<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

(Mark One)
[X]  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
     Act of 1934 No Fee Required for the fiscal year ended December 26, 1997 or

[_]  Transition report pursuant to section 13 or 15(d) of the Securities
     Exchange Act of
     1934 No Fee Required for the transition period from ________ to ________

                        COMMISSION FILE NUMBER 0-27424
                                                --------

                            WILMAR INDUSTRIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE> 
          <S>                                         <C>                                  
                    New Jersey                                      22-2232386            
          -------------------------------             ------------------------------------
          (State or other jurisdiction of             (I.R.S. Employer Identification No.)
          incorporation or organization)                                                   
</TABLE> 
                303 Harper Drive                                 
             Moorestown, New Jersey                                08057  
      ----------------------------------------                   ----------
      (Address of principal executive offices)                   (Zip Code)

      Registrant's telephone number, including area code: (609) 439-1222
                                                          --------------

<TABLE>
<CAPTION>
  <S>                                                <C> 
  Securities registered pursuant to Section 
    12(b) of the Act: Title of each class            Name of each exchange on which registered
       Common Stock, without par value                         Nasdaq National Market
-------------------------------------------          ----------------------------------------- 
</TABLE>

       Securities registered pursuant to Section 12(g) of the Act: None
                                                                   ----

                               (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes  X   No
    ---                 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this annual report on Form 10-K or any amendment to
this annual report on Form 10-K. [X]

As of March 2, 1998, the aggregate market value of the Common Stock held by non-
affiliates of the registrant was $ 246,231,000. Such aggregate market value was
computed by reference to the closing sale price of the Common Stock as reported
on the National Market segment of The Nasdaq Stock Market on such date. For
purposes of making this calculation only, the registrant has defined affiliates
as including all directors and beneficial owners of more than ten percent of the
Common Stock of the Company.

As of March 2, 1998, there were 13,336,154 shares of the registrant's Common
Stock outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE:


As stated in Part III of this annual report on Form 10-K, portions of the
definitive proxy statement to be filed within 120 days after the end of the
fiscal year covered by this annual report on Form 10-K are incorporated herein
by reference.
<PAGE>
 
                            WILMAR INDUSTRIES, INC.

                            FORM 10-K ANNUAL REPORT

                    For Fiscal Year Ended December 26, 1997

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                     PAGE
                                                                           ----
<S>         <C>                                                            <C>
Item 1.     Business                                                         1

Item 2.     Properties                                                       4

Item 3.     Legal Proceedings                                                5

Item 4.     Submission of Matters to a Vote of Security Holders              5


PART II

Item 5.     Market for Registrant's Common Equity and Related
             Stockholder Matters                                             5

Item 6.     Selected Financial Data                                          6

Item 7.     Management's Discussion and Analysis of Financial
             Condition and Results of Operations                             7

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk      13

Item 8.     Financial Statements and Supplementary Data                     13

Item 9.     Changes In and Disagreements with Accountants on
             Accounting and Financial Disclosure                            13

PART III

Item 10.    Directors and Executive Officers of the Registrant              13

Item 11.    Executive Compensation                                          13

Item 12.    Security Ownership of Certain Beneficial Owners
              and Management                                                13

Item 13.    Certain Relationships and Related Transactions                  13


PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports
            on Form 8-K                                                     13
</TABLE>
<PAGE>
 
This document contains certain forward-looking statements that are subject to
risks and uncertainties.  Forward-looking statements include certain information
relating to future growth plans of the Company and its ability to compete with
its competitors, as well as information contained elsewhere in this Report where
statements are preceded by, followed by or include the words "believes,"
"expects," "anticipates" or similar expressions.  For such statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.  Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, those
discussed elsewhere in this Report and in the documents incorporated herein by
reference.

                                     PART I

ITEM 1.   BUSINESS.
------    -------- 

OVERVIEW

     Wilmar Industries, Inc. ("Wilmar" or the "Company") is a national marketer
and direct distributor of repair and maintenance products, principally to the
apartment housing market.  Through its 1,000+ page Wilmar Master Catalog, the
Company has become a "one-stop shopping" resource for maintenance managers by
offering the industry's most extensive selection of over 15,000 standard and
specialty plumbing, hardware, electrical, janitorial and related products.  By
purchasing directly from domestic and foreign manufacturers in relatively large
volumes, Wilmar is able to offer customers competitive prices on both name brand
and private label products.  The Company seeks to win new accounts and increase
sales to existing accounts through a direct sales force, outbound telesales
representatives, a national accounts sales program and monthly direct mail
flyers.  Customer service representatives located at Wilmar's regional call
centers use the Company's proprietary software applications to quickly process
orders and answer customer inquiries.  The Company provides free, next-day
delivery in local markets served by its distribution centers and ships by parcel
delivery services to other areas.  Since 1991, Wilmar has expanded from four
distribution centers located in Philadelphia, Washington, D.C., Houston and
Indianapolis to nineteen distribution centers located throughout the United
States. From 1992 to 1997, the Company's net sales increased at a compound
annual rate of 43.8%. From November 1995 through December 1997, Wilmar has
acquired eight regional repair and maintenance supply companies with total
annualized net sales of approximately $80 million. References in this report to
1995, 1996 and 1997 refers to the fiscal years ended December 29, 1995, December
27, 1996 and December 26, 1997, respectively.

ACQUISITIONS

     An important element of the Company's growth strategy has been to take
advantage of the highly fragmented nature of its industry by continuing to
explore strategic acquisitions.  The Company made several acquisitions in 1997,
as described below:

    In January 1997, the Company acquired certain assets of Pier-Angeli Group,
Inc. ("Pier-Angeli"), a distributor of plumbing and electrical supplies
primarily to the multi-family industry or apartment housing market.  The total
purchase price of the acquisition was paid in cash, including costs of
acquisition.  Goodwill and other intangibles recorded in connection with this
acquisition are being amortized on a straight-line basis over 3 to 30 years.

   In August 1997, the Company acquired certain assets of Lindley Plumbing and
Supply Company ("Lindley"), a distributor of plumbing supplies primarily to the
multi-family industry or apartment housing market.  The total purchase price of
the acquisition was paid in cash.  Goodwill and other intangibles recorded in
connection with this acquisition are being amortized on a straight-line basis
over 3 to 40 years.

    In September 1997, the Company acquired 100% of the capital stock of
Management Supply Company ("MSC"), a distributor of repair and maintenance
supplies, based in Farmington Hills, Michigan.  The purchase price of this
acquisition consisted of cash and common stock of the company and has been
allocated to the assets acquired based upon their estimated fair market values.
Goodwill and other intangibles recorded in connection with this acquisition are
being amortized on a straight-line basis over 3 to 40 years.

     The Company believes that there are additional attractive acquisition
candidates in both new and existing markets.  Acquisitions in new geographic
markets should permit the Company to acquire established accounts and gain
market presence quickly.  In addition to increasing sales, the Company believes
the acquisition of companies 

                                       1
<PAGE>
 
serving Wilmar's newly targeted end markets will accelerate the Company's growth
in these end markets. It is the Company's strategy to implement its business
model at each acquired company as soon as practical after each acquisition is
completed.

PRODUCTS AND MERCHANDISING

     Wilmar markets over 15,000 repair and maintenance products. These items
constitute a full range of standard and specialty products in the following
product categories: plumbing, hardware, electrical, chemical and janitorial,
appliance parts, window and floor coverings, heating, ventilating and air
conditioning ("HVAC"), and paint and paint accessories. Wilmar offers a broad
range of name brands such as Kwikset, Insinkerator, Delta Faucet, Moen, Philips
Lighting, and Briggs Plumbingware. In fiscal 1997, excluding unassimilated HMA
Enterprises, Inc. ("HMA") and MSC, private label products marketed under the
"Wilmar" and "Wilflo" names accounted for 17.7% of net sales, and no single
product accounted for more than 1.2% of the Company's net sales. Through its
inventory management system, the Company is able to identify sales trends and
adjust the Company's merchandise mix accordingly.

     Product Categories. For the periods presented, the approximate percentages
of the Company's net sales by product category, excluding unassimilated HMA and
MSC, were as follows:

<TABLE>
<CAPTION>
                                                       FISCAL YEAR
                                                   -------------------
PRODUCT CATEGORY                                   1995   1996   1997
----------------------------------------------------------------------
<S>                                                <C>    <C>    <C>
Plumbing.........................................    34%    29%    30%
Electrical.......................................    19     20     18
Hardware.........................................    18     16     15
Chemical and janitorial..........................     6      6      5
Appliances  .....................................    --     --      5
Appliance parts..................................     5      7      5
Window and floor coverings.......................     7      6      7
HVAC.............................................     5      7      8
Paint and paint accessories......................     3      3      3
Other............................................     3      6      4
                                                   ----   ----   ----
                                                   100%   100%   100%
</TABLE>

SALES AND MARKETING

The Company markets and sells through a direct sales force to all levels of the
customer's organization, including senior managers of property management
companies, local and regional property managers and, most importantly, on-site
maintenance managers. The Company's sales and marketing efforts are designed to
establish and solidify customer relationships through frequent contact, and to
emphasize the Company's broad product selection, reliable next-day delivery,
high level of customer service and competitive pricing. The Company's base of
active customers (customers that have purchased in the preceding 12 months) has
grown to approximately 38,000 at December 26, 1997. No single property accounted
for as much as 1% of the Company's net sales during fiscal 1997, although
approximately 1,800 properties managed by two large property management
companies accounted for an aggregate of 7.5% of Wilmar's net sales during this
period.

Wilmar maintains one of the largest direct sales forces in its industry. At
December 26, 1997, the Company had 175 field sales representatives covering 130
markets nationwide. The Company has found that it garners a greater percentage
of its customers' overall spending on repair and maintenance supplies in markets
serviced by local Wilmar sales representatives, particularly where local sales
representatives are supported by a nearby distribution center, thus enabling
free, next-day delivery of the Company's entire product line. To generate new
customers, the Company provides its sales representatives with lists of
prospective customers and generally expects them to call on existing customers
approximately every two weeks. In servicing existing customers, local sales
representatives are expected not only to generate orders but also to be problem
solvers. Typical problem solving services include shop organization, special
orders, part identification and complaint resolution. Local sales
representatives are compensated based on a combination of salary and commission.
The Company's sales force is managed by Wilmar's Vice President of Sales and six
regional sales managers. The Company also employs eight telesales
representatives whose responsibility is to obtain new customers and maintain
regular contact with active customers, principally in territories where the
Company does not employ a local field sales representative.

                                       2
<PAGE>
 
OPERATIONS

The Company receives all orders placed by customers or customers' local sales
representatives at its regional customer service centers via telephone through
the Company's toll-free "800" number and by fax. Calls are received by customer
service representatives who utilize on-line terminals to enter customer orders
into a fully computerized order processing system. Through this system, customer
service representatives access product availability, product location, pricing
and promotions information. Customer service personnel determine immediately
whether the product is available at the distribution center closest to the
customer and, if not, the closest distribution center with availability. As a
result, the customer service representative informs the customer immediately as
to when the product can be delivered. Customer service lines are open from 8:00
a.m. to 8:00 p.m. Eastern Standard Time. Once an order is entered into the
computer system by a customer service representative, a picking slip is
generated at the appropriate distribution center. Items on the picking slip are
automatically arranged by warehouse location sequence to facilitate ease of
picking within the distribution center. Distribution center personnel pick items
from 8:00 a.m. to 6:00 p.m. and all orders received before 3:00 p.m. are readied
for shipment on the same day. Wilmar uses bar-coding on all orders to track
shipment and delivery status. Most sales are billed on net 30 day terms, with
the balance paid by credit card at the time of sale. The Company seeks to
carefully manage inventory to assure product availability and minimize inventory
shrinkage. The Company regularly performs cycle counts of key inventory items.

