EXHIBIT 13.1
HUGHES SUPPLY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                             Fiscal Years Ended
                                                                        ------------------------------------------------------------
                                                                          January 29,             January 30,            January 31,
                                                                             1999                    1998                    1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                     <C>                     <C>
Net Sales ..................................................            $ 2,536,265             $ 1,945,446             $ 1,619,362
Cost of Sales ..............................................              1,977,266               1,519,323               1,276,481
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit ...............................................                558,999                 426,123                 342,881
------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
  Selling, general and administrative ......................                416,642                 318,923                 261,355
  Depreciation and amortization ............................                 23,269                  18,727                  15,566
  Provision for doubtful accounts ..........................                  1,882                   1,229                   1,023
------------------------------------------------------------------------------------------------------------------------------------
    Total operating expenses ...............................                441,793                 338,879                 277,944
------------------------------------------------------------------------------------------------------------------------------------
Operating Income ...........................................                117,206                  87,244                  64,937
------------------------------------------------------------------------------------------------------------------------------------
Non-Operating Income and (Expenses):
  Interest and other income ................................                  6,886                   5,837                   6,241
  Interest expense .........................................                (25,415)                (19,257)                (14,842)
------------------------------------------------------------------------------------------------------------------------------------
                                                                            (18,529)                (13,420)                 (8,601)
------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes .................................                 98,677                  73,824                  56,336
Income Taxes ...............................................                 37,234                  26,254                  19,282
------------------------------------------------------------------------------------------------------------------------------------
Net Income .................................................            $    61,443             $    47,570             $    37,054
====================================================================================================================================
Earnings Per Share:
  Basic ....................................................            $      2.57             $      2.37             $      2.13
====================================================================================================================================
  Diluted ..................................................            $      2.55             $      2.33             $      2.09
====================================================================================================================================
Average Shares Outstanding:
  Basic ....................................................                 23,889                  20,108                  17,384
====================================================================================================================================
  Diluted ..................................................                 24,138                  20,432                  17,719
====================================================================================================================================
</TABLE>

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


                                                                              13

<PAGE>

HUGHES SUPPLY, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                     January 29,         January 30,
                                                                                                         1999                1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>                <C>
ASSETS
Current Assets:
  Cash and cash equivalents ..................................................................       $     6,010        $     8,204
  Accounts receivable, less allowance for losses of $2,809 and $3,522 ........................           341,109            293,837
  Inventories ................................................................................           409,734            353,846
  Deferred income taxes ......................................................................             8,520              9,708
  Other current assets .......................................................................            31,346             18,625
------------------------------------------------------------------------------------------------------------------------------------
    Total current assets .....................................................................           796,719            684,220

Property and Equipment, Net ..................................................................           127,632            108,068
Excess of Cost over Net Assets Acquired ......................................................           181,622            153,775
Deferred Income Taxes ........................................................................                --              3,438
Other Assets .................................................................................            17,540             16,241
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     $ 1,123,513        $   965,742
====================================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Current portion of long-term debt ..........................................................       $        39        $       674
  Accounts payable ...........................................................................           176,234            148,693
  Accrued compensation and benefits ..........................................................            25,029             21,272
  Other current liabilities ..................................................................            27,982             27,475
------------------------------------------------------------------------------------------------------------------------------------
    Total current liabilities ................................................................           229,284            198,114

Long-Term Debt ...............................................................................           402,203            343,197
Deferred Income Taxes ........................................................................             4,711                 --
Other Noncurrent Liabilities .................................................................             3,359              2,662
------------------------------------------------------------------------------------------------------------------------------------
    Total liabilities ........................................................................           639,557            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; 24,183,834
    and 23,437,039 shares issued .............................................................            24,184             23,437
  Capital in excess of par value .............................................................           219,558            202,210
  Retained earnings ..........................................................................           242,730            197,364
  Unearned compensation related to outstanding restricted stock ..............................            (2,516)            (1,242)
------------------------------------------------------------------------------------------------------------------------------------
    Total shareholders' equity ...............................................................           483,956            421,769
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     $ 1,123,513        $   965,742
====================================================================================================================================
</TABLE>

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


14
<PAGE>

HUGHES SUPPLY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                           Common Stock                Capital in
                                                                   ----------------------------         Excess of          Retained
                                                                     Shares             Amount          Par Value          Earnings
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>               <C>               <C>
Balance, January 26, 1996 as previously reported ...........       14,106,745       $    14,107       $    37,793       $   133,131
  Adjustment for pooling of interests ......................          843,146               843              (841)            3,893
------------------------------------------------------------------------------------------------------------------------------------
Balance, January 26, 1996 as restated ......................       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

  Net income ...............................................               --                --                --            61,443
  Cash dividends--
    $.33 per share .........................................               --                --                --            (7,866)
    Pooled companies .......................................               --                --                --            (1,222)
  Shares issued under stock option and bonus plans .........          107,980               108             1,282                --
  Purchase and retirement of common shares .................          (19,439)              (19)             (193)             (389)
  Issuance of restricted stock .............................           52,500                52             1,615                --
  Capitalization of undistributed earnings
    of Subchapter S corporation ............................               --                --             7,697            (7,697)
  Other acquisitions .......................................          605,754               606             6,947             1,097
------------------------------------------------------------------------------------------------------------------------------------
Balance, January 29, 1999 ..................................       24,183,834       $    24,184       $   219,558       $   242,730
====================================================================================================================================
</TABLE>

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


                                                                              15
<PAGE>

HUGHES SUPPLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
                                                                                                    Fiscal Years Ended
                                                                                        --------------------------------------------
                                                                                        January 29,     January 30,      January 31,
                                                                                           1999             1998             1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>              <C>              <C>
Cash Flows from Operating Activities:
  Net income ....................................................................       $  61,443        $  47,570        $  37,054
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
      Depreciation and amortization .............................................          23,269           18,727           15,566
      Provision for doubtful accounts ...........................................           1,882            1,229            1,023
      Other, net ................................................................            (671)            (626)            (708)
  Changes in assets and liabilities, net of
    effects of business acquisitions:
      (Increase) in accounts receivable .........................................         (25,497)         (30,443)         (14,143)
      (Increase) in inventories .................................................         (29,493)         (39,136)         (23,894)
      (Increase) decrease in other current assets ...............................          (7,718)          (3,865)           4,922
      (Increase) in other assets ................................................          (5,692)          (9,061)             (67)
      Increase (decrease) in accounts payable and accrued liabilities ...........           8,532            6,102          (10,577)
      (Decrease) increase in accrued interest and income taxes ..................          (2,948)           1,880             (839)
      Increase in other noncurrent liabilities ..................................             697              408              421
      Decrease (increase) in net deferred income taxes ..........................           7,763            2,425           (1,988)
------------------------------------------------------------------------------------------------------------------------------------
        Net cash provided by (used in) operating activities .....................          31,567           (4,790)           6,770
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
  Capital expenditures ..........................................................         (26,921)         (28,185)         (16,898)
  Proceeds from sale of property and equipment ..................................           6,630            1,184            1,838
  Business acquisitions, net of cash ............................................         (40,378)         (47,725)        (100,078)
------------------------------------------------------------------------------------------------------------------------------------
        Net cash used in investing activities ...................................         (60,669)         (74,726)        (115,138)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
  Net borrowings (payments) under short-term debt arrangements ..................          10,232           36,921           (6,808)
  Principal payments on long-term debt ..........................................         (24,975)         (28,503)         (20,762)
  Proceeds from issuance of long-term debt ......................................          50,000           80,000           98,000
  Proceeds from sale of common stock ............................................              --               --           48,193
  Proceeds from stock options exercised .........................................           1,084            1,373            1,123
  Purchase of common shares .....................................................            (601)            (578)            (553)
  Dividends paid ................................................................          (8,832)          (8,112)          (8,548)
------------------------------------------------------------------------------------------------------------------------------------
        Net cash provided by financing activities ...............................          26,908           81,101          110,645
------------------------------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents ............................          (2,194)           1,585            2,277
Cash and Cash Equivalents, Beginning of Year ....................................           8,204            6,619            4,342
------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year ..........................................       $   6,010        $   8,204        $   6,619
====================================================================================================================================
</TABLE>

