972
Less accumulated depreciation and amortization.................................. (69,671) (78,904)
---------- ----------
$ 78,409 $ 108,068
---------- ----------
---------- ----------
</TABLE>

F-12
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 4 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
7.96% Senior notes, due 2011.................................................... $ 98,000 $ 98,000
7.14% Senior notes, due 2012.................................................... -- 40,000
7.19% Senior notes, due 2012.................................................... -- 40,000
Unsecured revolving bank notes under $180,000 credit agreement, payable August
17, 2000, fluctuating interest (5.9% to 6.1% at January 30, 1998)............. 80,000 105,900
Short-term instruments classified as long-term debt............................. 40,921 50,000
Other notes payable............................................................. 10,274 8,729
Capital lease obligations....................................................... 2,264 1,242
---------- ----------
231,459 343,871
Less current portion............................................................ (3,108) (674)
---------- ----------
$ 228,351 $ 343,197
---------- ----------
---------- ----------
</TABLE>

On May 29, 1996, the Company issued $98,000 of senior notes in a private
placement in connection with the acquisition of PVF. The notes mature in 2011,
bear interest at 7.96% and will be payable in 20 equal semi-annual payments
beginning in 2001. Proceeds received by the Company in the private placement of
the senior notes were used to partially fund the PVF acquisition and to reduce
indebtedness outstanding under the Company's revolving credit facility and line
of credit agreement (the "credit agreement").

On August 28, 1997, the Company issued $80,000 of senior notes due 2012 in a
private placement. The notes, of which $40,000 bear interest at 7.14% and
$40,000 bear interest at 7.19%, will be payable in 21 and 13 equal semi-annual
payments beginning in 2002 and 2006, respectively. Proceeds received by the
Company from the sale of the notes were used to reduce indebtedness outstanding
under the Company's credit agreement.

On August 27, 1997, in connection with the issuance of the $80,000 of senior
notes, the Company entered into an interest rate swap agreement (the "swap
agreement"). The swap agreement effectively converts the Company's $40,000 of
7.19% senior notes due 2012 from fixed-rate debt to floating-rate debt based on
six month London Interbank Offered Rates (LIBOR) less a predetermined spread of
.05% (5.86% as of January 30, 1998). The differential is accrued as interest
rates change and is recorded as an adjustment to interest expense. As a result
of the swap agreement, interest expense decreased by $219 in fiscal 1998. The
swap agreement matures in 2012, however, the counterparty has the option to
terminate the agreement at any time from May 30, 2000 through November 30, 2011.
The estimated fair value of the swap agreement, based on a valuation from an
investment bank, approximated $1,091 at January 30, 1998.

On August 18, 1997, the Company's credit agreement with a group of banks was
amended. The credit agreement, as amended, now permits the Company to borrow up
to $180,000 (subject to borrowing limitations under the credit agreement) --
$130,000 of which is long-term debt due August 17, 2000, and $50,000 of which is
a line of credit convertible to a term note due two years from conversion date.
The $50,000 line of credit backs commercial paper. Under the credit agreement,
interest is payable at market rates plus applicable margins. Commitment fees of
.225% and .125% are paid on the unused portions of the revolving and line of
credit facilities, respectively.

F-13
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 .60 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 $38,970 was
available at January 30, 1998 for payment of dividends.

The Company has a commercial paper program backed by its revolving credit
facility. The weighted average interest rate on outstanding commercial paper
borrowings of $50,000 and $36,521 as of January 30, 1998 and January 31, 1997
was 6.1% and 5.5%, respectively. In addition, the Company had short-term bank
borrowings of $4,400 at a weighted average interest rate of 6.0% as of January
31, 1997.

The Company's credit agreement enables the Company to refinance short-term
borrowings on a long-term basis to the extent that the credit facility is
unused. Accordingly, $50,000 and $40,921 of short-term borrowings at January 30,
1998 and January 31, 1997, respectively, have been classified as long-term debt.