Wilmar attempts to ship its products in the most cost-effective and efficient
manner. For customers located within the local delivery radius of a distribution
center (typically 50 miles), Wilmar's own trucks or a contract delivery service
will deliver the products directly to the customer the next day, at no charge
for orders over $25. For customers located outside the local delivery radius of
a distribution center, the Company will deliver products via UPS or another
parcel delivery company or, in the case of large orders, by less-than-truckload
common carrier. For these customers, the Company imposes a $25 minimum order
size and does not charge delivery costs if the customer's order exceeds $50,
except for heavy or oversized products marked in the catalog with a "plus
freight" symbol.

The Company arranges for pick-up of returns at no charge to the customer in the
local delivery radius. For customers outside the local delivery radius, the
Company provides parcel service pick-up of the returns at no charge plus full
refund if the return is the result of Company error. In 1997, the Company's
return rate was approximately 4.7% of sales. The company offers 12-year
warranties on its "Wilflo" faucets and one-year warranties on its "Wilmar"
ceiling fans and "Wilmar" garbage disposals.


COMPETITION

The Company believes that the principal competitive factors in the distribution
of repair and maintenance products to the apartment housing market and similar
markets are the breadth and quality of products offered, reliability of
delivery, customer service, product pricing and sales relationships. The Company
believes it competes favorably with respect to these factors.

Although there are a large number of repair and maintenance distributors in the
United States, based on industry reports and its own experience, the Company
believes that most of them operate in a single region (often with a single
distribution center) and have significantly less annual sales than the Company.
However, there is a trend toward consolidation in the repair and maintenance
distribution industry, and several competitors are building a national presence
and are marketing to the apartment housing market. In addition, the Company
competes with mail order catalog companies, retail stores including superstores,
specialty suppliers and industrial suppliers. Certain of the Company's
competitors have greater financial resources and sell more products than Wilmar.

                                       3
<PAGE>
 
EMPLOYEES

The Company employed 764 people as of December 26, 1997. Of these, 175 were in
sales, 8 in telesales, 89 in customer service, 364 in operations and 128 in
management and administration. Fifty-six of the Company's distribution center
employees and truck drivers at the Philadelphia distribution center are covered
by a collective bargaining agreement with Highway Truck Drivers and Helpers
Local 107, which is affiliated with the International Brotherhood of Teamsters.
This agreement expires in May 1998. The Company has never experienced a work
stoppage, and believes its relations with its employees are good.


ITEM 2.   PROPERTIES
------    ----------

The Company leases approximately 12,500 square feet of office space in
Moorestown, New Jersey from William Green, Chairman, President, and Chief
Executive Officer of the Company, for its headquarters (see Note 9 to the
Consolidated Financial Statements). The Company leases the following
distribution centers:

<TABLE>
<CAPTION>
                                                       CURRENT          YEAR
DISTRIBUTION CENTER                                SQUARE FOOTAGE  OPENED/ACQUIRED
-----------------------------------------------------------------------------------
<S>                                                <C>             <C>
Washington, D.C..................................      28,500             1982
Houston, TX......................................      25,000             1987
Indianapolis, IN.................................      16,000             1991
Fresno, CA.......................................      14,400             1992
Tampa, FL........................................      36,700             1994
Columbus, OH.....................................      20,800             1995
Seattle, WA......................................      16,200             1995
Miami, FL (One Source)...........................      37,000             1995*
Denver, CO (Mile High)..........................       27,100             1996*
Houston, TX (HMA)................................      55,000             1996*
San Antonio, TX (HMA)............................       5,700             1996*
Philadelphia, PA.................................      70,000             1996/(1)/
Chicago, IL (Pier-Angeli)........................      18,800             1997*
Dallas, TX.......................................      50,400             1997
Charlotte, NC....................................      24,000             1997
Phoenix, AZ......................................      24,000             1997
Farmington Hills, MI (MSC).......................      70,000             1997*
Berkley, MI (MSC)...............................        8,000             1997*
Atlanta, GA.....................................       28,800             1997/(2)/
</TABLE>

__________________________________
*    Distribution center acquired.

     /(1)/In September 1996, the Company moved its Philadelphia distribution
     center, opened in 1978, to a new 70,000 square foot facility, which also
     houses the Company's national call center. This distribution center is
     leased from 804 Eastgate Associates LLC, a related party (see Note 9 to
     the Consolidated Financial Statements).

     /(2)/In December 1997, the Company moved its Atlanta Distribution Center,
     opened in 1993, to a larger facility.

These properties are leased for periods of three to ten years and generally do
not include tenant renewal options. The Company believes its current facilities
are adequate for its current and reasonably foreseeable needs and that suitable
additional or alternative space will be available as needed to accommodate
future growth and to open additional distribution centers.

                                       4
<PAGE>
 
ITEM 3.    LEGAL PROCEEDINGS.
------     ----------------- 

The Company is involved in various legal proceedings in the ordinary course of
its business which are not anticipated to have a materially adverse effect on
the Company's results of operations or financial condition.

The Company collects sales tax in the 32 states where it has the required
contacts. From time to time, various states have sought to impose on direct
marketers the burden of collecting use taxes on the sale of products shipped to
residents of these states. The United States Supreme Court held that it is
unlawful for a state to impose use tax collection obligations on an out-of-state
company whose only contacts with the state were the distribution of catalogs and
other advertising materials through the mail and subsequent delivery of
purchased goods by mail or common carrier. In the event legislation is passed to
overturn the Supreme Court's decision, the imposition of a use tax collection
obligation on the Company in states into which it ships products but with which
it has no other contacts would result in additional administrative expense to
the Company and higher prices to customers.


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

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.


PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
------    --------------------------------------------------------------------- 

Since completing its initial public offering of Common Stock in the first
quarter of 1996, the Company's Common Stock has been listed on the National
Market segment of The Nasdaq Stock Market ("Nasdaq National Market") under the
symbol "WLMR." The following table sets forth the high and low stock prices for
each quarter in 1997 and 1996, as quoted on The Nasdaq National Market.


<TABLE>
<CAPTION>
Fiscal Year 1997                                High               Low
----------------                            ------------       -----------
<S>                                         <C>                <C>
  First Quarter                                  $27.50            $15.50
  Second Quarter                                 $26.75            $15.25
  Third Quarter                                  $29.75            $23.50
  Fourth Quarter                                 $27.88            $22.00
 
Fiscal Year 1996 
---------------- 
  First Quarter                                  $22.50            $15.00
  Second Quarter                                 $28.25            $19.50
  Third Quarter                                  $26.25            $17.75
  Fourth Quarter                                 $27.75            $20.25

</TABLE>

At March 2, 1998, there were no shares of Preferred Stock Outstanding. On March
2, 1998, the closing sale price for a share of Common Stock as reported by The
Nasdaq National Market was $22.50. As of March 2, 1998, there were approximately
1,550 holders of the Company's Common Stock. The Company did not declare
dividends on its Common Stock in Fiscal Year 1997 or in the Fiscal Year 1996 and
does not intend to declare dividends on its Common Stock in the foreseeable
future.

                                       5
<PAGE>
 
ITEM 6.   SELECTED FINANCIAL DATA.  
------    -----------------------                                            

The selected financial and operating data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company, including
the notes thereto included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The selected
financial data for the fiscal years presented have been derived from the
Company's financial statements, which have been audited by independent auditors.

<TABLE>
<CAPTION>
                                                         FISCAL YEAR /(1)/
                                                         -----------------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                                            1993      1994      1995       1996       1997
                                          --------  --------  ---------  ---------  ---------
<S>                                       <C>       <C>       <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net Sales                                  $35,640   $47,679  $ 60,823   $100,644   $150,792
Cost of Sales /(2)/                         24,735    32,787    41,835     70,853    106,605
                                           -------   -------  --------   --------   --------
Gross Profit                                10,905    14,892    18,988     29,791     44,187
Operating and Selling Expenses               5,400     7,068     9,099     14,168     21,024
Corporate General & Admin. Expenses          2,393     2,895     3,985      6,718      9,857
Non-Recurring Severance Expenses                --        --        --         --        259
Bonuses of S Corporation shareholders        1,463        --        --         --         --
                                           -------   -------  --------   --------   --------
Operating Income                             1,649     4,929     5,904      8,905     13,047
Interest expense (income), net                 173       289     1,164       (551)    (1,580)
                                           -------   -------  --------   --------   --------
Income before income taxes                   1,476     4,640     4,740      9,456     14,627
                                           -------   -------  --------   --------   --------
Income tax provision /(3)/                     586     1,860     1,896      3,593      5,393
                                           -------   -------  --------   --------   --------
Net income /(3)/                           $   890   $ 2,780  $  2,844   $  5,863   $  9,234
                                           =======   =======  ========   ========   ========
Net income per share /(3),(5)/
  - Basic                                              $0.31     $0.37      $0.53       $.70
                                                     =======  ========   ========   ========
  - Diluted                                            $0.31     $0.36      $0.51       $.69 
                                                     =======   =======   ========   ========  
 
Weighted average common shares /(4),(5)/
  - Basic                                              9,071     7,765     11,105     13,165
                                                     =======  ========   ========   ======== 
  - Diluted                                            9,071     7,868     11,458     13,335 
                                                     =======  ========   ========   ======== 
 
BALANCE SHEET DATA
Working capital (deficit)                  $ 3,818   $ 4,367  $    (54)  $ 65,300     64,848
Total assets                                 9,866    14,561    26,871     88,309    108,115
Long-term debt, less current position        1,817     2,693     5,667         --        500
Mandatorily-redeemable preferred stock          --        --    25,058         --         --
Total stockholders' equity (deficit)         2,468     2,719   (27,062)    75,500     90,549
</TABLE>

/(1)/ The Company's fiscal year is based on a 52/53 week fiscal period ending on
      the last Friday in December. Fiscal 1993 was a 53 week year while all
      other fiscal years consist of 52 weeks.
/(2)/ Cost of sales includes merchandise, freight, distribution center occupancy
      and delivery costs.
/(3)/ Prior to March 1, 1995, the Company elected to be taxed as an S
      Corporation for federal (and certain state) income tax purposes. Pro forma
      information has been computed as if the Company had been subject to
      federal income taxes and all applicable state corporate income taxes for
      each period presented. The income tax provision and net income for 1997
      and 1996 are actual amounts.
/(4)/ See Note 2 to the Consolidated Financial Statements for description of the
      determination of weighted average common shares outstanding.
/(5)/ Net income per share data for 1996 and earlier years have been restated to
      reflect the adoption of SFAS No. 128, "Earnings Per Share" (see Note 2 to
      the Consolidated Financial Statements).

                                       6
<PAGE>
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
-------   ----------------------------------------------------------------------
OF OPERATIONS
-------------


OVERVIEW

   Wilmar was founded in 1978 by its current Chief Executive Officer, William
Green, and his father, Martin Green, to provide reliable, next-day delivery of
repair and maintenance products to customers in its original Philadelphia
market.  Since its inception, the Company has experienced significant growth.
The Company opened its second distribution center in Washington, D.C. in 1982
and its third in Houston in 1987.  Since 1991, the Company has accelerated its
growth, opening nine distribution centers: Indianapolis (1991), Fresno (1992),
Atlanta (1993), Tampa (December 1994), Columbus (July 1995), Seattle (October
1995), Dallas (February 1997), Charlotte, (March 1997) and Phoenix (June 1997).
From November 1995 through December 1997, the Company has acquired seven
additional distribution centers through acquisitions: Miami (November 1995),
Denver (May 1996), Houston (July 1996), San Antonio (July 1996), Chicago
(January 1997), Farmington Hills, Michigan and Berkley, Michigan (September
1997).