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


16
<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.  The Company  distributes
nine different  product groups which it has classified  into three major product
categories:  (i) Fluid Control Products,  consisting of the Company's industrial
pipe, plate, valves and fittings,  plumbing,  water and sewer, and water systems
product groups; (ii) Electrical Products, consisting of the Company's electrical
and electric utilities product groups; and (iii) Specialty Products,  consisting
of the Company's air conditioning and heating,  building materials, and pool and
spa equipment and supplies product groups. 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 1999, 1998
and 1997 contained 52 weeks, 52 weeks and 53 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:

Buildings and improvements..................................       5-40 years
Transportation equipment....................................       2- 7 years
Furniture, fixtures and equipment...........................       2-12 years
Property under capital leases...............................      20-40 years

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.

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 29, 1999 and January 30, 1998,  goodwill  was $181,622 and  $153,775,
respectively,   net  of  accumulated   amortization   of  $16,688  and  $11,098,
respectively.  Amortization  of goodwill  totaled  $5,614,  $5,053 and $4,535 in
fiscal 1999, 1998 and 1997, 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 29, 1999 and January 30,  1998,
unamortized software development costs were $9,474 and $8,357, respectively, net
of accumulated  amortization of $1,873 and $394,  respectively.  Amortization of
capitalized  internal software development costs totaled $1,680, $316 and $78 in
fiscal 1999, 1998 and 1997, respectively.

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


                                                                              17
<PAGE>

HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except per share data)

asset's  carrying  amount  to  determine  if a  write-down  to  market  value or
discounted cash flow is required.

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.

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  values  of  long-term  debt,  excluding  capital  lease
obligations,  approximated $407,836 and $346,320 and the related carrying values
were   $402,242  and  $342,629  at  January  29,  1999  and  January  30,  1998,
respectively.

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 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.  The  Company  adopted the  provisions  for the pro forma
disclosure requirements of SFAS 123.

Earnings Per Common 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  23,889,000,
20,108,000  and  17,384,000  for fiscal 1999,  1998 and 1997,  respectively.  In
calculating  diluted earnings per share,  these amounts were adjusted to include
249,000,  324,000  and 335,000 of dilutive  potential  common  shares for fiscal
1999,  1998 and 1997,  respectively.  The Company's  dilutive  potential  common
shares consist of stock options and restricted stock.


18
<PAGE>

Reclassifications

The January 30, 1998 balance sheet contains certain reclassifications which were
made to conform to the January  29, 1999  financial  statement  format.  None of
these reclassifications affected net income or shareholders' equity.

In fiscal 1999,  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 and 1997  contain  certain  reclassifications  which  were  made to
conform to the Company's current financial statement format.

Estimates

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

NOTE 2--BUSINESS COMBINATIONS

On 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  transaction  has been  accounted  for as a pooling of  interests  and
accordingly,  the consolidated  financial  statements for the periods  presented
have been restated to include the accounts of  Winn-Lange.  Winn-Lange's  fiscal
year end has 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
Winn-Lange merger were as follows:

<TABLE>
<CAPTION>
                                                                                          Unaudited
                                                                                          Pro Forma
                                                          Net               Net              Net
                                                         Sales            Income           Income
--------------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>              <C>
Three months ended
  April 30, 1998 (unaudited):
    Hughes, as previously reported.........           $  582,042          $10,746          $10,746
    Winn-Lange.............................               19,989              857              537
--------------------------------------------------------------------------------------------------
    Combined...............................           $  602,031          $11,603          $11,283
==================================================================================================
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
==================================================================================================
Fiscal year ended
  January 31, 1997:
    Hughes, as previously reported.........           $1,567,571          $35,314          $33,458
    Winn-Lange.............................               51,791            1,740            1,132
--------------------------------------------------------------------------------------------------
    Combined...............................           $1,619,362          $37,054          $34,590
==================================================================================================
</TABLE>

Unaudited pro forma net income  reflects  adjustments to net income to record an
estimated  provision  for  income  taxes  for  each  period  presented  assuming
Winn-Lange was a tax-paying entity.  Additionally,  in fiscal 1998 and 1997, the
Company  merged with certain other  Subchapter S  corporations,  including  Chad
Supply,  Inc. ("Chad"),  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,  Chad, ELASCO and the Metals Group did not pay U.S. federal income
taxes in periods  prior to the mergers.  Chad,  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 January 30,  1998,  April 26, 1996 and January 24,
1997, respectively.  For purposes of calculating unaudited pro forma net income,
Chad, ELASCO and the Metals Group were also assumed to be tax-paying entities.


                                                                              19
<PAGE>

HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except per share data)

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 $98,772,  consisting of cash
in the amount of $38,477 and the issuance of 2,153,396  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.

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:

                                                    Fiscal Years Ended
                                               -------------------------
                                                   1998           1997
------------------------------------------------------------------------
Net sales..................................... $2,180,227     $1,892,371
Net income....................................     53,214         44,800
Earnings per share:
  Basic.......................................       2.41           2.26
  Diluted.....................................       2.37           2.22

The past and future financial performance of Mountain Country, International and
PVF will be directly influenced by price fluctuations in stainless steel, nickel
alloys, copper,  aluminum,  plastic and other commodities.  As a result of these
commodity price  fluctuations and the fact that significant  price  fluctuations
could continue to create cyclicality in Mountain Country's,  International's and
PVF's  future  operating  performance,  management  believes  that the pro forma
information is not necessarily indicative of future performance.

During fiscal 1999, 1998 and 1997, 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:

                                                         1999             1998
--------------------------------------------------------------------------------
Land .........................................       $  25,590        $  19,738
Buildings and improvements ...................          93,341           85,309
Transportation equipment .....................          31,158           28,719
Furniture, fixtures and equipment ............          57,840           43,799
Assets under capital leases ..................              --            9,407
--------------------------------------------------------------------------------
                                                       207,929          186,972
Less accumulated depreciation
  and amortization ...........................         (80,297)         (78,904)
--------------------------------------------------------------------------------
                                                     $ 127,632        $ 108,068
================================================================================


20
<PAGE>

NOTE 4--LONG-TERM DEBT

Long-term debt consists of the following:

                                                          1999            1998
--------------------------------------------------------------------------------
7.96% Senior notes, due 2011 ...................      $  98,000       $  98,000
7.14% Senior notes, due 2012 ...................         40,000          40,000
7.19% Senior notes, due 2012 ...................         40,000          40,000
6.74% Senior notes, due 2013 ...................         50,000              --
Unsecured bank notes under $225,000
  revolving credit agreement, payable
  January 25, 2004, fluctuating interest
  (5.3% to 5.6% at January 29, 1999) ...........        108,450         105,900
Short-term instruments classified as
  long-term debt ...............................         65,753          50,000
Other notes payable ............................             39           8,729
Capital lease obligations ......................             --           1,242
--------------------------------------------------------------------------------
                                                        402,242         343,871
Less current portion ...........................            (39)           (674)
--------------------------------------------------------------------------------
                                                      $ 402,203       $ 343,197
================================================================================


On August 28,  1997,  the Company  issued  $80,000 of senior notes due 2012 in a
private placement. The senior 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
principal payments beginning in 2002 and 2006,  respectively.  Proceeds received
by  the  Company  from  the  sale  of the  senior  notes  were  used  to  reduce
indebtedness outstanding under the Company's revolving credit agreement and line
of credit agreement (the "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% (5.08% as of January 29,  1999).  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 $171 and $219 in fiscal
1999 and 1998,  respectively.  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 $1,251 and $1,091 at
January 29, 1999 and January 30, 1998, respectively.