Maturities of long-term debt, excluding capital lease obligations, for each
of the five years subsequent to January 30, 1998 and in the aggregate are as
follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDING
- ----------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 231
2000............................................................................ 636
2001............................................................................ 161,768
2002............................................................................ 9,587
2003............................................................................ 13,342
Later years..................................................................... 157,065
----------
$ 342,629
----------
----------
</TABLE>

NOTE 5 -- INCOME TAXES

The components of deferred tax assets and liabilities at January 30, 1998
and January 31, 1997 are as follows:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................................................. $ 1,513 $ 1,286
Inventories..................................................................... 3,461 1,445
Property and equipment.......................................................... 1,241 3,184
Accrued vacation................................................................ 1,588 2,252
Deferred compensation........................................................... 832 1,092
Other accrued liabilities....................................................... 5,253 3,596
Other........................................................................... 1,083 1,129
--------- ---------
Total deferred tax assets................................................... 14,971 13,984
Deferred tax liabilities:
Intangible assets............................................................... 6 838
--------- ---------
Net deferred tax assets........................................................... $ 14,965 $ 13,146
--------- ---------
--------- ---------
</TABLE>

F-14
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

No valuation allowance has been provided for these deferred tax assets at
January 30, 1998 and January 31, 1997 as full realization of these assets is
expected.

The consolidated provision for income taxes consists of the following:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Currently payable:
Federal.............................................................. $ 11,676 $ 18,399 $ 21,058
State................................................................ 1,863 2,911 3,377
--------- --------- ---------
13,539 21,310 24,435
--------- --------- ---------
Deferred:
Federal.............................................................. (1,555) (1,739) 1,500
State................................................................ (256) (289) 319
--------- --------- ---------
(1,811) (2,028) 1,819
--------- --------- ---------
$ 11,728 $ 19,282 $ 26,254
--------- --------- ---------
--------- --------- ---------
</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
-----------------------------------------------------
1996 1997 1998
-------------------- -------------------- ---------
AMOUNT % AMOUNT % AMOUNT
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tax computed at statutory Federal rate.............................. $ 13,081 35.0 $ 19,718 35.0 $ 25,838
Effect of:
State income tax, net of Federal income tax benefit............... 1,058 2.8 1,741 3.1 2,459
Subchapter S corporation earnings................................. (3,044) (8.1) (2,360) (4.2) (2,315)
Nondeductible purchase adjustments................................ 43 .1 123 .2 288
Nondeductible expenses............................................ 396 1.1 637 1.1 886
Other, net........................................................ 194 .5 (577) (1.0) (902)
--------- --- --------- --- ---------
Income tax expense.................................................. $ 11,728 31.4 $ 19,282 34.2 $ 26,254
--------- --- --------- --- ---------
--------- --- --------- --- ---------

%
---------
<S> <C>
Tax computed at statutory Federal rate.............................. 35.0
Effect of:
State income tax, net of Federal income tax benefit............... 3.3
Subchapter S corporation earnings................................. (3.1)
Nondeductible purchase adjustments................................ .4
Nondeductible expenses............................................ 1.2
Other, net........................................................ (1.2)
---
Income tax expense.................................................. 35.6
---
---
</TABLE>

Prior to their merger with the Company, ELASCO, the Metals Group, Chad and
Winn-Lange were Subchapter S corporations and were not subject to corporate
income tax.

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.

F-15
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 30,
1998 and January 31, 1997, the plan owned approximately 259,000 and 258,000
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 fiscal
1998, 1997 and 1996 were $1,581, $2,088 and $2,322, respectively.

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 $1,539, $1,544 and $1,354 for fiscal 1998, 1997 and
1996, respectively.

STOCK PLANS

The Company's stock plans provide for the granting of stock options,
restricted stock awards and stock appreciation rights ("SARs"). The stock option
plans authorize the granting of both incentive and non-incentive stock options
for an aggregate of 2,452,500 shares of common stock to key employees and, with
respect to 202,500 of these shares, to directors. Under the plans, options are
granted at prices not less than the 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 December 2006, 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.

Under one of its stock plans, the Company can grant up to 375,000 shares of
the authorized options as restricted stock to certain key employees. These
shares are subject to certain transfer restrictions, and vesting may be
dependent upon continued employment, the satisfaction of performance objectives,
or both. During fiscal 1998, the Company granted certain employees 50,000 shares
of restricted stock with a market value of $1,300 at the date of grant. The
market value of the restricted stock was recorded as unearned compensation, a
component of shareholders' equity, and is being charged to expense over the
shorter of the 10-year vesting period, or the period of time from the date of
grant through the date when the employee will reach age 65. In fiscal 1998, this
expense amounted to $58.

The employee plans permit the granting of 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
30, 1998.