   The 1995 Recapitalization.  In March 1995, the Company effected a
recapitalization (the "1995 Recapitalization").  As an integral part of the 1995
Recapitalization, the Company made a dividend distribution to William Green, the
sole shareholder of the Company at that time, in the form of 105,914 shares of
Series B Junior Preferred Stock with a redemption value of $10.6 million, to be
amended as described below.  The Company issued 129,450 shares of its Series A
Senior Preferred Stock to Summit Ventures III, L.P.,  Summit Investors II, L. P.
and Summit Subordinated Debt Fund, L. P.  (collectively, the "Summit Investors")
for a purchase price of $12.9 million.  All of the outstanding Series A Senior
Preferred Stock was redeemed, by its terms, for $12.9 million (plus accrued
dividends estimated at $900,000) upon consummation of the Company's initial
public offering in January 1996.  The Company used the proceeds of the
investment by Summit to redeem 3,584,000 shares of Common Stock held by William
Green for $15.1 million.  As deferred consideration for the redemption of Mr.
Green's Common Stock in connection with the 1995 Recapitalization, the Company
issued a $2.0 million note to Mr. Green on November 22, 1995, payable only if
the Company satisfies certain earnings targets in 1995 and 1996, or upon the
earlier consummation of a qualified liquidity event, including the initial
public offering.  The Company paid the note with a portion of the proceeds of
its initial public offering in January 1996.  In connection with the 1995
Recapitalization, the Company issued 3,080,000 shares of its Common Stock to the
Summit Investors for an aggregate purchase price of $55,000.  As a result of the
1995 Recapitalization, the Company incurred significant interest expense and was
required to accrue preferred dividends from March 9, 1995 through the initial
public offering in January 1996.  In connection with Wilmar's initial public
offering, William Green agreed to convert $5.0 million of his Series B Junior
Preferred Stock into Common Stock at the initial public offering price of
$11.00. Simultaneously with the initial public offering, the terms of the Series
B Junior Preferred Stock were amended to provide that $5.0 million of Mr.
Green's Series B Junior Preferred Stock would be converted into 454,545 shares
of Common Stock, and the balance would be redeemed for $5.6 million (plus
accrued dividends of approximately $700,000).

   S Corporation Status.  From its inception until March 1, 1995, the Company
was subject to federal income taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended and the regulations promulgated there under
(the "Code"). As a result, for federal and certain state income tax purposes,
the net income of the Company was reported by and taxed directly to its
shareholders, rather than to the Company. Accordingly, the Company has
calculated pro forma income tax provision, pro forma net income and pro forma
income per share for the 1995 fiscal year and prior as if the Company were a C
Corporation subject to all federal and applicable state income taxes. The
effective tax rate used in calculating the pro forma income tax provision was
approximately 40% for all periods. In connection with the termination of its S
Corporation status, the Company distributed to William Green, the Company's then
sole shareholder, an aggregate of approximately $5.2 million between late 1994
and early 1995. These distributions represented the Company's income previously
taxed to Mr. Green, net of prior distributions to him.

                                       7
<PAGE>
 
   Acquisitions.  In 1997, the Company acquired certain assets of Pier-Angeli
and Lindley, distributors of plumbing and electrical supplies primarily to the
multi-family industry or apartment housing market. The total purchase price for
these acquisitions was paid in cash.

In September 1997, the Company acquired 100% of the capital stock of MSC, a
distributor of repair and maintenance supplies, based in Farmington Hills,
Michigan. The purchase price of this acquisition consisted of cash and common
stock of the company and has been allocated to the assets acquired based upon
their estimated fair market values.

The Company accounted for the three 1997 acquisitions as purchases for financial
reporting purposes. The Company paid an aggregate purchase price of
approximately $20.1 million. The resulting goodwill of approximately $12.6
million is amortized on a straight-line basis over 30-40 years and other
intangible assets of approximately $2.0 million are amortized over 3 to 20
years.

In July 1996, the Company acquired 100% of the capital stock of HMA for a base
purchase price of $7.6 million, including costs of acquisition, plus contingent
consideration $750,000. Also during 1996, the Company completed three additional
acquisitions (Mile High Maintenance Supply, Inc. ("Mile High"), Sun Valley
Maintenance Supply, Inc. ("Sun Valley"), and Aaron Distributing, Inc. ("Aaron"))
for an aggregate purchase price of approximately $4.4 million. The Company
accounted for the four 1996 acquisitions as purchases for financial reporting
purposes. The resulting goodwill of approximately $4.7 million is amortized on a
straight-line basis over 30 years and other intangible assets of $1.8 million
are amortized over 3 to 20 years.

The Company believes that there are additional attractive acquisition candidates
in both new and existing markets.  Acquisitions in  new geographic markets
should permit the Company to acquire established accounts and gain market
presence quickly.  In addition to increasing sales, the Company believes the
acquisition of companies serving Wilmar's newly targeted end markets will
accelerate the Company's growth in these end markets.  It is the Company's
strategy to implement its business model at each acquired company as soon as
practical after each acquisition is completed.


                                       8
<PAGE>
 
RESULTS OF OPERATIONS

   The following table sets forth statement of operations data as a percentage
of net sales for the periods indicated.

<TABLE>
<CAPTION>
                                                            Fiscal Year
                                                 ------------------------------
 
                                                     1995      1996     1997
                                                 --------     -----    -----
<S>                                              <C>          <C>      <C> 
Net Sales                                           100.0%    100.0%   100.0%
                                                                               
Cost of Sales                                        68.8      70.4     70.7   
                                                 --------     -----    -----   
                                                                               
Gross Profit                                         31.2      29.6     29.3   
                                                                               
Operating and Selling Expenses                       15.0      14.1     13.9   
                                                                               
Corporate General and Administrative Expenses         6.5       6.7      6.5   
                                                                               
Non-Recurring Severance Expenses                      --        --       0.2 
                                                 --------     -----    -----   
                                                                               
Operating Income                                      9.7       8.8      8.7   
                                                                               
Interest expense (income), net                        1.9      (0.6)    (1.0)   
                                                 --------     -----    -----   
                                                                               
Income before income taxes                            7.8       9.4      9.7   
                                                 --------     -----    -----   
                                                                               
Income tax provision                               3.1/(1)/     3.6      3.6   
                                                 --------     -----    -----   
                                                                               
   Net Income                                         4.7%      5.8%     6.1%   
                                                 ========     =====    =====    
</TABLE>

   /(1)/ Prior to March 1, 1995, the Company elected to be taxed as an S
   Corporation for federal (and certain state) income tax purposes. Pro forma
   information has been computed as if the Company had been subject to federal
   income taxes and all applicable state corporate income taxes for 1995. 


FISCAL 1997 COMPARED TO FISCAL 1996

Net Sales. Net sales increased by $ 50.1 million, or 49.8%, to $ 151 million in
1997 from $ 101 million in 1996. This increase was primarily attributable to the
acquisitions of Mile High, HMA, MSC, and certain assets of Sun Valley, Aaron,
Pier-Angeli, and Lindley, which occurred in May 1996, July 1996, September 1997,
May 1996, November 1996, January 1997, and August 1997, respectively. In
addition, the maturation of the existing sales force, the Company's telesales
effort, increased sales to national accounts and a continuing investment in
"line-hauling" (the use of third party trucks to ship multiple orders from a
distribution center to other markets overnight followed by next day local
delivery), also contributed significantly to the Company's growth. The Company's
sales force at the end of 1997 was 175, an increase of 46 when compared with
1996. Price increases during both years were modest and made only on selected
items. During 1997, Wilmar generated approximately $5.1 million in net sales to
new end markets as a result of the Company's decision to target customers
outside its core apartment housing market beginning in 1995.

                                       9
<PAGE>
 
Gross Profit. Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
29.3% in 1997 compared to 29.6% in 1996. This expected decrease in the gross
margin resulted from the acquisition of HMA, whose historic gross margins have
been lower due to increased competition in the Texas market, as well as a higher
volume of less profitable HVAC equipment and major appliance sales. In addition,
the acquisition of MSC, whose historic gross margins reflect its higher volume
in lower margin major appliances, the increased delivery expenses associated
with "line-hauling" to new markets, as well as higher relative occupancy costs
relating to the operation of the Company's new distribution centers in Chicago,
Dallas, Phoenix and Charlotte also contributed to the decrease in gross margin.

Operating and Selling Expenses. Operating and selling expenses consist of labor
and other costs associated with operating a distribution center as well as
selling expenses and commissions. Operating and selling expenses increased by
$6.8 million, or 48.4%, to $21.0 million in 1997 from $14.2 million in 1996. As
a percentage of net sales, these expenses represented 13.9% in 1997 compared to
14.1% in 1996. The decrease resulted primarily from the acquisition of HMA,
which operates three mature distribution centers and employs a mature sales
force. Historically, the Company's operating and selling expenses as a
percentage of sales have been higher than HMA's due to the Company's investment
in new, immature distribution centers and its rapidly expanding sales force.

Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $ 3.2 million, or 46.7%, to $ 9.9 million
in 1997 from $ 6.7 million in 1996. This increase is primarily the result of the
enhanced staffing required to manage a larger volume of business and an increase
in amortization expense attributable to the acquisitions completed since the
first quarter of 1996. As a percentage of net sales, these expenses represented
6.5% for 1997 compared to 6.7% for 1996. The Company expenses all distribution
center pre-opening costs when incurred. During 1997, the Company incurred
approximately $ 323,000 in expenses related to the assimilation of HMA, Aaron
and Pier-Angeli and pre-opening expenses for its new Chicago, Dallas, Phoenix
and Charlotte distribution centers. Excluding the expenses described above, 
corporate general and administrative expenses as a percentage of net sales would
have been 6.3% for 1997 compared to 6.6% for 1996.

Operating Income.  Operating income increased by $4.1 million, or 46.5%, to
$13.0 million for 1997 from $8.9 million for 1996.  As a percentage of net
sales, operating income was 8.7% for 1997 compared to 8.9% for 1996.   During
the third quarter of 1997, operating income was negatively impacted by a non-
recurring severance charge of $259,000.  Excluding the non-recurring charge, as
well as the assimilation and pre-opening expenses, operating income would have
increased by $4.7 million, or 53.0% for 1997.  As a percentage of net sales,
operating income, excluding these expenses, would have been 9.0% for 1997
compared to 8.9% for 1996.

Interest Income, Net.  Net interest income increased by $ 1.0 million to $1.6
million of net interest income for 1997 from $ 551,000 of net interest income
for 1996. This occurred as a result of the reduction in debt made from the
proceeds of the initial public offering and the investment income from the
proceeds of the secondary public offering completion in July, 1996.


FISCAL 1996 COMPARED TO FISCAL 1995

Net Sales. Net sales increased by $39.8 million, or 65.5%, to $100.6 million in
1996 from $60.8 million in 1995.  Of this increase, 22.7% was attributable to
higher sales volumes shipped from distribution centers open for all of both
periods, and the balance was attributable to the three distribution centers
(Columbus, Seattle and Miami) opened or acquired between August 1, 1995 and
December 29, 1995 and the Company's 1996 acquisitions.  The higher net sales
from distribution centers open during all of both periods resulted primarily
from the increased experience of the Company's direct sales and telesales forces
and increased sales to national accounts.  The Company's sales force at the end
of 1996 was 129, an increase of 43 when compared with the end of 1995.  Price
increases during both years were modest and made only on selected items. During
1996, Wilmar generated approximately $2.1 million in net sales to new end
markets as a result of the Company's decision to target customers outside its
core apartment housing market beginning in 1995.

Gross Profit.  Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs. As a percentage of net sales, gross profit was
29.6% in 1996 compared to 31.2% in 1995.  This expected decrease in the gross
margin resulted from the acquisition of HMA, whose historic gross margins have
been lower due to increased competition in the Texas market, as well as a higher
volume of less profitable HVAC equipment and major appliance sales.  Increased
delivery expenses associated with line-hauling to new markets, higher 

                                       10
<PAGE>
 
relative occupancy costs relating to the operation of two immature distribution
centers opened after July 1995 (Columbus and Seattle) also contributed to the
decrease in gross margins.
 