On May 5, 1998, the Company issued $50,000 of senior notes due 2013 in a private
placement.  The senior  notes bear  interest  at 6.74% and will be payable in 21
equal semi-annual principal payments beginning in 2003. Proceeds received by the
Company  from the sale of the  senior  notes  were used to  reduce  indebtedness
outstanding under the Company's credit agreement.

On January 26,  1999,  the Company  entered into a new credit  agreement  with a
group of  banks.  The  credit  agreement  permits  the  Company  to borrow up to
$300,000 (subject to borrowing limitations under the credit agreement)--$225,000
under its revolving credit agreement as long-term debt due January 25, 2004, and
$75,000 under its line of credit agreement. Under the credit agreement, interest
is payable at market rates plus  applicable  margins.  Facility fees of .20% and
 .175% are paid on the total of the revolving credit agreement and line of credit
agreement, respectively.

The credit  agreement  contains  financial  covenants  requiring  the Company to
maintain certain  financial  ratios and minimum net worth levels.  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 $60,793 was available at January 29, 1999 for payment of
dividends.

The  Company  has a  commercial  paper  program  backed  by its  line of  credit
agreement.  The weighted-average  interest rate on outstanding  commercial paper
borrowings  of $65,753  and  $50,000 as of January 29, 1999 and January 30, 1998
was 5.8% and 6.1%,  respectively.  The  Company  has the  ability  and intent to
refinance short-term borrowings on a long-term basis.  Accordingly,  $65,753 and
$50,000 of the commercial  paper  borrowings at January 29, 1999 and January 30,
1998, respectively, have been classified as long-term debt.

On September 30, 1998, the Company entered into a new $25,000 line of credit for
short-term  borrowing.  There  were no  amounts  outstanding  under this line of
credit at January 29, 1999.


                                                                              21
<PAGE>

HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except per share data)


Maturities  of long-term  debt for each of the five years  subsequent to January
29, 1999 and in the aggregate are as follows:

Fiscal Years Ending
--------------------------------------------------------------------------------
2000 ..................................................                 $     39
2001 ..................................................                       --
2002 ..................................................                    9,334
2003 ..................................................                   13,143
2004 ..................................................                  192,108
Later years ...........................................                  187,618
--------------------------------------------------------------------------------
                                                                        $402,242
================================================================================


NOTE 5--INCOME TAXES

The  components of deferred tax assets and  liabilities  at January 29, 1999 and
January 30, 1998 are as follows:

                                                             1999          1998
--------------------------------------------------------------------------------
Deferred tax assets:
  Allowance for doubtful accounts ..................       $ 1,211       $ 1,286
  Inventories ......................................           506         1,445
  Property and equipment ...........................           215         3,184
  Accrued vacation .................................         3,001         2,252
  Deferred compensation ............................         1,446         1,092
  Other accrued liabilities ........................         2,326         3,596
  Other ............................................            55         1,129
--------------------------------------------------------------------------------
    Total deferred tax assets ......................         8,760        13,984
--------------------------------------------------------------------------------
Deferred tax liabilities:
  Capitalized software development costs ...........         2,664            --
  Intangible assets ................................         2,287           838
--------------------------------------------------------------------------------
    Total deferred tax liabilities .................         4,951           838
--------------------------------------------------------------------------------
Net deferred tax assets ............................       $ 3,809       $13,146
================================================================================


No  valuation  allowance  has been  provided  for these  deferred  tax assets at
January 29, 1999 and January  30, 1998 as full  realization  of these  assets is
more likely than not.

The consolidated provision for income taxes consists of the following:

                                                  Fiscal Years Ended
                                    --------------------------------------------
                                       1999             1998              1997
--------------------------------------------------------------------------------
Currently payable:
  Federal .................         $ 25,119         $ 21,058          $ 18,399
  State ...................            2,778            3,377             2,911
--------------------------------------------------------------------------------
                                      27,897           24,435            21,310
--------------------------------------------------------------------------------
Deferred:
  Federal .................            7,864            1,500            (1,739)
  State ...................            1,473              319              (289)
--------------------------------------------------------------------------------
                                       9,337            1,819            (2,028)
--------------------------------------------------------------------------------
                                    $ 37,234         $ 26,254          $ 19,282
================================================================================


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


                                            Fiscal Years Ended
                       ---------------------------------------------------------
                               1999                1998              1997
--------------------------------------------------------------------------------
                         Amount       %      Amount      %     Amount       %
--------------------------------------------------------------------------------
Tax computed
  at statutory
  Federal rate .....   $ 34,537     35.0   $ 25,838    35.0   $ 19,718    35.0
Effect of:
  State income
    tax, net of
    Federal income
    tax benefit ....      2,763      2.8      2,459     3.3      1,741     3.1
  Subchapter
    S corporation
    earnings .......       (606)     (.6)    (2,315)   (3.1)    (2,360)   (4.2)
  Nondeductible
    purchase
    adjustments ....        880       .9        288      .4        123      .2
  Nondeductible
    expenses .......      1,085      1.1        886     1.2        637     1.1
  Other, net .......     (1,425)    (1.5)      (902)   (1.2)      (577)   (1.0)
--------------------------------------------------------------------------------
Income tax
  expense ..........   $ 37,234     37.7   $ 26,254    35.6   $ 19,282    34.2
================================================================================


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.

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


22
<PAGE>

tax  deduction.  At  January  29,  1999 and  January  30,  1998,  the plan owned
approximately 248,000 and 259,000 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 1999,
1998 and 1997 were $1,946, $1,581 and $2,088, 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 $1,576,  $1,539 and $1,544 for fiscal 1999, 1998 and
1997, respectively.

Stock Plans

The Company's two active stock plans include the 1997 Executive  Stock Plan (the
"1997 Stock  Plan") and the  Directors'  Stock  Option  Plan.  These stock plans
authorize the granting of both incentive and non-incentive  stock options for an
aggregate of 952,500  shares of common stock,  including  750,000  shares to key
employees and 202,500  shares to directors.  Under the stock 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 with  respect to the 1997 Stock  Plan,  or May 2003 with
respect to the Directors'  Stock Option Plan. An option  becomes  exercisable at
such times and in such  installments as set forth by the Compensation  Committee
or by the Directors' Stock Option Plan.

Under the 1997 Stock Plan,  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 1999 and 1998, the Company  granted certain  employees  52,500 and
50,000  shares of restricted  stock,  with market values of $1,667 and $1,300 at
the date of grant,  respectively.  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 respective vesting periods. In fiscal 1999 and
1998, this expense amounted to $393 and $58, respectively.