F-16
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

A summary of option transactions during each of the three fiscal years in
the period ended January 30, 1998 is shown below:

<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
SHARES OPTION PRICE
----------- -------------
<S> <C> <C>
Under option, January 27, 1995 (509,015 shares exercisable)................... 705,516 $ 9.89
Granted..................................................................... 22,500 12.83
Exercised................................................................... (140,311) 8.94
Cancelled................................................................... (2,791) 7.36
-----------
Under option, January 26, 1996 (494,912 shares exercisable)................... 584,914 10.24
Granted..................................................................... 172,500 19.58
Exercised................................................................... (85,100) 9.05
Cancelled................................................................... (6,000) 13.50
-----------
Under option, January 31, 1997 (492,312 shares exercisable)................... 666,314 12.78
Granted..................................................................... 271,991 33.23
Exercised................................................................... (112,908) 11.53
Cancelled................................................................... (6,000) 13.50
-----------
Under option, January 30, 1998 (455,897 shares exercisable)................... 819,397 19.74
-----------
-----------
</TABLE>

There were 1,208,788 shares available for the granting of options at January
30, 1998.

The following table summarizes the stock options outstanding at January 30,
1998:

<TABLE>
<CAPTION>
NUMBER
OUTSTANDING AT WEIGHTED-AVERAGE
JANUARY 30, REMAINING WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES 1998 CONTRACTUAL LIFE EXERCISE PRICE
- ---------------------------------------------------- -------------- ---------------- -----------------
<S> <C> <C> <C>
$ 8.00 - $11.75..................................... 260,594 3 Years $ 8.68
12.08 - 16.92..................................... 126,000 7 Years 13.96
18.67 - 25.67..................................... 183,303 8 Years 20.03
33.00 - 34.00..................................... 249,500 10 Years 33.99
</TABLE>

The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation expense has been recognized for its stock option
plans. If the fair value estimates had been used to record compensation expense,
pro forma net income would have been $47,140, $36,747 and $25,561 in fiscal
1998, 1997 and 1996, respectively, with an immaterial effect on earnings per
share. The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yields of 1.3% for fiscal 1998, 1997 and 1996; expected
volatility of 32% for fiscal 1998 and 33% for fiscal 1997 and 1996; risk-free
interest rates of 5.72%, 6.47% and 6.44% for fiscal 1998, 1997 and 1996,
respectively; and expected lives of 8 years for fiscal 1998, 1997 and 1996. The
weighted-average fair value of options granted during the year was $13.92, $8.76
and $5.70 for fiscal 1998, 1997 and 1996, respectively. The pro forma
calculations only include the effects of fiscal 1998, 1997 and 1996 grants. As
such, the impact is not necessarily indicative of the effects on reported net
income in future years.

F-17
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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
$445, $421 and $238 in fiscal 1998, 1997 and 1996, respectively.

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases certain facilities under agreements which are classified
as capital leases. The building leases are with a corporation which is owned by
two directors and one executive officer of Hughes Supply, Inc. These 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 $1,044, $1,092
and $1,149 for fiscal 1998, 1997 and 1996, respectively. Assets under capital
leases are included in the consolidated balance sheets as follows:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Property (land and buildings)...................................................... $ 9,407 $ 9,407
Equipment.......................................................................... 289 --
--------- ---------
9,696 9,407
Accumulated amortization........................................................... (8,492) (8,866)
--------- ---------
$ 1,204 $ 541
--------- ---------
--------- ---------
</TABLE>

In addition, rents under operating leases paid to the related corporation
were $96, $220 and $358 in fiscal 1998, 1997 and 1996, respectively.

Future minimum payments, by year and in the aggregate, under the
aforementioned leases and other noncancelable operating leases with initial or
remaining terms in excess of one year as of January 30, 1998, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEARS ENDING LEASES LEASES
- ----------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
1999............................................................................. $ 565 $ 20,673
2000............................................................................. 377 17,443
2001............................................................................. 331 14,779
2002............................................................................. 148 11,208
2003............................................................................. 74 6,523
Later Years...................................................................... 37 10,552
--------- -----------
Total minimum lease payments................................................. 1,532 $ 81,178
-----------
-----------
Less amount representing interest.................................................. (290)
---------
Present value of net minimum lease payments........................................ 1,242
Less current portion............................................................... (443)
---------
$ 799
---------
---------
</TABLE>

F-18
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Lease-related expenses are as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Capital lease amortization............................................. $ 584 $ 552 $ 518
Capital lease interest expense......................................... 364 290 199
Operating lease rentals (excluding month-to-month rents)............... 13,229 16,544 22,335
</TABLE>

LEGAL MATTERS

The Company is involved in various legal proceedings arising in the normal
course 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

In May 1996, the Company sold 2,230,483 shares of its common stock in a
public offering which generated net proceeds of $48,193. Proceeds received by
the Company from the sale of the common stock were used to partially fund the
PVF acquisition and to reduce indebtedness outstanding under the Company's
credit agreement.