Operating and Selling Expenses.  Operating and selling expenses consist of labor
and other costs associated with opening and operating a distribution center as
well as selling expenses and commissions.  The Company expenses all distribution
center pre-opening costs when incurred.  Operating and selling expenses
increased by $5.1 million, or 55.7%, to $14.2 million in 1996 from $9.1 million
in 1995.  As a percentage of net sales, these expenses represented 14.1% in 1996
compared to 15.0% in 1995.  The decrease, in percentage of sales, resulted
primarily from the acquisition of HMA which operates three mature distribution
centers and employs a mature sales force.  Historically, the Company's operating
and selling expenses as a percentage of sales have been higher than HMA's due to
the Company's investment in new, immature distribution centers and its rapidly
expanding sales force.

Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased by $2.7 million, or 68.6%, to $6.7 million in
1996 from $4.0 million in 1995, as a result of the increased staffing required
to manage a larger volume of business. As a percentage of net sales, those
expenses represented 6.7% in 1996 compared to 6.5% in 1995. In 1996, the Company
incurred approximately $430,000 in first time public company expenses and
acquisition related amortization of intangibles. Additionally, during 1995, the
Company incurred $207,000 in expenses related to the 1995 Recapitalization.
Excluding the expenses described above, corporate general and administrative
expenses as a percentage of net sales would have been 6.2% in 1996 and 1995.

Operating Income. Operating income increased by $3.0 million,  or 50.8%, to
$8.9 million in 1996 from $5.9 million in 1995.  As a percentage of net sales,
operating income was 8.8% in 1996 compared to 9.7% in 1995.

Interest Expense, Net. Net interest expense decreased $1.7 million to $551,000
of net interest income in 1996 from $1.2 million of net interest expense in 1995
as a result of the reduction in debt made from the proceeds of the Company's
initial public offering in January 1996 and secondary public offering in July
1996.


SEASONALITY

Generally, the Company's sales volumes are not seasonal, although November
and December sales tend to be lower  because customers defer purchases at year
end as their budget limits are met and because of the holiday season between
Thanksgiving and New Year's.


LIQUIDITY AND CAPITAL RESOURCES

Historically, Wilmar's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its bank line of credit to support
increases in accounts receivable and inventory, net of accounts payable, and,
since its initial public offering in January 1996, through the proceeds of the
sale of its securities.

Cash provided by operating activities was $4.2 million during 1997 compared to
$1.4 million in 1996.  Cash provided by operating activities during 1997
consisted of $9.2 million of net income before adding back depreciation and
amortization and other non-cash charges of $1.8 million, decreased by $5.0
million of changes in operating assets and liabilities, primarily resulting from
a $2.9 million increase in accounts payable and accrued expenses offset by an
increase in the accounts receivable and inventory of $7.1 million, consistent
with its higher volume of business.   Additionally, the Company's income tax
liability was reduced by approximately $1.5 million, net of the tax benefit from
exercise of stock options.

Cash used in investing activities during 1997 was $12.7 million, consisting
primarily of $15.0 million related to the acquisitions of Pier-Angeli, Lindley
and MSC, and $1.7 million for the purchase of property and equipment, offset by
$3.9 million in proceeds from the sale of short-term investments.

Cash provided by financing activities during 1997 was $ 1.0 million, consisting
of $ 1.3 million of net proceeds from exercise of stock options, reduced by 
$260,000 for the repayment of a note payable.

Capital expenditures were $ 1.7 million for 1997 compared to $ 1.2 million for
1996. The Company spent approximately $ 637,000 during 1997 to equip its new
Dallas, Charlotte and Phoenix distribution centers.  A typical 

                                       11
<PAGE>
 
distribution center requires a capital investment of approximately $150,000 to
$200,000 for equipment and leasehold improvements and an initial commitment of
approximately $250,000 for working capital (net of accounts payable attributable
to new inventory). The Company typically incurs expenses of approximately
$60,000 before a new distribution center becomes operational. The Company
intends to finance its future capital expenditures with cash flow from
operations and possibly with a portion of the previous public offerings, term
debt or capital leases.

Wilmar's credit facilities consist of two unsecured bank lines of credit
totaling $16 million. These lines of credit had zero balances at December 26,
1997.  In April 1997, the Company renewed an existing $10 million unsecured bank
line of credit, which bears interest at three quarter percent below the bank's
prime rate. During 1997, the Company obtained a $6 million unsecured bank line
of credit, which bears interest at the bank's prime rate. These credit
facilities will expire in June 1998 and July 1998, respectively.  The Company
believes it could increase the amount of these credit facilities if needed,
although there can be no assurance that it could do so on equally or more
favorable terms.

The Company believes that its existing cash balances, supplemented by borrowings
under the lines of credit, are adequate to meet planned operating and capital
expenditure needs at least through 1998.  However, if the Company were to make
any significant acquisitions for cash, it may be necessary for the Company to
obtain additional debt or equity financing.


YEAR 2000 COMPLIANCE 

The Company recognizes that the arrival of the Year 2000 poses a worldwide
challenge to the ability of all systems to recognize the date change from
December 31, 1999 to January 1, 2000, and like other companies, is assessing and
modifying its computer applications and business processes to provide for their
continued functionality.   Many of the Company's systems include the new
hardware and software recently purchased from large vendors who have represented
that these systems are already Year 2000 compliant.  The Company expects to
complete its Year 2000 assessment and remediation by 1999.  However, there can
be no guarantee that the systems of other companies with which the Company
interfaces will be timely converted, or that a failure to convert by another
company would not have a material adverse effect on the Company.

The total cost to the Company of these Year 2000 activities has not been and is
not anticipated to be material to its financial position, results of operations
or cash flows in any given year, and such cost has been and is expected to
continue to be funded from the Company's operations.

INFLATION

The Company does not believe that inflation has had a material effect on its
results of operations in recent years. There can be no assurance, however, that
the Company's business will not be affected by inflation in the future.

                                       12
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-------   ----------------------------------------------------------

Not Applicable.
 
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
------    ------------------------------------------- 

The consolidated financial statements of the Company and its subsidiaries and
supplementary data required by this item are attached to this report beginning
on page F-1.

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

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
-------   -------------------------------------------------- 

Information concerning directors and compliance with Section 16(a) of the
Securities Exchange Act of 1934 called for by this Item will be contained in the
Company's definitive proxy statement for the 1998 Annual Meeting of Shareholders
(the "Proxy Statement"), which is incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION.
-------   ---------------------- 

Information with respect to this item will be contained in the Proxy Statement,
which is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------   -------------------------------------------------------------- 

Information with respect to this item will be contained in the Proxy Statement,
which is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------   ---------------------------------------------- 

Information with respect to this item will be contained in the Proxy Statement,
which is incorporated herein by reference.

PART IV

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

(a)       1.  Financial Statements.  Financial Statements listed in the
              --------------------
accompanying Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 are filed as part of this annual report on Form 10-K.

          2.  Financial Statement Schedules.  Financial Statement Schedules
              -----------------------------
listed in the accompanying Index to Financial Statements and Financial Statement
Schedules appearing on page F-1 are filed as part of this annual report on Form
10-K.

(b)       Reports on Form 8-K.
          ------------------- 

          The Company did not file a report on Form 8-K during the quarter ended
          December 26, 1997.

(c)       Exhibits.
          -------- 
          The following is a list of exhibits filed as part of this annual
          report on Form 10-K. Where so indicated by footnote, exhibits which
          were previously filed are incorporated by reference.

                                       13
<PAGE>
 
EXHIBIT NO.    DESCRIPTION
--------------------------
 
3.1(a)+        Certificate of Incorporation.
 
3.2+           Bylaws.
 
10.1+          Amended and Restated 1995 Stock Option Plan.
 
10.2++         Lease Agreement, dated April 29, 1996, between the Company and
               804 Eastgate Associates, L.L.C.
 
10.3++         Assumption Agreement, dated as of June 1, 1996, between the
               Company and 804 Eastgate Associates, L.L.C.
 
10.4+          Amended and Restated Registration Rights Agreement, dated as of
               March 9, 1996, among the Company, William Green and the Summit
               Investors.

10.5+          Registration Rights Agreement, dated as of July 8, 1996, among
               the Company and the shareholders of HMA Enterprises, Inc.

10.6+          Amended and Restated Employment Agreement, dated as of April 12,
               1994 between the Company and Fred B. Gross, Esq.

10.7+          Employment Agreement, dated as of March 9, 1995, between the
               Company and William S. Green.

21             Subsidiaries of the Company.

23             Consent of Deloitte & Touche, LLP.

27             Financial Data Schedule

+    Incorporated by reference to the Company's Registration Statement on Form
     S-1 (No. 33-99750), filed with the Securities and Exchange Commission on
     November 22, 1995.
++   Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the quarter ended March 29, 1996.

                                       14
<PAGE>

                                  SIGNATURES
                                  ----------
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                   WILMAR INDUSTRIES, INC.


Date:  March 26, 1998              By /s/ William S. Green
                                     ---------------------
                                      William S. Green
                                      Chairman, President and Chief Executive
                                      Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

     Each person, in so signing also makes, constitutes and appoints William S.
Green, Chairman, President and Chief Executive Officer of Wilmar Industries,
Inc., and Fred B. Gross, Vice President - Corporate Development and Secretary of
Wilmar Industries, Inc., and each of them acting alone, as his true and lawful
attorneys-in-fact, in his name, place and stead, to execute and cause to be
filed with the Securities and Exchange Commission any or all amendments to this
report.

<TABLE>
<CAPTION>
Signature                                 Capacity                                        Date
---------                                 --------                                        ----
<S>                                       <C>                                             <C> 
/s/ William S. Green                      Chairman, President and Chief Executive         March 26, 1998
--------------------
    William S. Green                      Officer (principal executive officer) 
                                          and Director                          
 
/s/  Fred B. Gross                        Vice President - Corporate Development,         March 26, 1998 
------------------
     Fred B. Gross                        Secretary and Director 
                                         
/s/ Michael T. Toomey                     Chief Financial Officer and Treasurer           March 26, 1998 
---------------------
    Michael T. Toomey                     (principal financial and accounting  
                                          officer)                             
 
/s/ Martin E. Hanaka                      Director                                        March 26, 1998 
--------------------
    Martin E. Hanaka
 
/s/ Ernest K. Jacquet                     Director                                        March 26, 1998 
---------------------
    Ernest K. Jacquet
                                         
/s/ Donald M. Wilson                      Director                                        March 26, 1998 
--------------------
    Donald M. Wilson                    
</TABLE>

                                       15
<PAGE>
 
EXHIBIT 21
----------
 
Wilmar Industries, Inc.
List of Subsidiaries

<TABLE>
<CAPTION>
                                                               State or Jurisdiction
Name of Subsidiary                                             of Incorporation
------------------                                             ----------------
<S>                                                            <C> 
HMA Enterprises, Inc.                                          Texas
 
One Source Supply, Inc.                                        Florida
 
Mile High Maintenance Supply, Inc.                             Colorado
 
Management Supply Company                                      Michigan

Wilmar Financial, Inc.                                         Delaware

Wilmar Holdings, Inc.                                          Delaware
</TABLE>

                                       16
<PAGE>
 
EXHIBIT 23
----------

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

To the Board of Directors
Wilmar Industries, Inc.
Moorestown, New Jersey

We consent to the incorporation by reference in Registration Statement No. 333-
19563 of Wilmar Industries, Inc. on Form S-8 of our report dated March 5, 1998,
appearing in this Annual Report on Form 10-K of Wilmar Industries, Inc. for the
year ended December 26, 1997.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Wilmar Industries, Inc.,
listed in Item 14.  This financial statement schedule is the responsibility of
the Company's management.  Our responsibility is to express an opinion based on
our audit.  In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 26, 1997

                                       17
<PAGE>
 
                         WILMAR INDUSTRIES, INC.