The 1997 Stock Plan also  permits  the  granting  of stock  appreciation  rights
("SARs") to holders of options.  Such rights permit the optionee to surrender an
exercisable  option, in whole or in part, on any date that the fair market value
of the Company's common stock exceeds the option price for the stock and receive
payment in common stock or, if the Board of Directors  approves,  in cash or any
combination of cash and common stock.  Such payment would be equal to the excess
of the fair market  value of the shares  under the  surrendered  option over the
option price for such shares.  The change in value of SARs would be reflected in
income  based upon the market  value of the stock.  No SARs have been granted or
issued through January 29, 1999.

A summary of option  transactions,  including  a  terminated  plan  under  which
options remain outstanding,  during each of the three fiscal years in the period
ended January 29, 1999 is shown below:

                                                                       Weighted-
                                                      Number            Average
                                                        of              Option
                                                      Shares             Price
--------------------------------------------------------------------------------
Under option, January 26, 1996
  (494,912 shares exercisable) ................       584,914          $   10.24
    Granted ...................................       172,500              19.58
    Exercised .................................       (85,100)              9.05
    Canceled ..................................        (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
    Canceled ..................................        (6,000)             13.50
--------------------------------------------------------------------------------
Under option, January 30, 1998
  (455,897 shares exercisable) ................       819,397              19.74
    Granted ...................................        48,000              34.19
    Exercised .................................       (98,587)             10.99
    Canceled ..................................       (12,800)             34.06
--------------------------------------------------------------------------------
Under option, January 29, 1999
  (435,810 shares exercisable) ................       756,010              21.55
================================================================================


There were 400,309  shares  available for the granting of options at January 29,
1999.


                                                                              23
<PAGE>

HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except per share data)


The following  table  summarizes  the stock options  outstanding  at January 29,
1999:

                                               Weighted-
                                                Average              Weighted-
    Range of               Number              Remaining              Average
    Exercise           Outstanding at         Contractual            Exercise
     Prices           January 29, 1999           Life                  Price
--------------------------------------------------------------------------------
 $ 8.42-$12.08            182,469               2 Years               $ 8.54
  12.83- 18.67            257,776               6 Years                16.55
  24.83- 35.63            315,765               9 Years                33.16

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  $60,307,  $47,140 and $36,747 in fiscal  1999,  1998 and
1997,  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 1999, 1998 and 1997;  expected  volatility of 33%, 32%
and 33% for fiscal 1999, 1998 and 1997,  respectively;  risk-free interest rates
of 4.77%,  5.72% and 6.47% for fiscal  1999,  1998 and 1997,  respectively;  and
expected   lives  of  eight  years  for  fiscal   1999,   1998  and  1997.   The
weighted-average  fair value of  options  granted  during  the year was  $13.81,
$13.92 and $8.76 for fiscal  1999,  1998 and 1997,  respectively.  The pro forma
calculations do not include the effects of options granted prior to fiscal 1996.
As such, the impact is not necessarily indicative of the effects on reported net
income in future years.

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
$537, $445 and $421 in fiscal 1999, 1998 and 1997, respectively.

NOTE 7--COMMITMENTS AND CONTINGENCIES

Lease Commitments

The  Company  leases  certain  properties  from a  corporation  owned  by  three
executive officers of Hughes Supply,  Inc. The leases generally provide that all
expenses  related to the  properties  are to be paid by the lessee.  On April 1,
1998,  certain  amendments  to these leases were  executed,  which  included the
extension of their lease terms through March 31, 2003. Rents paid to the related
corporation  under these leases and other  operating  leases amounted to $1,241,
$1,140 and $1,312 in fiscal 1999, 1998 and 1997, 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 29, 1999, are as follows:

Fiscal Years Ending
--------------------------------------------------------------------------------
2000...................................................        $ 29,578
2001...................................................          26,499
2002...................................................          20,478
2003...................................................          15,070
2004...................................................           8,852
Later years............................................          14,754
--------------------------------------------------------------------------------
Total minimum lease payments...........................        $115,231
================================================================================


Lease-related expenses were as follows:

                                                       Fiscal Years Ended
                                               ---------------------------------
                                                 1999         1998         1997
--------------------------------------------------------------------------------
Capital lease amortization ..............      $    89      $   518      $   552
Capital lease interest expense ..........           30          199          290
Operating lease rentals
  (excluding month-to-
  month rents) ..........................       33,062       22,335       16,544

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.


24
<PAGE>

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 75,000 shares.  Each share of
Series A Stock will be entitled to 1,000  votes 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 $1.00 per share or
1,000 times the  aggregate  per share amount of the dividend  declared on common
stock in the related  quarter.  In the event of liquidation,  shares of Series A
Stock will be  entitled  to the greater of $1,000 per share plus any accrued and
unpaid dividend or 1,000 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 one one-thousandth of a share (a "unit") of Series A Stock at a
purchase price of $200 per unit. The rights  generally  become  exercisable if a
person or group acquires 15% or more of the Company's  common stock or commences
a tender  offer that could  result in such person or group owning 15% or more of
the Company's common stock. If certain  subsequent events occur after the rights
first become exercisable,  the rights may become exercisable for the purchase of
shares of common stock of the  Company,  or of an  acquiring  company,  having a
value equal to two times the exercise price of the right. In general, the rights
may be  redeemed by the Company at $.01 per right at any time prior to the later
of (i) ten days after 20% or more of the Company's stock is acquired by a person
or group and (ii) the first date of a public announcement that a person or group
has acquired 15% or more of the  Company's  stock.  The rights expire on June 2,
2008 unless terminated earlier in accordance with the rights plan.

NOTE 9--SUPPLEMENTAL CASH FLOWS INFORMATION

Cash paid for interest  during fiscal 1999,  1998 and 1997 was $23,972,  $18,107
and $14,216,  respectively.  Cash paid for income taxes during fiscal 1999, 1998
and 1997 was $33,862, $23,099 and $22,735, respectively.

Noncash Investing and Financing Activities

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

                                                  Fiscal Years Ended
                                      ------------------------------------------
                                          1999           1998             1997
--------------------------------------------------------------------------------
Fair value of:
  Assets acquired ..............      $  77,707       $ 172,546       $ 161,198
  Liabilities assumed ..........        (32,048)        (45,816)        (32,958)
--------------------------------------------------------------------------------
Purchase price .................      $  45,659       $ 126,730       $ 128,240
================================================================================


Consideration  in fiscal 1999,  1998 and 1997  included  207,829,  2,850,526 and
1,420,154  shares of common  stock,  with fair  values of  $5,438,  $78,768  and
$28,162, respectively.


                                                                              25
<PAGE>

HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except per share data)

NOTE 10--PRODUCT, GEOGRAPHIC AND CUSTOMER INFORMATION

The  Company's  products are  classified  into three major  product  categories,
including Fluid Control Products,  Electrical  Products and Specialty  Products.
Net sales for each of these product categories were as follows:

                                                   Fiscal Years Ended
                                      ------------------------------------------
                                          1999            1998            1997
--------------------------------------------------------------------------------
Fluid Control
  Products .....................      $1,512,828      $1,048,688      $  843,835
Electrical Products ............         572,048         536,490         493,260
Specialty Products .............         451,389         360,268         282,267
--------------------------------------------------------------------------------
                                      $2,536,265      $1,945,446      $1,619,362
================================================================================


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.  Revenues and assets of  operations  located  outside the United
States are not material.