On May 20, 1997, the Company's Board of Directors declared a three-for-two
stock split to shareholders of record as of July 10, 1997. The date of issuance
for the additional shares was July 17, 1997. Accordingly, all share and per
share data have been restated for periods prior to the stock split.

On May 20, 1997, the shareholders approved an amendment to the Restated
Articles of Incorporation of the Company increasing the number of authorized
shares of common stock from 20,000,000 to 100,000,000 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

F-19
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 $.0l 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 terminated earlier in accordance with the rights
plan.

NOTE 9 -- CONCENTRATION OF CREDIT RISK

The Company sells its products in the major areas of construction and
industrial markets in certain states primarily in the southeast, southwest and
midwest United States. Approximately 90% of the Company's sales are credit sales
which are made 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.

NOTE 10 -- SUPPLEMENTAL CASH FLOWS INFORMATION

Cash paid for interest during fiscal 1998, 1997 and 1996 was $18,107,
$14,216 and $10,098, respectively. Cash paid for income taxes during fiscal
1998, 1997 and 1996 was $23,099, $22,735 and $15,729, respectively.

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
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Fair value of:
Assets acquired................................................... $ 25,120 $ 161,198 $ 172,546
Liabilities assumed............................................... (10,027) (32,958) (45,816)
---------- ---------- ----------
Purchase price...................................................... $ 15,093 $ 128,240 $ 126,730
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Consideration in fiscal 1998, 1997 and 1996 included 2,850,526, 1,420,154
and 286,476 shares of common stock, with fair values of $78,768, $28,162 and
$3,222, respectively.

F-20
<PAGE>
HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 11 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FISCAL 1997
Net sales........................................................ $ 372,423 $ 421,920 $ 435,164 $ 389,855
Gross profit..................................................... $ 75,194 $ 89,365 $ 92,556 $ 85,766
Net income....................................................... $ 5,958 $ 11,531 $ 11,406 $ 8,159
Earnings per share:
Basic.......................................................... $ .41 $ .66 $ .62 $ .43
Diluted........................................................ $ .40 $ .65 $ .61 $ .42
Average shares outstanding (in thousands):
Basic.......................................................... 14,655 17,461 18,459 19,050
Diluted........................................................ 14,928 17,805 18,804 19,414
Market price per share:
High........................................................... $ 23.00 $ 27.33 $ 27.25 $ 29.75
Low............................................................ $ 17.75 $ 21.08 $ 21.42 $ 21.33
Dividends per share.............................................. $ .060 $ .060 $ .067 $ .067

FISCAL 1998
Net sales........................................................ $ 448,842 $ 493,801 $ 525,838 $ 476,965
Gross profit..................................................... $ 97,056 $ 108,282 $ 115,294 $ 105,491
Net income....................................................... $ 9,301 $ 14,129 $ 14,669 $ 9,471
Earning per share:
Basic.......................................................... $ .48 $ .72 $ .72 $ .45
Diluted........................................................ $ .48 $ .71 $ .71 $ .44
Average shares outstanding (in thousands):
Basic.......................................................... 19,255 19,577 20,318 21,266
Diluted........................................................ 19,552 19,952 20,647 21,624
Market price per share:
High........................................................... $ 24.00 $ 26.83 $ 35.69 $ 36.13
Low............................................................ $ 20.33 $ 22.00 $ 25.56 $ 31.38
Dividends per share.............................................. $ .073 $ .075 $ .080 $ .080
</TABLE>

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.

The Company historically performs a detailed analysis of its accounts
receivable in the fourth quarter for purposes of determining and recording the
write-off of doubtful accounts. In fiscal 1998 and 1997, the Company's
collection experience was better than anticipated, resulting in credits of
$(179) and $(2,040) in the provision for doubtful accounts for the fourth
quarter of the respective years.

F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER THE COMPANY NOR THE SELLING SHAREHOLDERS HAVE AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.

NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT AN OFFERING OF SECURITIES OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION IN
JURISDICTIONS OUTSIDE THE UNITED STATES AND CANADA ARE REQUIRED TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND THE
DISTRIBUTION OF THIS PROSPECTUS APPLICABLE IN THAT JURISDICTION.

927,219 SHARES

HUGHES SUPPLY, INC.

COMMON STOCK

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

PROSPECTUS

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

DATED OCTOBER 22, 1998

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