     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
     SCHEDULES

<TABLE>
<S>                                                                       <C>
Independent Auditors' Report.............................................  F-2
Consolidated Balance Sheets..............................................  F-3
Consolidated Statements of Income........................................  F-4
Consolidated Statements of Stockholders' Equity (Deficit)................  F-5
Consolidated Statements of Cash Flows....................................  F-6
Notes to Consolidated Financial Statements...............................  F-8

Schedule II - Valuation and Qualifying Accounts.......................... F-19
</TABLE>

                                      F-1
<PAGE>
 
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Wilmar Industries, Inc.
Moorestown, NJ

We have audited the accompanying consolidated balance sheets of Wilmar
Industries, Inc. and its subsidiaries (the "Company") as of December 26, 1997
and December 27, 1996, and the related consolidated statements of income,
stockholders' equity (deficit) and cash flows for each of the three fiscal years
in the period ended December 26, 1997.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 26, 1997 and December 27, 1996, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended December
26, 1997, in conformity with generally accepted accounting principles.



/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania

March 5, 1998



                                      F-2
<PAGE>
 
WILMAR INDUSTRIES, INC.
 
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                                                   December 26,      December 27,
                                                                                                      1997              1996
                                                                                                 ----------------  ---------------
<S>                                                                                              <C>               <C>
ASSETS                                                                                          
                                                                                                
CURRENT ASSETS:                                                                                 
  Cash and Cash Equivalents                                                                        $ 30,723,746     $ 38,228,710
  Cash - Restricted                                                                                     283,655          719,185
  Investments                                                                                                          3,927,276
  Accounts Receivable - trade, net of allowance for doubtful accounts                                                           
    of $ 1,359,800 in 1997 and $ 806,300 in 1996.                                                    23,801,733       16,140,693
  Inventory                                                                                          24,979,935       17,669,441
  Prepaid expenses and other current assets                                                             898,255          656,588
  Deferred income taxes                                                                               1,227,000          768,000
                                                                                                   ------------     ------------
                                                                                                
           Total current assets                                                                      81,914,324       78,109,893 
                                                                                                                                 
PROPERTY AND EQUIPMENT, Net                                                                           3,540,889        2,460,748
                                                                                                                                 
Goodwill, net of accumulated amortization of $426,066 in 1997 and $100,756 in 1996                   18,121,121        4,932,050 
                                                                                                                                 
INTANGIBLE ASSETS AND OTHER, Net                                                                      4,538,971        2,806,452 
                                                                                                   ------------     ------------ 
                                                                                                                                 
TOTAL ASSETS                                                                                       $108,115,305     $ 88,309,143 
                                                                                                   ------------     ------------ 
                                                                                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             
                                                                                                
CURRENT LIABILITIES:                                                                                                             
  Notes Payable                                                                                    $    725,000     $    285,000 
  Accounts Payable                                                                                   13,244,918        8,537,019 
  Accrued expenses and other current liabilities                                                      2,875,484        2,053,350 
  Income taxes payable                                                                                  220,819        1,934,160
                                                                                                   ------------     ------------
                                                                                                                                 
           Total current liabilities                                                                 17,066,221       12,809,529 
                                                                                                                                 
NOTES PAYABLE                                                                                           500,000                  
                                                                                                   ------------     ------------ 
           Total liabilities                                                                         17,566,221       12,809,529 
                                                                                                                               
COMMITMENTS AND CONTINGENT LIABILITIES                                                                                         
                                                                                                                               
STOCKHOLDERS' EQUITY:                                                                                                          
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued                                                      
Common stock, no par value - 50,000,000 shares authorized;                                                                     
  13,335,754 shares issued and outstanding in 1997                                                                             
  13,048,371 shares issued and outstanding in 1996                                                  102,793,984       96,978,776
Accumulated deficit                                                                                 (12,244,900)     (21,479,162)
                                                                                                   ------------     ------------
           Total stockholders' equity                                                                90,549,084       75,499,614 
                                                                                                   ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                         $108,115,305     $ 88,309,143 
                                                                                                   ============     ============
</TABLE> 

See notes to consolidated financial statements.

                                      F-3
<PAGE>
 
<TABLE>
<CAPTION>
WILMAR INDUSTRIES, INC.
 
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------------------------------------------------------------
                                                                              Year Ended        Year Ended       Year Ended
                                                                             December 26,      December 27,     December 29,
                                                                                 1997              1996             1995
                                                                            --------------    --------------    ------------
<S>                                                                         <C>               <C>               <C>
NET SALES                                                                    $150,792,516      $100,644,167      $60,823,188
 
COST OF SALES                                                                 106,604,587        70,852,668       41,835,284
                                                                             ------------      ------------      -----------

           Gross profit                                                        44,187,929        29,791,499       18,987,904
                                                                             ------------      ------------      -----------
 
OPERATING EXPENSES:
  Operating and selling expenses                                               21,024,183        14,168,050        9,098,440
  Corporate general and administrative expenses                                 9,857,340         6,718,428        3,984,873
  Non-recurring severence expenses                                                259,000
                                                                             ------------      ------------      -----------
 
                                                                               31,140,523        20,886,478       13,083,313
                                                                             ------------      ------------      -----------
 
           Operating income                                                    13,047,406         8,905,021        5,904,591
 
INTEREST (INCOME)  EXPENSE, NET                                                (1,580,056)         (551,351)       1,164,129
                                                                             ------------      ------------      -----------
 
           Income before income taxes                                          14,627,462         9,456,372        4,740,462
 
PROVISION FOR INCOME TAXES                                                      5,393,200         3,593,280        1,623,580
                                                                             ------------      ------------      -----------
 
           Net income                                                        $  9,234,262      $  5,863,092      $ 3,116,882
                                                                             ------------      ------------      -----------
 
Net income per share -- Basic                                                $       0.70      $       0.53
                                                                             ------------      ------------
Net income per share -- Diluted                                              $       0.69      $       0.51
                                                                             ------------      ------------ 
UNAUDITED PRO FORMA DATA:
  Income before income taxes                                                                                     $ 4,740,462
  Provision for income taxes                                                                                       1,896,000
                                                                                                                 -----------

  Pro forma net income                                                                                           $ 2,844,462
                                                                                                                 -----------
 
  Pro forma net income per share -- Basic                                                                        $      0.37
                                                                                                                 -----------
 
  Pro forma net income per share -- Diluted                                                                      $      0.36
                                                                                                                 -----------
</TABLE>

See notes to consolidated financial statements.

                                      F-4
<PAGE>
 
WILMAR INDUSTRIES, INC.
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                                                                                          RETAINED                        TOTAL 
                                                                                          EARNINGS                     STOCKHOLDER'S
                                                              COMMON        STOCK       (ACCUMULATED      TREASURY        EQUITY 
                                                              SHARES        AMOUNT         DEFICIT)         STOCK         (DEFICIT)
                                                            ------------------------------------------------------------------------
<S>                                                         <C>          <C>            <C>            <C>            <C> 
BALANCE, DECEMBER 30, 1994                                   5,824,000   $    100,000    $  4,619,158   $(2,000,000)   $  2,719,158 

Distributions to stockholders                                                              (3,722,710)                   (3,722,710)

Capital contribution                                                                          694,000      (694,000)                

Redemption of common stock                                  (3,584,000)       (30,769)    (17,086,231)                  (17,117,000)

Dividend of Series B Preferred Stock                                                      (10,591,400)                  (10,591,400)

Issuance of common stock                                     3,080,000         55,000                                        55,000 

Accretion of Mandatorily Redeemable                                                                                                 

   Preferred Stock                                                                         (1,522,021)                   (1,522,021)

Retirement of treasury shares                                                              (2,694,000)    2,694,000                 

Net income                                                                                  3,116,882                     3,116,882 
                                                            ----------   ------------    ------------   -----------    ------------ 

BALANCE, DECEMBER 29, 1995                                   5,320,000        124,231     (27,186,322)                  (27,062,091)

Accretion of Mandatorily Redeemable                                                                                                 

   Preferred Stock                                                                           (155,932)                     (155,932)

Conversion of Series B Preferred Stock                         454,545      5,000,000                                     5,000,000 

Issuance of Common Stock - Initial Public                                                                                           

   Offering                                                  4,600,000     46,152,891                                    46,152,891 

Issuance of Common Stock - Secondary Offering                2,565,500     43,179,654                                    43,179,654 

Issuance of Common Stock - HMA Acquisition                      63,980      1,522,000                                     1,522,000 

Issuance of Common Stock - Aaron Acquisition                    44,346      1,000,000                                     1,000,000 

Net income                                                                                  5,863,092                     5,863,092 
                                                            ----------   ------------    ------------   -----------    ------------ 

BALANCE, DECEMBER 27, 1996                                  13,048,371     96,978,776     (21,479,162)                   75,499,614 

Exercised Stock Options                                        131,485      1,305,796                                     1,305,796 

Tax Benefit from Exercised Stock Options                                      660,000                                       660,000

Issuance of Common Stock - Mile High Acquisition                 4,652        100,024                                       100,024

Issuance of Common Stock - Management Supply Acquisition       151,246      3,749,388                                     3,749,388

Net income                                                                                  9,234,262                     9,234,262
                                                            ----------   ------------   -------------   -----------    ------------

BALANCE, DECEMBER 26, 1997                                  13,335,754   $102,793,984   $ (12,244,900)  $              $ 90,549,084
                                                            ==========   ============   =============   ===========    ============
</TABLE> 
 
See notes to consolidated financial statements.
 
                                     F-5 
<PAGE>
 
WILMAR INDUSTRIES, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                                                  YEAR ENDED      Year Ended         Year Ended
                                                                                 DECEMBER 26,    December 27,       December 29,
                                                                                     1997            1996               1995
                                                                                --------------   --------------  ------------------
<S>                                                                             <C>              <C>             <C>
OPERATING ACTIVITIES:
Net Income                                                                      $  9,234,262     $  5,863,092     $  3,116,882
Adjustments to reconcile net income to net cash provided by                                                                   
  operating activities:                                                                                             
  Depreciation and amortization                                                    1,391,884          735,345          330,480
  Deferred income taxes                                                             (205,000)        (250,000)        (408,000)
  Gain on disposition of property and equipment                                       (2,012)          (3,286)                
  Changes in assets and liabilities, net of effects of acquisitions:                                                          
    Accounts receivable                                                           (2,767,229)        (990,023)      (2,640,523)
    Inventory                                                                     (4,342,521)        (245,134)      (4,327,986)
    Prepaid expenses and other current assets                                       (623,110)         (17,670)         (66,361)
    Other assets                                                                     121,584          (63,425)        (315,966)
    Accounts payable                                                               2,787,491       (3,857,976)       2,887,101
    Accrued expenses and other current liabilities                                   123,009         (352,850)         483,574
    Accrued interest                                                                                 (212,823)         196,901
    Income taxes payable                                                          (1,524,797)         803,169        1,020,991
                                                                                ------------     ------------     ------------
                                                                                                                              
           Net cash provided by operating activities                               4,193,561        1,408,419          277,093
                                                                                ------------     ------------     ------------
                                                                                                                              
INVESTING ACTIVITIES:                                                                                                        
  Purchase of property and equipment                                              (1,679,103)      (1,173,048)        (507,272)
  Proceeds from sale of property and equipment                                         7,958            4,250                 
  Proceeds from sale of (purchase of) short-term investments                       3,927,276       (3,927,276)                
  Acquisition of businesses, including escrow                                    (15,000,452)      (9,111,111)      (3,572,796)
                                                                                ------------     ------------     ------------
                                                                                                                              