Approximately  90% of the  Company's  sales  are  credit  sales  which  are made
primarily  to  customers  whose  ability to pay is  dependent  upon the economic
strength  of  the  construction   industry  in  the  areas  where  it  operates.
Concentration  of credit  risk with  respect  to trade  accounts  receivable  is
limited,  however, due to the large number of customers comprising the Company's
customer base and the fact that 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 11--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      Quarter
                                                               -----------------------------------------------------
                                                                 First         Second          Third         Fourth
--------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>            <C>
Fiscal 1999
Net sales ..............................................       $602,031       $674,550       $659,045       $600,639
Gross profit ...........................................       $129,277       $148,841       $146,639       $134,242
Net income .............................................       $ 11,603       $ 19,773       $ 19,150       $ 10,917
Earnings per share:
  Basic ................................................       $    .49       $    .83       $    .80       $    .45
  Diluted ..............................................       $    .49       $    .82       $    .79       $    .45
Average shares outstanding (in thousands):
  Basic ................................................         23,601         23,925         23,989         24,038
  Diluted ..............................................         23,874         24,180         24,204         24,294
Market price per share:
  High .................................................       $  39.81       $  39.19       $  32.50       $  29.50
  Low ..................................................       $  32.56       $  29.13       $  25.13       $  25.13
Dividends per share ....................................       $   .080       $   .080       $   .085       $   .085
--------------------------------------------------------------------------------------------------------------------
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>


26
<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,  of  shareholders'  equity and of cash flows
present  fairly,  in all material  respects,  the  financial  position of Hughes
Supply,  Inc. and its subsidiaries at January 29, 1999 and January 30, 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended  January 29, 1999,  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 19, 1999


MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The consolidated  financial  statements and related information included in this
annual report were prepared in conformity  with  generally  accepted  accounting
principles.  Management  is  responsible  for  the  integrity  of the  financial
statements  and for the  related  information.  Management  has  included in the
Company's  financial   statements  amounts  that  are  based  on  estimates  and
judgements which it believes are reasonable under the circumstances.

The  responsibility  of the Company's  independent  accountants is to express an
opinion on the fairness of the financial  statements.  Their opinion is based on
an audit conducted in accordance with generally  accepted auditing  standards as
further described in their report.

The Audit Committee of the Board of Directors is composed of four non-management
directors. The Committee meets periodically with financial management,  internal
auditors, and the independent accountants to review internal accounting control,
auditing, and financial reporting matters.


                                                                              27
<PAGE>

HUGHES SUPPLY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As described in Note 2 of the Notes to  Consolidated  Financial  Statements,  in
fiscal 1999 the Company  entered  into a business  combination  with  Winn-Lange
which was accounted for as a pooling of  interests.  Accordingly,  all financial
data in Management's  Discussion and Analysis of Financial Condition and Results
of Operations is reported as though the companies have always been one entity.

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 subsequently defined),
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.


RESULTS OF OPERATIONS

Net Sales

In fiscal 1999, the Company generated net sales of $2.54 billion, a 30% increase
over  fiscal  1998 net sales of $1.95  billion.  Fiscal  1998 net sales of $1.95
billion increased 20% over fiscal 1997 net sales of $1.62 billion. The increases
in net sales are primarily due to acquired and newly-opened  wholesale  branches
resulting  from  the  Company's   acquisition  and  internal  growth   programs.
Same-store sales growth also contributed to the increases. On a basis comparable
to the prior year, same-store sales increased 6% for both fiscal 1999 and 1998.

The same-store sales increase of 6% for fiscal 1999 is primarily attributable to
(i) continued  growth in construction  markets and (ii) the favorable  impact of
warm and dry weather  conditions  experienced  in certain  regions served by the
Company's air conditioning and pool supply products. This increase was offset to
a  large  extent,  however,  by  the  impact  of  declining  prices  on  certain
commodity-priced   products,  as  further  discussed  below.   Conversely,   the
same-store sales increase of 6% for fiscal 1998 was below the high  single-digit
increases  the Company  experienced  in  previous  years,  primarily  due to the
adverse  impact that mild and wet weather had on sales of air  conditioning  and
pool supply products.

Gross Margin

Over the past three years, gross margins have been improving. Gross margins were
22.0%,  21.9% and 21.2%  for  fiscal  1999,  1998 and  1997,  respectively.  The
improvement  in gross  margins  resulted  from several  factors,  including  the
Company's overall expansion of higher-margin  products resulting  primarily from
its acquisition program,  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


28
<PAGE>

preferred  vendor  program.  In fiscal  1999,  total gross  profit  dollars were
negatively  impacted by  deflationary  pressure on the pricing of certain of the
Company's  products  whose  manufacture  is  reliant  on  certain   commodities,
including stainless steel, nickel alloys, copper, aluminum and plastic.  Despite
the commodity  pricing pressure,  however,  the Company was able to maintain the
gross  margins  on much of the  business  associated  with  these  products  and
increase overall gross margin for the year.

Operating Expenses

Operating  expenses in fiscal 1999 were $442 million (or 17.4% of net sales),  a
30% increase  over fiscal 1998  operating  expenses of $339 million (or 17.4% of
net  sales).   Approximately  25  percentage  points  of  the  30%  increase  is
attributable  to  branches  acquired  and opened  after  February  1, 1997.  The
remainder  of  the  increase  is  primarily  due  to (i)  higher  personnel  and
transportation  costs  associated with  same-store  sales growth and (ii) higher
expenses  associated  with the Company's  program of upgrading  its  information
technology  ("IT")  systems.  While  upgrading  the  IT  systems  has  increased
operating  expenses in the short term, the Company believes this investment will
provide  a  platform   for  future   growth  and  enable  it  to  realize   more
administrative synergies from past and future acquisitions.

Similarly,  the increase of $61 million in fiscal 1998  compared to fiscal 1997,
which  had  operating  expenses  of $278  million  (or 17.2% of net  sales),  is
primarily  attributable to branches  acquired and opened after January 27, 1996.
The  remainder of the increase is primarily  due to higher  personnel  expenses,
including  health care costs,  and higher  transportation  costs associated with
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  acquisitions  completed in the fourth
quarter of fiscal 1998.

Non-Operating Income and Expenses

Interest  and other  income was $6.9  million in fiscal  1999  compared  to $5.8
million in fiscal 1998 and $6.2  million in fiscal  1997.  The  increase of $1.1
million in fiscal  1999 is  primarily  the result of higher  levels of  accounts
receivable  and the  related  collection  of  service  charge  income  levied on
accounts receivable. The decrease of $.4 million from fiscal 1997 to fiscal 1998
is primarily due to  non-recurring  gains recognized on the sale of property and
equipment in fiscal 1997.

Interest expense for fiscal 1999, 1998 and 1997 was $25.4 million, $19.3 million
and $14.8 million,  respectively.  The $6.1 million  increase in fiscal 1999 and
the $4.5  million  increase  in fiscal 1998 are  primarily  the result of higher
borrowing levels, partially offset by lower interest rates. The higher borrowing
levels  are  primarily  due  to  the  Company's   expansion   through   business
acquisitions, which has been partially funded by debt financing.

Income Taxes

The  effective  tax rates for fiscal 1999,  1998 and 1997 were 37.7%,  35.6% and
34.2%,  respectively.  Prior to the mergers with ELASCO on April 26, 1996,  with
the Metals  Group on January  24,  1997,  with Chad on January 30, 1998 and with
Winn-Lange  on  June  30,  1998,  each  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 1999 compared to
fiscal 1998 and is higher for fiscal 1998 compared to fiscal 1997. The Company's
effective tax rate for fiscal 1999, 1998 and 1997 would have been  approximately
38.3%, 38.7%, and 38.6%,  respectively,  assuming ELASCO, the Metals Group, Chad
and Winn-Lange were tax-paying entities.