           Net cash used in investing activities                                 (12,744,321)     (14,207,185)      (4,080,068)
                                                                                ------------     ------------     ------------
                                                                                                                              
FINANCING ACTIVITIES:                                                                                                        
  Net (repayments) proceeds of notes payable                                        (260,000)      (9,922,510)       6,408,510
  Proceeds of long-term debt - Bank                                                                                  2,000,000
  Principal payments on long-term debt :                                                                                      
    Banks                                                                                          (1,499,999)      (2,729,635)
    Related parties                                                                                (2,940,922)        (102,264)
  Issuance of common stock                                                                                              55,000
  Repurchase of common stock                                                                                       (15,117,000)
  Repurchase of Series A Preferred Stock, plus accrued dividends                                  (13,870,928)                
  Repurchase of Series B Preferred Stock, plus accrued dividends                                   (6,343,425)                
  Proceeds from the issuance (repayment) of subordinated debentures                                (4,000,000)       4,000,000
  Net proceeds from issuance of Common Stock - Initial Public Offering                             46,152,891                 
  Net proceeds from issuance of Common Stock - Secondary Public Offering                           43,427,326                 
  Issuance of Series A Preferred Stock                                                                              12,945,000
  Distributions to stockholders                                                                                     (3,722,710)
  Net proceeds from exercise of stock options                                      1,305,796                                 -
                                                                                ------------     ------------     ------------

           Net cash provided by financing activities                               1,045,796       51,002,433        3,736,901
                                                                                ------------     ------------     ------------
                                                                                                                              
NET (DECREASE) INCREASE IN CASH                                                   (7,504,964)      38,203,667          (66,074)
                                                                                                                              
CASH, BEGINNING OF YEAR                                                           38,228,710           25,043           91,117
                                                                                ------------     ------------     ------------
                                                                                                                              
CASH, END OF YEAR                                                               $ 30,723,746     $ 38,228,710     $     25,043
                                                                                ============     ============     ============
</TABLE>


                                      F-6
<PAGE>
 
WILMAR INDUSTRIES, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
--------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                                                                           YEAR ENDED        YEAR ENDED          YEAR ENDED        
                                                                          DECEMBER 26,       DECEMBER 27,      DECEMBER 29,       
                                                                             1997              1996              1995            
                                                                       -----------------  ---------------    ---------------
<S>                                                                    <C>                <C>                <C> 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                             
                                                                                                                             
Cash paid during the year for :                                                                                              
  Interest                                                               $   35,329        $  392,801        $   967,228     
                                                                         ==========        ==========        ===========     
  Income taxes                                                           $6,872,600        $3,048,802        $   642,279     
                                                                         ==========        ==========        ===========     
                                                                                                                           
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND                                                                           
  FINANCING ACTIVITIES                                                                                                     
  Accretion of mandatorily redeemable Series A Senior and                                                                  
  Series B Junior Preferred Stock redemption values                                        $  155,932        $ 1,522,021   
                                                                                                                           
Distribution of mandatorily redeemable Series B Junior                                                                     
  Preferred Stock to stockholders                                                                            $10,591,400   
                                                                                                                           
Issuance of note payable - Related party                                                                     $ 2,000,000   
                                                                                                        
Conversion of Series B Junior Preferred stock into                                         $5,000,000   
  454,545 shares of Common stock                                                                        
                                                                                                        
Issuance of Common stock in connection with the purchase of :                                           
  Management Supply Company                                              $3,749,388                     
  Mile High Maintenance, Inc.                                            $  100,024                     
  HMA Enterprises, Inc.                                                                    $1,522,000   
  Aaron Distributing, Inc.                                                                 $1,000,000   
                                                                                                        
Issuance of Notes in connection with the purchase of :                                                  
  Management Supply Company                                              $1,125,000                     
  Pier-Angeli Company                                                    $   75,000                     
  Aaron Distributing, Inc.                                                                 $  285,000   
</TABLE> 
 
See notes to consolidated financial statements.
 
                                      F-7
<PAGE>
 
WILMAR INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE FISCAL YEARS IN THE PERIOD ENDED DECEMBER 26, 1997
--------------------------------------------------------------------------------

1.   DESCRIPTION OF THE BUSINESS

     Wilmar Industries, Inc. ("Wilmar" or the "Company") is a national marketer
     and distributor of repair and maintenance products with nineteen
     distribution centers throughout the United States. The Company sells
     primarily to apartment complexes and other institutional customers.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the accounts of Wilmar Industries, Inc. and its subsidiaries. Material
     inter-company balances and transactions have been eliminated.

     FISCAL YEAR - The Company operates on a 52-53 week fiscal year, which ends
     on the last Friday in December. Each of the three fiscal years in the
     period ended December 26, 1997 were fifty-two week years. References herein
     to 1997, 1996 and 1995 are for the fiscal years ended December 26, 1997,
     December 27, 1996 and December 29, 1995, respectively.

     CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of cash and
     highly liquid investments with an original maturity of three months or
     less.

     INVESTMENTS - At December 27, 1996, the Company held investments in debt
     securities designated as available-for-sale. These debt securities were
     stated at fair value (which approximated carrying value) based upon market
     quotations and consisted of debt securities issued by municipalities.

     INVENTORY - Inventory is stated at the lower of cost (first-in, first-out
     method) or market.

     PROPERTY AND EQUIPMENT - Property, equipment and leasehold improvements are
     stated at cost. Expenditures for additions, renewals and betterments are
     capitalized; expenditures for maintenance and repairs are charged to
     expense as incurred. Upon the retirement or disposal of assets, the cost
     and accumulated depreciation or amortization is eliminated from the
     accounts and the resulting gain or loss is credited or charged to
     operations. Depreciation is computed primarily using the straight-line
     method based upon estimated useful lives of the assets, and amortization is
     computed using the straight-line method based upon the remaining terms of
     the associated leases, as follows:

       Machinery and equipment                                       5-7 years
       Office furniture and equipment                                5-7 years
       Leasehold improvements                             Remaining lease term

     LONG-LIVED ASSETS - The Company analyzes the carrying value of its recorded
     goodwill, intangible assets and other long-lived assets periodically or
     when facts or circumstances indicate that the carrying value may be
     impaired. The review includes an assessment of customer retention, cash
     flow projections and other factors the Company believes are relevant. The
     Company has concluded that there is no impairment to the carrying value of
     its recorded goodwill or other long-lived assets at December 26, 1997.

     Goodwill (the excess of cost over the fair value of the underlying assets
     at the date of acquisition) is being amortized on a straight-line basis
     over 30 to 40 years. Intangible assets include amounts assigned

                                      F-8
<PAGE>
 
     to customer lists and non-compete agreements. Intangibles are amortized on
     a straight-line basis over their useful lives, 20 years for customer lists
     and 3 to 10 years for non-compete agreements.

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

     FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of cash, accounts
     receivable, notes payable and accounts payable approximate fair value
     because of the short maturates of these items.

     REVENUE RECOGNITION- Sales are recognized as product is shipped, F.O.B.
     point of shipment and are net of sales returns, allowances and credits.
     
     COST OF SALES - Cost of sales includes merchandise costs, freight,
     distribution center occupancy and delivery costs.

     PRE-OPENING DISTRIBUTION CENTER EXPENSES - Pre-opening distribution center
     expenses are expensed as incurred.

     ADVERTISING COSTS - The Company expenses advertising costs as incurred.
     Total advertising expenses were approximately $ 448,000, $ 368,000 and
     $266,000 in 1997, 1996 and 1995, respectively.

     STOCK-BASED COMPENSATION - Statement of Financial Accounting Standards
     ("SFAS") No. 123, "Accounting for Stock Based Compensation," encourages,
     but does not require companies to record compensation cost for stock-based
     employee compensation plans at fair value. The Company has chosen to
     continue to account for stock-based compensation using the intrinsic method
     prescribed in Accounting Principles Board ("APB") Opinion No. 25,
     "Accounting for Stock Issued to Employees," and related Interpretations.
     Accordingly, compensation cost for stock options is measured as the excess,
     if any, of the quoted market price of the Company's stock at the date of
     the grant over the amount an employee must pay to acquire the stock (see
     Note 10).

     STOCK SPLITS - In March 1995 and November 1995, the Company effected a
     1,040-for-1 and a 37.333-for-1 stock split of its Common Stock,
     respectively. All share and per share amounts in the accompanying financial
     statements have been adjusted retroactively to reflect both splits.

     INCOME TAXES - Prior to February 24, 1995, the Company had elected to be
     taxed as an S Corporation under provisions of the Internal Revenue Code. As
     such, current taxable income had been included on the income tax returns of
     the sole stockholder for federal income tax purposes and no provision had
     been made for federal income taxes (see pro forma presentation). In
     anticipation of consummating the Recapitalization (see Note 4), the Company
     changed its election to be taxed as a C Corporation under the Internal
     Revenue Code. Taxes on income are provided based upon SFAS No. 109,
     "Accounting for Income Taxes," which requires an asset and liability
     approach to financial accounting and reporting for income taxes. Deferred
     income tax assets and liabilities are computed for differences between the
     financial statement and tax bases of assets and liabilities that will
     result in taxable or deductible amounts in the future. Such deferred income
     tax asset and liability computations are based on enacted tax laws and
     rates applicable to periods in which the differences are expected to affect
     taxable income. Valuation allowances are established when necessary to
     reduce deferred tax assets to the amounts expected to be realized.

                                      F-9
<PAGE>
 
   Net Income per Share Data - Net income per share for all periods have been
   computed in accordance with SFAS No. 128, "Earnings per Share." Data for 1996
   and 1995 has been restated to conform with SFAS No. 128. Basic net income
   per share is computed by dividing net income by the weighted average number
   of shares outstanding during the year. Diluted net income per share is
   computed by dividing net income by the weighted average number of shares
   outstanding during the year, assuming dilution.

   Pro forma net income per share data-Basic for 1995 represents pro forma net
   income (after a pro forma provision for income taxes as if the Company had
   been subject to federal and state income taxation as a C Corporation since
   inception) divided by the weighted average number of common shares
   outstanding during the period plus the number of shares of common stock
   required to be sold at the assumed initial public offering price to raise
   sufficient proceeds to redeem the Mandatorily Redeemable Preferred Stock
   (including accrued but unpaid dividends thereon) (see Note 4).

   Pro forma net income per share data-Diluted for 1995 is computed by dividing
   pro forma net income by the weighted average number of common shares
   outstanding during the period, assuming dilution.

   The amounts used in calculating net income per share data are as follows:

<TABLE>
<CAPTION>
                                                                  1997           1996           1995 (1)
                                                              ------------   ------------    ------------
     <S>                                                      <C>            <C>             <C>    
     Net Income                                               $  9,234,262   $  5,863,092    $  2,844,462
                                                              ============   ============    ============

     Weighted Average Shares Outstanding-Basic                  13,165,416     11,104,618       7,764,938
     Effect of Dilutive Stock Options                              169,214        353,849         103,403
                                                              ------------   ------------    ------------

     Weighted Average Shares Outstanding-Diluted                13,334,630     11,458,467       7,868,341
                                                              ============   ============    ============
</TABLE> 

     (1)  Fiscal year end 1995 net income and weighted average shares
          outstanding are shown pro forma as discussed above.

   Options to purchase 25,900 shares of common stock were outstanding during
   1997, but were not included in the computation of weighted average shares
   outstanding-diluted because the options' exercise price was greater than
   the average market price of common shares.

   NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB issued SFAS No. 130,
   "Reporting Comprehensive Income."  This statement, which establishes
   standards for reporting and disclosure of comprehensive income, is effective
   for interim and annual periods beginning after December 15, 1997, although
   earlier adoption is permitted.  Reclassification of financial information for
   earlier periods presented for comparative purposes is required under SFAS No.
   130.  As this statement only requires additional disclosures in the Company's
   consolidated financial statements, its adoption will not have any impact on
   the Company's consolidated financial position, results of operations or cash
   flows.  The Company will adopt SFAS No. 130 in its 1998 fiscal year.

                                      F-10
<PAGE>
 
   In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
   Enterprise and Related Information."  This statement, which establishes
   standards for the reporting of information operating segments and requires
   the reporting of selected information about operating segments in interim
   financial statements, is effective for periods beginning after December 15,
   1997, although earlier adoption is permitted. SFAS No. 131 is not required to
   be applied to interim financial statements in the initial year of
   application, but comparative information for interim periods in the initial
   year of application is to be reported in financial statements for interim
   periods in the second year of application.  Reclassification of segment
   information for earlier periods presented for comparative purposes is
   required under SFAS No. 131. As this statement only requires additional
   disclosures in the Company's consolidated financial statements, its adoption
   will not have any impact on the Company's consolidated financial position,
   results of operations or cash flows. The Company will adopt SFAS No. 131 in 
   its 1998 fiscal year.

3. SIGNIFICANT TRANSACTIONS

   PUBLIC OFFERINGS - On January 24, 1996, the Company completed an initial
   public offering (the "Offering") of 4,600,000 shares of its Common Stock for
   $11.00 per share resulting in net proceeds (after deducting underwriters'
   issuance costs) of $47,058,000.

   Prior to the Offering, $5,000,000 of the Mandatorily Redeemable Series B
   Junior Preferred Stock was converted into $5,000,000 of Series B Junior
   Preferred Stock with conversion rights.  Upon consummation of the Offering,
   $5,000,000 of the Series B Junior Preferred Stock with conversion rights were
   converted into 454,545 shares of Common Stock.

   On July 31, 1996, the Company completed a secondary public offering of
   4,335,500 shares of its Common Stock at a price of $17.875 per share. Of the
   shares offered, 2,565,500 shares were sold by the Company and 1,770,000 were
   sold by selling shareholders. The Company received net proceeds (after
   deducting underwriters' issuance costs) of $43,575,000.


                                      F-11
<PAGE>
 
   ACQUISITIONS - During 1997, the Company completed three acquisitions
   (Management Supply Company, Pier-Angeli Company and Lindley Plumbing and
   Supply Company) for an aggregate base purchase price of approximately $20.1
   million, including costs of acquisition. Goodwill recorded in connection with
   these acquisitions was $12.6 million.

   During 1996, the Company completed four acquisitions (HMA Enterprises, Inc.,
   Mile High Maintenance Supply, Inc., Sun Valley Maintenance Supply, Inc. and
   Aaron Distributing, Inc.) for an aggregate base purchase price of
   approximately $12.7 million, including costs of acquisition. Goodwill
   recorded in connection with these transactions was $4.7 million.

   In November 1995, the Company acquired One Source Supply, Inc., a supplier of
   repair and maintenance products to multi-unit apartment complexes in the
   South Florida market, for an aggregate consideration of approximately $3.6
   million. Goodwill recorded in connection with this acquisition was
   approximately $1.1 million.

   Each of the acquisitions described above have been accounted for under the
   purchase method.  Goodwill recorded in the transactions is being amortized on
   a straight-line basis over 30 to 40 years.

   The following table presents the unaudited results of operations of the
   Company for each of the three fiscal years in the period ended December 26,
   1997 as if the acquisitions had been consummated as of the beginning of the
   prior fiscal year, and include certain pro forma adjustments to reflect the
   amortization of intangible assets, reduction of overhead charges, reduction
   in compensation, interest expense on amounts drawn on the Company's line of
   credit to finance the acquisition as if the acquisitions had occurred on the
   dates described above and inclusion of a federal income tax provision:

<TABLE>
                                         1997             1996                1995
                                 -----------------  -----------------  -----------------
<S>                              <C>                <C>                <C>   
Revenues                          $     168,320,000     153,980,000      106,374,000.00
Net income                                9,652,000       6,950,000        3,798,000.00

Net income per share - Basic                   0.73            0.61                0.48
Net income per share - Diluted                 0.72            0.60                0.47   
</TABLE>

   The unaudited pro forma results of operations are prepared for comparative
   purposes only and do not necessarily reflect the results that would have
   occurred had the acquisitions occurred at the dates described above or the
   results which may occur in the future. The above acquisitions have been
   accounted for under the purchase method of accounting, and accordingly, the
   net assets and results of operations have been included in the accompanying
   consolidated financial statements since the dates of acquisition. The excess
   of purchase price over the estimated fair values of the net assets acquired
   for the above investment has been allocated to intangible assets and goodwill
   with amortization over 3 to 40 years.

4. STOCKHOLDERS' EQUITY

   RECAPITALIZATION - On March 6, 1995, the Company declared and subsequently
   issued a stock dividend to the then sole stockholder in the form of 105,914
   shares of Mandatorily Redeemable Series B Junior Preferred Stock with a
   redemption value of $10,591,400. On March 9, 1995, the Company entered into a
   Stock Purchase and Redemption Agreement (the "Agreement") with certain
   investors (the "Investors"). Pursuant to the Agreement, the Company
   repurchased 3,584,000 shares of common stock from its then sole stockholder
   for $15,117,000 plus a deferred payment of $2,000,000. In addition, pursuant
   to the Agreement, the Company issued 129,450 shares of Mandatorily Redeemable
   Series A Senior Preferred Stock for $12,945,000 and then sold 3,080,000
   shares of Common Stock to the Investors for $55,000, which represented the
   fair market value at that time. In addition, the Investors loaned $4,000,000
   to the Company pursuant to a Subordinated Debenture Purchase Agreement dated
   March 9, 1995. The debt
                                     F-12
<PAGE>
 
     instruments were repaid and satisfied on January 29, 1996 with proceeds
     from the Company's initial public offering.

     Distribution to Stockholders - In 1995, the then sole stockholder received
     compensation and bonuses of $249,340 and S Corporation distributions of
     $3,722,710.

5.   INTANGIBLE ASSETS AND OTHER 

     Intangible assets and other consist of the following:

<TABLE>
<CAPTION>
                                                                              1997                    1996       
                                                                       ------------------      ------------------
     <S>                                                               <C>                     <C>               
     Intangible assets                                                      $   4,952,950              $2,742,000   
     Less accumulated amortization                                               (634,967)               (122,241)
                                                                       ------------------      ------------------
                                                                                4,317,983               2,619,759    
                                                                                                                  
     Deposits                                                                     217,219                 180,857    
     Other                                                                          3,769                   5,836    
                                                                       ------------------      ------------------    
                                                                            $   4,538,971              $2,806,452    
                                                                       ==================      ================== 
</TABLE>

6.   BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
PROPERTY AND EQUIPMENT                                                        1997                    1996
                                                                        -----------------       ----------------- 
     <S>                                                                <C>                     <C>              
     Machinery and equipment                                               $    2,577,015             $ 2,098,731   
     Office furniture and equipment                                             3,093,290               1,391,807   
     Vehicles                                                                     948,844                 709,438   
     Leasehold improvements                                                       845,263                 746,864   
                                                                           --------------          --------------
                                                                                                                 
                                                                                7,464,412               4,946,840   
     Less accumulated depreciation and amortization                            (3,923,523)             (2,486,092)
                                                                           --------------          --------------
                                                                                                                 
                                                                           $    3,540,889             $ 2,460,748   
                                                                           ==============          ==============
                                                                                                                 
     ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES                                                              
                                                                                                                 
     Sales tax payable                                                     $      575,524             $   515,342   
     Accrued compensation and related benefits                                  1,101,257                 664,508   
     Other accrued liabilities                                                  1,198,703                 873,500   
                                                                           --------------          --------------
                                                                                                                 
                                                                           $    2,875,484             $ 2,053,350    
                                                                           ==============          ============== 
</TABLE>

     Depreciation expense was approximately $786,000, $521,000 and $322,000 for
     1997, 1996 and 1995, respectively.

7.   NOTES PAYABLE

     NOTES PAYABLE - At December 26, 1997, the Company has notes payable to the
     former shareholders of Management Supply Company, which total $625,000, and
     are due in 1998. The Company also has an 8% note payable to the former
     shareholders of Management Supply Company in the amount of $500,000, which
     is due on September 1, 1999.

     Also, at December 26, 1997, the Company has notes payable to former
     shareholders of acquired companies, totaling $100,000, which bear interest
     at 8% and are due in 1998.

                                      F-13
<PAGE>
 
     At December 27, 1996, the Company had an 8% note payable to the former sole
     shareholder of Aaron Distributing, Inc., in the amount of $285,000. The
     principal balance of the note and accrued interest were paid in 1997.

     LINES OF CREDIT - At December 26, 1997, the Company has a $10,000,000
     unsecured bank line of credit, which bears interest at 3/4% below the
     bank's prime rate (7.75% at December 26, 1997), and expires in June 1998.

     At December 26, 1997, the Company also has a $6,000,000 unsecured bank line
     of credit, which bears interest at the bank's prime rate (8.50% at December
     26, 1997), and expires in July 1998.

     No amounts were outstanding against these lines of credit at December 26,
     1997. Management anticipates that these lines of credit will be renewed in
     1998.

8.   PROFIT SHARING PLAN

     The Company has a qualified profit sharing plan under Section 401(k) of the
     Internal Revenue Code. Contributions to the plan by the Company are made at
     the discretion of the Company's Board of Directors. Company contributions
     to the plan were approximately $151,276, $102,600 and $59,600 for 1997,
     1996 and 1995, respectively.

9.   COMMITMENTS AND CONTINGENT LIABILITIES

     LEASE COMMITMENTS - The Company leases its facilities under operating
     leases expiring at various dates through 2006. Minimum future rental
     payments under these leases as of December 26, 1997 are as follows:

<TABLE>
       <S>                                             <C>                 
       1998                                                $   2,634,240  
       1999                                                    2,308,432  
       2000                                                    1,971,176  
       2001                                                    1,559,499  
       2002                                                      907,204  
       Thereafter                                                141,645   
                                                           -------------   
                                                                           
       Total                                               $   9,522,196 
                                                           =============
</TABLE>

     In September 1996, the Company moved its Philadelphia, PA, distribution
     center to a building which is leased from an entity which is partially
     owned by two officers of the Company. Minimum annual rent payable under
     this lease is approximately $289,000, plus all real estate taxes and
     assessments, utilities and insurance related to the premises. Total rent
     expense for this lease was approximately $289,000 and $74,000 for 1997 and
     1996, respectively. This lease expires on May 31, 2006 and does not contain
     any renewal terms. The Company believes that the terms of the lease are no
     less favorable to it than could be obtained from an unaffiliated party.

     The Company maintains its executive office in a building which is leased
     from a stockholder of the Company. As amended in March 1995, under the
     terms of the lease, the Company is required to pay approximately $137,500
     annually, plus all real estate taxes and assessments, utilities and
     insurance related to the premises. Total rental expense for this lease was
     $ 137,500, $137,500 and $145,000 for 1997, 1996 and 1995, respectively. The
     lease expires on February 28, 2004 and does not contain any renewal terms.
     The Company believes that the terms of the lease are no less favorable to
     it than could be obtained from an unaffiliated party.

                                      F-14
<PAGE>
 
   Rent expense under all operating leases was $1,683,000, $1,409,000 and
   $806,000 for 1997, 1996 and 1995, respectively. Certain of the leases provide
   that the Company pay taxes, insurance and other operating expenses applicable
   to the leased premises.


   EMPLOYMENT AND SEVERANCE AGREEMENTS - The Company has an employment agreement
   with its President until March 2000, unless terminated earlier by the
   Company, at an annual base salary of $200,000, subject to adjustments plus
   bonus.


   CONTINGENT LIABILITIES - At December 26,1997, the Company was contingently
   liable for unused letters of credit aggregating approximately $1,050,000.