                                                                              29
<PAGE>

HUGHES SUPPLY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Net Income

Net income in fiscal 1999  increased  29% to $61.4 million from $47.6 million in
fiscal 1998.  Diluted  earnings  per share  increased 9% to $2.55 in fiscal 1999
compared to $2.33 in fiscal 1998 on 18% more average shares  outstanding.  These
results  followed fiscal 1998 increases of 28% and 11% in net income and diluted
earnings per share,  respectively.  Net income and diluted earnings per share in
fiscal 1997 were $37.1 million and $2.09, respectively.

These improved results reflect operating leverage that has been achieved through
the   Company's   acquisition   program  and  the   resulting   purchasing   and
administrative synergies. Operating margins (operating income as a percentage of
net sales) have  improved to 4.6% in fiscal  1999,  compared to 4.5% and 4.0% in
fiscal 1998 and 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Working capital in fiscal 1999 amounted to $567 million compared to $486 million
and $351  million in fiscal 1998 and 1997,  respectively.  The  working  capital
ratio  was 3.5 to 1,  3.5 to 1 and 3.3 to 1 for  fiscal  1999,  1998  and  1997,
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 excessive.  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 provided by operations was $31.6 million in fiscal 1999 compared to net
cash used in  operations of $4.8 million in fiscal 1998 and net cash provided by
operations  of $6.8 million in fiscal 1997.  Net cash  provided by operations of
$31.6 million in fiscal 1999 is primarily  the result of the Company's  improved
profit  levels,  partially  offset  by  increases  in  accounts  receivable  and
inventories, resulting from higher sales volumes.

The  Company's  expenditures  for property and  equipment  were $26.9 million in
fiscal 1999, including approximately $10 million for new warehouse facilities to
support  its  internal  growth and  approximately  $7 million for  computer  and
communications hardware and related software.  Capital expenditures for property
and equipment, not including amounts for business acquisitions,  are expected to
be approximately $35 million in fiscal 2000.

Proceeds  from the sale of property and  equipment  were $6.6 million for fiscal
1999,  compared  to $1.2  million  and $1.8  million  for fiscal  1998 and 1997,
respectively.  This  increase  in  fiscal  1999 is  primarily  due to a sale and
subsequent  lease-back of certain  computer  hardware  during the second quarter
ended July 31, 1998, which generated proceeds of $5.4 million.

Principal  reductions  on  long-term  debt were $25.0  million  for fiscal  1999
compared  to  $28.5  million  and  $20.8  million  for  fiscal  1998  and  1997,
respectively.  These amounts are primarily attributable to the repayment of debt
assumed as a result of certain business acquisitions.  Dividend payments of $8.8
million,  $8.1  million  and $8.5  million  during  fiscal  1999,  1998 and 1997
included cash dividends of pooled companies totaling $1.2 million,  $2.8 million
and $5.4 million, respectively.

As discussed in Note 4 of the Notes to Consolidated Financial Statements, in May
1998 the Company  issued $50 million of 6.74% senior notes due 2013 in a private
placement.   The  proceeds  of  this  private  placement  were  used  to  reduce
indebtedness outstanding under the Company's credit agreement.

In January 1999, the Company entered into a new credit agreement with a group of
banks.  The credit  agreement  permits the Company to borrow up to $300  million
($180 million previously),  with an option to increase the borrowing capacity to
$350  million.  With this  facility,  the Company  believes it has the resources
necessary,  with  approximately $156 million available under its existing credit
facilities (subject to borrowing  limitations under long-term debt covenants) as
of January 29, 1999,  to fund ongoing  operating  requirements  and  anticipated
capital


30
<PAGE>

expenditures.  The Company also believes it has sufficient borrowing capacity to
take  advantage of growth and  business  acquisition  opportunities  and to fund
share  repurchases in the near term. The Company  expects to continue to finance
future expansion on a  project-by-project  basis through additional borrowing or
through the issuance of common stock.

Business Acquisitions

In addition to the  business  combination  with  Winn-Lange  accounted  for as a
pooling of interests,  during fiscal 1999 the Company acquired several wholesale
distributors for  approximately $58 million ($40 million in cash and $18 million
in stock).  In fiscal 1998,  consideration  paid by the Company for acquisitions
(excluding poolings of interests) was approximately $144 million ($48 million in
cash  and  $96  million  in  stock).   Outlays  for  acquisitions  of  wholesale
distributors  in fiscal 1997  (excluding  poolings of  interests)  totaled  $144
million ($100 million in cash and $44 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.  The acquisitions
completed in fiscal 1999,  along with the merger of  Winn-Lange,  were primarily
responsible  for the increase in the number of the Company's  branches to 438 as
of the end of fiscal  1999,  compared  to 384  branches  as of the end of fiscal
1998.

Share Repurchases

On March 15, 1999,  the Board of Directors  authorized the Company to repurchase
up to 2.5 million of its outstanding shares of common stock.  Repurchases may be
made  from  time to time in open  market  transactions  and are  expected  to be
financed  through  additional  borrowing under the Company's  credit  agreement.
Through March 31, 1999, the Company  repurchased 370,800 shares for a total cost
of $8.1 million or an average of $21.82 per share.

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 stainless
steel,  nickel alloys,  copper,  aluminum,  plastic and other  commodities.  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 that  inflation  (which has been moderate over the past few
years) and changing prices did not significantly  affect the Company's operating
results or markets in fiscal 1998 and 1997.  As previously  discussed,  however,
the Company's results of operations for fiscal 1999 were negatively  impacted by
deflationary pressure on the pricing of certain commodity-priced  products. Such
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.

RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Financial  Accounting Standards No. 131, Disclosures about Segments
of an Enterprise  and Related  Information  ("SFAS  131"),  was effective in the
period  ended  January 29,  1999.  SFAS 131  superseded  Statement  of Financial
Accounting  Standards  No. 14,  Financial  Reporting  for Segments of a Business
Enterprise,  replacing the  "industry  segment"  approach with the  "management"
approach.  The management approach designates the internal  organization that is
used by management for making operating  decisions and assessing  performance as
the  source  of  a  company's  reportable  segments.   SFAS  131  also  requires
disclosures  about products and services,  geographic areas and major customers.
As the  Company  operates  in one  reportable  segment,  SFAS 131 did not have a
material impact on its financial reporting.


                                                                              31
<PAGE>

HUGHES SUPPLY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


In March 1998, The American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  98-1,  Accounting  for the Costs of  Computer  Software
Developed  or Obtained for Internal Use ("SOP  98-1").  SOP 98-1  provides  that
software  development costs,  including external direct costs,  internal payroll
and related costs,  and interest  costs be capitalized  and amortized over their
useful lives. As the Company's  previous  accounting  policy was consistent with
the provisions of SOP 98-1, there was no impact as a result of its adoption.

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.

All  required  modifications  to the  Company's  central  operating  system were
completed  in  December  1998.  This  system  was  thoroughly   tested  and  the
modifications  were  implemented into the production  environment.  An upgraded,
vendor-certified  year 2000 compliant version of the Company's accounting system
was received and tested for compatibility with the version currently being used.
The Company's own internal  verification  and  validation  testing for year 2000
compliance of the accounting system is expected to be completed by May 31, 1999.
With respect to these two systems, the Company does not anticipate that the Year
2000 Issue will materially impact its operations or operating results.

As of March 5, 1999, the Company had 30 remote operating systems in place. These
systems utilize commercially available business software applications. Of the 30
remote  operating  systems,  six are  certified  year  2000  compliant  by their
vendors,  five have  vendor-certified year 2000 compliant upgrades available and
the  remaining 19 systems will be removed from service and replaced  with one of
the  Company's  systems  that is expected to be year 2000  compliant.  Of the 19
systems to be replaced,  12 resulted from acquisitions  completed on or prior to
July 31, 1998 and are  expected to be replaced by July 31, 1999.  The  remaining
seven systems resulted from  acquisitions  completed after July 31, 1998 and are
expected to be replaced by October 31, 1999.

The Company will conduct its own internal verification and validation testing on
each of the vendor-certified year 2000 compliant systems that are expected to be
in use on January 1, 2000. These tests are scheduled to be completed by July 31,
1999 for entities  acquired on or prior to July 31, 1998 and by October 31, 1999
for entities  acquired from August 1, 1998 through March 5, 1999. All additional
remote operating  systems added after March 5, 1999 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,  or  replaced  with one of the
Company's systems that is expected to be year 2000 compliant.

Management  estimates  total pretax costs  relating to the Year 2000 Issue to be
approximately $2 million. Approximately 11% of these costs were incurred through
January 29, 1999 and the  remaining  costs are  expected to be incurred  through
March 2000.  The estimate of $2 million  excludes  certain  costs of  converting
remote  operating  systems to the Company's  other year 2000 compliant  systems,
because  such  costs  are not  expected  to be  material  or the  conversion  is
scheduled to be performed as part of


32
<PAGE>


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 to assess the
risk of these  entities not being able to continue to provide goods and services
to the Company. Initial responses received from these entities indicate that the
majority  of  them  have   programs  in  place  to  address   their   respective
organization's Year 2000 Issues. However, because the Company believes this area
is among its greatest risks, as more information is received and evaluated,  the
Company intends to develop contingency plans, as deemed necessary,  to safeguard
its  ongoing   operations.   Such  contingency  plans  may  include  identifying
alternative  suppliers or service providers,  stockpiling certain inventories if
alternative  sources  of supply  are not  available,  evaluating  the impact and
creditworthiness  of  non-compliant  customers  and the  addition  of  borrowing
capacity if deemed  necessary to finance  higher  levels of inventory or working
capital on an interim basis.


                                                                              33
<PAGE>

HUGHES SUPPLY, INC.
SELECTED FINANCIAL DATA
(in thousands, except per share data and ratios)

<TABLE>
<CAPTION>
                                                                   Fiscal Years Ended(1)(2)
                                                 -----------------------------------------------------------
                                                      1999           1998           1997            1996
------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>             <C>             <C>
STATEMENTS OF INCOME DATA:
Net sales ..................................     $2,536,265      $1,945,446      $1,619,362      $1,326,978
Cost of sales ..............................     $1,977,266      $1,519,323      $1,276,481      $1,052,120
Gross margin ...............................          22.0%           21.9%           21.2%           20.7%
------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses     $  416,642      $  318,923      $  261,355      $  218,093
  As a percentage of net sales .............          16.4%           16.4%           16.1%           16.4%
Depreciation and amortization ..............     $   23,269      $   18,727      $   15,566      $   11,859
Provision for doubtful accounts ............     $    1,882      $    1,229      $    1,023      $    2,203
Operating income ...........................     $  117,206      $   87,244      $   64,937      $   42,703
Operating margin ...........................           4.6%            4.5%            4.0%            3.2%
------------------------------------------------------------------------------------------------------------
Interest and other income ..................     $    6,886      $    5,837      $    6,241      $    5,111
Interest expense ...........................     $   25,415      $   19,257      $   14,842      $   10,440
------------------------------------------------------------------------------------------------------------
Income before income taxes .................     $   98,677      $   73,824      $   56,336      $   37,374
  As a percentage of net sales .............           3.9%            3.8%            3.5%            2.8%
Income taxes (benefits) ....................     $   37,234      $   26,254      $   19,282      $   11,728
Net income .................................     $   61,443      $   47,570      $   37,054      $   25,646
  As a percentage of net sales .............           2.4%            2.4%            2.3%            1.9%
------------------------------------------------------------------------------------------------------------
Earnings per share:
  Basic ....................................     $     2.57      $     2.37      $     2.13      $     1.78
  Diluted ..................................     $     2.55      $     2.33      $     2.09      $     1.75
------------------------------------------------------------------------------------------------------------
Average shares outstanding:
  Basic ....................................         23,889          20,108          17,384          14,418
  Diluted ..................................         24,138          20,432          17,719          14,647

BALANCE SHEET DATA:
Working capital ............................     $  567,435      $  486,106      $  350,975      $  235,113
Total assets ...............................     $1,123,513      $  965,742      $  684,056      $  474,574
Long-term debt, less current portion .......     $  402,203      $  343,197      $  228,351      $  139,165
Shareholders' equity .......................     $  483,956      $  421,769      $  299,233      $  188,926
------------------------------------------------------------------------------------------------------------
Current ratio...............................       3.5 to 1        3.5 to 1        3.3 to 1        2.6 to 1
Ratio of long-term debt to
  total capital employed....................       .45 to 1        .45 to 1        .43 to 1        .42 to 1

Leverage (total assets/shareholders' equity)           2.32            2.29            2.29            2.51

OTHER DATA:
Cash dividends per share ...................     $      .33      $      .31      $      .25      $      .20
Shareholders' equity per share .............     $    20.01      $    18.00      $    15.29      $    12.64
Return on average assets ...................           5.9%            5.8%            6.4%            5.7%
Return on average shareholders' equity .....          13.6%           13.2%           15.2%           14.5%
Capital expenditures(3) ....................     $   26,921      $   28,185      $   16,898      $   14,713
------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The Company's fiscal year ends on the last Friday in January.
(2)  All data adjusted for poolings of interests and three-for-two stock splits
     declared in fiscal 1998 and 1989.
(3)  Excludes capital leases.


34
<PAGE>

<TABLE>
<CAPTION>
                                                                Fiscal Years Ended(1)(2)
                                                 ------------------------------------------------------
                                                    1995           1994          1993          1992
-------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>           <C>           <C>
STATEMENTS OF INCOME DATA:
Net sales ..................................     $1,065,549      $880,977      $724,466      $ 690,311
Cost of sales ..............................     $  848,698      $704,907      $583,513      $ 557,380
Gross margin ...............................          20.4%         20.0%         19.5%          19.3%
-------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses     $  172,828      $145,913      $119,732      $ 116,317
  As a percentage of net sales .............          16.2%         16.6%         16.5%          16.8%
Depreciation and amortization ..............     $   10,131      $  8,657      $  7,382      $   7,987
Provision for doubtful accounts ............     $    1,501      $  2,448      $  2,028      $   3,247
Operating income ...........................     $   32,391      $ 19,052      $ 11,811      $   5,380
Operating margin ...........................           3.0%          2.2%          1.6%            .8%
-------------------------------------------------------------------------------------------------------
Interest and other income ..................     $    3,206      $  3,677      $  4,072      $   2,696
Interest expense ...........................     $    6,813      $  6,456      $  6,087      $   7,702
-------------------------------------------------------------------------------------------------------
Income before income taxes .................     $   28,784      $ 16,273      $  9,796      $     374
  As a percentage of net sales .............           2.7%          1.8%          1.4%            .1%
Income taxes (benefits) ....................     $    7,984      $  4,710      $  1,734      $  (1,359)
Net income .................................     $   20,800      $ 11,563      $  8,062      $   1,733
  As a percentage of net sales .............           2.0%          1.3%          1.1%            .3%
-------------------------------------------------------------------------------------------------------
Earnings per share:
  Basic ....................................     $     1.54      $    .97      $    .68      $     .15
  Diluted ..................................     $     1.50      $    .92      $    .68      $     .15
-------------------------------------------------------------------------------------------------------
Average shares outstanding:
  Basic ....................................         13,504        11,900        11,899         11,899
  Diluted ..................................         13,992        13,675        11,917         11,899