   LEGAL PROCEEDINGS - The Company is involved in various legal proceedings in
   the ordinary course of its business which are not anticipated to have a
   material adverse effect on the Company's results of operations or financial
   position.

10.STOCK OPTION PLAN

   The Company has a stock option plan (the "1995 Plan") under which employees
   may be granted options to purchase shares of Common Stock. The Company also
   has a plan (the "Director Plan") under which non-employee directors may be
   granted options to purchase shares of Common Stock. The 1995 Plan and the
   Director Plan, together, are referred to hereafter as the Option Plans.
   Options granted are to be issued at prices equal to at least fair market
   value and expire up to ten years after the grant date. The stock option plans
   are administered by the Compensation Committee of the Board of Directors,
   which determines the vesting provisions, the form of payment for shares and
   all other terms of the options. The maximum number of shares to be reserved
   under the 1995 Plan and Director Plan is 800,000 and 100,000 shares,
   respectively. At December 26, 1997, 462,985 shares were available for future
   grants. Stock option transactions are summarized as follows:

<TABLE>
<CAPTION>
                                                                                           WEIGHTED          
                                                     NUMBER          EXERCISE PRICE    AVERAGE EXERCISE     
                                                   OF SHARES           PER SHARE        PRICE PER SHARE     
                                             -----------------------------------------------------------    
   <S>                                       <C>                    <C>                 <C>                 
   Granted during 1995                             280,000          $           4.23           $ 4.23       
                                                                                                            
   1996:                                                                                                    
     Granted                                       121,000          $11.00 - $ 24.25           $12.41       
     Forfeited                                      (2,800)         $           4.23           $ 4.23       
                                               -----------                                                  
                                                                                                            
   Outstanding at December 27, 1996:               398,200          $ 4.23 -  $24.25           $ 6.72       
                                                                                                            
   1997:                                                                                                    
     Granted                                       187,900          $15.25 -  $29.75           $18.83       
     Exercised                                    (131,485)         $ 4.23 -  $15.50           $10.00       
     Forfeited                                     (17,600)         $ 4.23 -  $29.75           $19.23       
                                               -----------                                                  
   Outstanding at December 26, 1997:               437,015          $ 4.23 -  $29.75           $10.43       
                                               ===========                                                   
</TABLE>

                                     F-15
<PAGE>
 
   The following table summarizes information about the stock options
   outstanding under the Option Plans as of December 26, 1997:

<TABLE>
<CAPTION>
                                               Options Outstanding                  Options Exercisable           
                                               -------------------                  -------------------           
                                          Weighted                                                                
                        Number            Average             Weighted-         Number              Weighted-     
       Range of      Outstanding at       Remaining            Average        Exercisable            Average      
    Exercise Prices     12/26/97       Contractual Life     Exercise Price    at 12/26/97         Exercise Price  
    ---------------  --------------    ----------------     --------------    -----------         --------------  
   <S>               <C>               <C>                  <C>               <C>                 <C>             
   $ 4.23                   244,136        7.2 years        $       4.23            38,331        $       4.23    
   $11.00 - $16.50          105,879        9.1 years               14.80            49,479               13.96    
   $17.25 - $25.88           79,900        9.4 years               22.15             5,000               22.13    
   $26.00 - $29.75            7,100        9.7 years               26.80                 -                   -    
                     --------------                                           ------------                        
                            437,015                                                 92,810                        
                     ==============                                           ============                         
</TABLE>

   All stock options are granted at a price not less than the fair market value
   of the Common Stock at the grant date. The weighted average fair value of the
   stock options granted during 1997, 1996 and 1995 were $10.06, $5.67 and $.80,
   respectively. The fair value of each stock option granted is estimated on the
   date of grant using the Black-Scholes option pricing model with the following
   weighted average assumptions used for grants in 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                        1997                    1996                    1995        
                                                -------------------     -------------------     ------------------- 
   <S>                                          <C>                     <C>                     <C>                 
   Risk-free interest rate                                     6.5%                   5.5%                     5.3%
   Expected volatility                                        57.3%                  74.2%                     --  
   Expected life                                               4.5 years               2.3 years               4.5 years  
   Contractual life                                             10 years                10 years                10 years   
   Dividend yield                                              0.0%                   0.0%                     0.0% 
</TABLE>

   The Company accounts for the Option Plans in accordance with APB Opinion 
   No. 25, under which no compensation cost has been recognized for stock option
   awards. Had compensation cost for the Option Plans been determined with SFAS
   No. 123, "Accounting for Stock-Based Compensation", the Company's pro forma
   net income and earnings per share for the years ended December 26, 1997,
   December 27, 1996 and December 29, 1995 would have been as follows (in
   thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                        1997                  1996                 1995      
                                                ------------------    ------------------    -----------------
   <S>                                          <C>                   <C>                   <C>              
   Net Income:                                                                                               
        As reported                                      $   9,234             $   5,863            $   2,844      
        Pro forma                                        $   8,579             $   5,485            $   2,540      
   Net Income per share:                                                                                     
        As reported                                      $    0.70             $    0.53            $    0.37
        Pro forma                                        $    0.65             $    0.49            $    0.33
   Net Income per share, assuming dilution:                                                                  
        As reported                                      $    0.69             $    0.51            $    0.36
        Pro forma                                        $    0.64             $    0.48            $    0.32 
</TABLE>

                                     F-16
<PAGE>
 
11. PROVISION FOR INCOME TAXES

    The income tax provision for 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                         1997                   1996                   1995      
                                                 ------------------     ------------------     ------------------
    <S>                                          <C>                    <C>                    <C>               
    Current:                                                                                                     
         Federal                                      $   4,733,500       $   3,110,000          $   1,723,680   
         State                                              864,700             733,280                307,900   
                                                      -------------       -------------          -------------   
                                                                                                                 
                                                          5,598,200           3,843,280              2,031,580   
                                                      -------------       -------------          -------------   
    Deferred:                                                                                                    
         Federal                                           (181,000)           (209,000)              (365,000)  
         State                                              (24,000)            (41,000)               (43,000)  
                                                      -------------       -------------          -------------   
                                                                                                                 
                                                           (205,000)           (250,000)              (408,000)  
                                                      -------------       -------------          -------------   
                                                                                                                 
                                                      $   5,393,200       $   3,593,280          $   1,623,580   
                                                      =============       =============          =============    
</TABLE>

    The reconciliation of the provision for income taxes at the federal
    statutory tax rate to the provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                         1997                   1996                   1995       
                                                 ------------------     ------------------     ------------------ 
    <S>                                          <C>                    <C>                    <C>                
    Federal statutory tax rate                                 34.0 %                 34.0 %                 34.0 %
    State income taxes, net of federal benefit                  4.8                    5.1                    4.3 
    Non-deductible expenses                                     1.0                    2.2                    0.6 
    Non-taxable investment income                              (2.3)                  (4.6)                     - 
    Other                                                      (0.6)                   1.3                    4.5 
    Benefit of change in tax status                               -                      -                   (4.9)
    S Corporation earnings                                        -                      -                   (4.3)
                                                 ------------------     ------------------     ------------------ 
                                                                                                                  
                                                              36.9 %                 38.0 %                 34.2 %
                                                 ==================     ==================     ==================  
</TABLE>

    Deferred income taxes result primarily from temporary differences in the
    recognition of certain expenses for financial and income tax reporting
    purposes.

    The components of the Company's net deferred tax asset consisted of the
    following as of:


<TABLE>
<CAPTION>
                                                              DECEMBER 26,          December 27,   
                                                                  1997                  1996       
                                                          -------------------   -------------------
                                                                                                   
    <S>                                                     <C>                   <C>              
    Inventory                                                   $  722,000              $436,000
    Bad debt reserves                                              394,000               234,000
    State taxes                                                    108,000                93,000
    Other                                                            3,000                 5,000
                                                          -------------------   -------------------
                                                                                                   
                                                                $1,227,000              $768,000
                                                          ===================   =================== 
</TABLE>

                                     F-17
<PAGE>
 
12.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     Unaudited quarterly financial information for 1997 and 1996 are as follows
     (amounts are in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                              1997                                          
                                                  -------------------------------------------------------------            
                                                      FIRST           Second          Third           FOURTH               
                                                    (13 WEEKS)      (13 weeks)      (13 weeks)      (13 WEEKS)             
     <S>                                            <C>             <C>             <C>             <C>                     
     Net sales                                       $   33,209      $   36,409      $   40,184      $   40,991
     Gross profit                                         9,995          10,770          11,712          11,711            
     Operating income                                     2,922           3,152           3,429           3,544            
     Net income                                           2,072           2,247           2,414           2,501            
                                                                                                                           
     Net income per share - Basic                    $     0.16      $     0.17      $     0.18      $     0.19            
     Net income per share - Diluted                  $     0.16      $     0.17      $     0.18      $     0.19            
<CAPTION>                                                                                                                  
                                                                              1996                                         
                                                  -------------------------------------------------------------            
                                                      FIRST          Second           Third          FOURTH                
                                                   (13 WEEKS)      (13 weeks)      (13 weeks)      (13 WEEKS)              
     <S>                                           <C>             <C>             <C>             <C>                     
     Net sales                                       $   19,309      $   21,415      $   30,712      $   29,208            
     Gross profit                                         5,936           6,553           8,718           8,584            
     Operating income                                     1,707           1,952           2,774           2,472            
     Net income                                             960           1,218           1,857           1,828            
                                                                                                                           
     Net income per share  - Basic                   $     0.11      $     0.12      $     0.15      $     0.14            
     Net income per share, - Diluted                 $     0.10      $     0.12      $     0.15      $     0.14             
</TABLE>

     The total of the quarterly information presented above may not equal the
     annual results presented in the Consolidated Statement of Income as a
     result of rounding.

     The Company's quarters end on the last Friday of each calendar quarter.

     The Company's sales volumes tend to be lower in the fourth quarter because
     customers defer purchases at year end as their budget limits are met. In
     addition, net sales in the fourth quarter are reduced because of the
     holidays during the period. The third and fourth quarters of 1997 included
     sales of Management Supply Company, which was acquired in September 1997.
     The third and fourth quarters of 1996 included sales of HMA Enterprises,
     Inc., which was acquired in July 1996. 

                                      F-18
<PAGE>
 
                                                                     SCHEDULE II
WILMAR INDUSTRIES, INC.

VALUATION ACCOUNTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                           BALANCE AT                                         BALANCE AT
                                           BEGINNING   CHARGED TO                   OTHER        END
                                            OF YEAR     EXPENSE    DEDUCTIONS /1/  CHANGES     OF YEAR
                                          -----------------------------------------------------------------
<S>                                        <C>         <C>         <C>            <C>         <C>
Year ended December 29, 1995:
       Allowance for doubtful accounts       $135,000     186,727       167,657   82,000 /2/   $    236,070
                                             --------     -------       -------   --------     ============
 
Year ended December 27, 1996:
       Allowance for doubtful accounts       $236,070     364,500        37,481  243,211 /3/   $    806,300
                                             --------     -------       -------   --------     ============
 
Year ended December 26, 1997:
       Allowance for doubtful accounts       $806,300     586,025       525,675  493,150 /4/   $  1,359,800
                                             --------     -------       -------   --------     ============
</TABLE>

1. Accounts receivable written off as uncollectible, net of recoveries.

2. Represents reserve established in connection with acquisition of One Source
   Supply, Inc.  See Note 4 to Consolidated Financial Statements.

3. Represents reserves established in connection with acquisitions of Mile High
   Maintenance Supply, Inc. and HMA Enterprises, Inc. See Note 4 to Consolidated
   Financial Statements.

4. Represents reserves established in connection with acquisitions of
   Management Supply Company, Pier-Angeli Company and Lindley Supply Company.
   See Note 4 to Consolidated Financial Statements.

                                      F-19