BALANCE SHEET DATA:
Working capital ............................     $  212,573      $171,702      $148,919      $ 134,961
Total assets ...............................     $  418,717      $330,526      $294,510      $ 276,439
Long-term debt, less current portion .......     $  127,166      $121,292      $103,870      $  89,921
Shareholders' equity .......................     $  165,427      $116,918      $106,597      $  99,649
-------------------------------------------------------------------------------------------------------
Current ratio...............................       2.7 to 1      2.9 to 1      2.8 to 1       2.6 to 1
Ratio of long-term debt to
  total capital employed....................       .43 to 1      .51 to 1      .49 to 1       .47 to 1

Leverage (total assets/shareholders' equity)           2.53          2.83          2.76           2.77

OTHER DATA:
Cash dividends per share ...................     $      .15      $    .11      $    .08      $     .16
Shareholders' equity per share .............     $    11.40      $   9.43      $   8.71      $    8.14
Return on average assets ...................           5.6%          3.7%          2.8%            .6%
Return on average shareholders' equity .....          14.7%         10.3%          7.8%           1.7%
Capital expenditures(3) ....................     $   15,824      $  9,997      $ 10,335      $   6,073
-------------------------------------------------------------------------------------------------------


<CAPTION>
                                                        Fiscal Years Ended(1)(2)
                                                 -------------------------------------
                                                   1991          1990          1989
--------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>
STATEMENTS OF INCOME DATA:
Net sales ..................................     $752,951      $706,860      $655,648
Cost of sales ..............................     $608,322      $565,386      $520,592
Gross margin ...............................        19.2%         20.0%         20.6%
--------------------------------------------------------------------------------------
Selling, general and administrative expenses     $117,649      $107,882      $ 97,695
  As a percentage of net sales .............        15.6%         15.3%         14.9%
Depreciation and amortization ..............     $  9,929      $  9,743      $  9,289
Provision for doubtful accounts ............     $  3,119      $  2,962      $  1,724
Operating income ...........................     $ 13,932      $ 20,887      $ 26,348
Operating margin ...........................         1.9%          3.0%          4.0%
--------------------------------------------------------------------------------------
Interest and other income ..................     $  4,732      $  3,348      $  4,116
Interest expense ...........................     $  9,850      $  8,911      $  7,654
--------------------------------------------------------------------------------------
Income before income taxes .................     $  8,814      $ 15,324      $ 22,810
  As a percentage of net sales .............         1.2%          2.2%          3.5%
Income taxes (benefits) ....................     $  2,058      $  4,937      $  7,732
Net income .................................     $  6,756      $ 10,387      $ 15,078
  As a percentage of net sales .............          .9%          1.5%          2.3%
--------------------------------------------------------------------------------------
Earnings per share:
  Basic ....................................     $    .58      $    .84      $   1.21
  Diluted ..................................     $    .58      $    .81      $   1.13
--------------------------------------------------------------------------------------
Average shares outstanding:
  Basic ....................................       11,746        12,374        12,499
  Diluted ..................................       11,746        14,062        14,182

BALANCE SHEET DATA:
Working capital ............................     $143,011      $140,226      $129,526
Total assets ...............................     $273,216      $285,434      $263,364
Long-term debt, less current portion .......     $ 99,261      $ 94,409      $ 85,994
Shareholders' equity .......................     $102,094      $107,113      $103,070
--------------------------------------------------------------------------------------
Current ratio...............................     3.0 to 1      2.7 to 1      2.8 to 1
Ratio of long-term debt to
  total capital employed....................     .49 to 1      .47 to 1      .45 to 1

Leverage (total assets/shareholders' equity)         2.68          2.66          2.56

OTHER DATA:
Cash dividends per share ...................     $    .24      $    .23      $    .21
Shareholders' equity per share .............     $   8.64      $   8.54      $   8.05
Return on average assets ...................         2.4%          3.8%          6.1%
Return on average shareholders' equity .....         6.5%          9.9%         15.2%
Capital expenditures(3) ....................     $  8,877      $ 11,844      $ 10,295
--------------------------------------------------------------------------------------
</TABLE>


                                                                              35
<PAGE>

HUGHES SUPPLY, INC.
CORPORATE AND SHAREHOLDER INFORMATION


DIRECTORS

David H. Hughes
Chairman of the Board

John D. Baker II
President and Chief Executive Officer,
Florida Rock Industries, Inc.

Robert N. Blackford
Attorney, Holland & Knight LLP

H. Corbin Day
Chairman,
Jemison Investment Co., Inc.

John B. Ellis
Former Senior Vice President--
Finance and Treasurer,
Genuine Parts Company

A. Stewart Hall, Jr.

Vincent S. Hughes

William P. Kennedy
Chief Executive Officer,
Nephron Pharmaceuticals Corporation


EXECUTIVE OFFICERS
AND MANAGEMENT

David H. Hughes
Chairman of the Board and
Chief Executive Officer

A. Stewart Hall, Jr.
President and Chief Operating Officer

Benjamin P. Butterfield
Secretary and General Counsel

Jacquel K. Clark
Assistant Secretary and
Assistant Treasurer

Jasper L. Holland, Jr.
Regional Vice President

Clyde E. Hughes III
Regional Vice President

Russell V. Hughes
Vice President

Vincent S. Hughes
Vice President

James C. Plyler, Jr.
Regional Vice President

Kenneth H. Stephens
Regional Vice President

Sidney J. Strickland, Jr.
Vice President of Administration

Gradie E. Winstead, Jr.
Regional Vice President

J. Stephen Zepf
Treasurer and Chief Financial Officer


TRANSFER AGENT
AND REGISTRAR

American Stock Transfer
& Trust Company
40 Wall Street
New York, New York 10005


ANNUAL MEETING

Wednesday, May 19, 1999,
at 10:00 a.m., local time
Hughes Supply, Inc.
20 North Orange Avenue
Suite 200
Orlando, Florida 32801


INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
Orlando, Florida


CORPORATE HEADQUARTERS

Hughes Supply, Inc.
20 North Orange Avenue
Orlando, Florida 32801
Telephone: 407-841-4755


--------------------------------------------------------------------------------
The shares of Hughes Supply,  Inc. common stock are traded on the New York Stock
Exchange  under the symbol  "HUG." The  approximate  number of  shareholders  of
record as of February  19,  1999 was 1,226.  A COPY OF THE HUGHES  SUPPLY,  INC.
ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE  COMMISSION
WILL BE MADE AVAILABLE WITHOUT CHARGE, UPON WRITTEN REQUEST.  REQUESTS SHOULD BE
DIRECTED TO:

J. Stephen Zepf
Treasurer and Chief Financial Officer
Hughes Supply, Inc.
Post Office Box 2273
Orlando, Florida 32802


36