<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 25, 1998 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)

    303 Harper Drive
 Moorestown, New Jersey                                08057
------------------------                             ---------
(Address of principal executive offices)             (Zip Code)
</TABLE>

       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 1, 1999, the aggregate market value of the Common Stock held by non-
affiliates of the registrant was $163,949,000. 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 1, 1999, there were 13,389,827 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 25, 1998

                               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                               12

Item 8.     Financial Statements and Supplementary Data                                            12

Item 9.     Changes In and Disagreements with Accountants on Accounting and Financial Disclosure   12

PART III

Item 10.    Directors and Executive Officers of the Registrant                                     12

Item 11.    Executive Compensation                                                                 12

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

Item 13.    Certain Relationships and Related Transactions                                         12

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K                          12
</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, the anticipated costs associated with those
plans, the Company's liability and capital resources, 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, general market conditions, increased
competition, failure to locate and acquire acquisition candidates, and factors
discussed elsewhere in this report and in the documents incorporated herein by
reference.  The following discussion should be read in conjunction with the
financial statements and the notes thereto contained elsewhere in this report on
Form 10-K.

                                     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, same-day or
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 twenty distribution centers located throughout the
United States.   From 1993 to 1998, the Company's net sales increased at a
compound annual rate of 40.1%. From November 1995 through December 1998, Wilmar
has acquired twelve regional repair and maintenance supply companies with total
annualized net sales of approximately $82 million. Throughout this report
references to 1996, 1997 and 1998 refer to the fiscal years ended December 27,
1996, December 26, 1997, and December 25, 1998, 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 1998, as
described below, each of which was accounted for using the purchase method:

In March 1998, the Company acquired certain assets of the California-based
American Maintenance Supply, Inc. ("AMS-CA") and in May 1998, the Company
acquired certain assets of the Nevada-based American Maintenance Supply, Inc.
("AMS-NV"). Both are distributors of plumbing supplies primarily to the multi-
family industry or apartment housing market. The total purchase price of both
acquisitions was paid in cash.

In June 1998, the Company acquired certain assets of Apartment Cleaning Supply
and Pool Supply, Inc. ("ACSPS"), a distributor of both janitorial and pool
chemicals, supplies and equipment primarily to the multi-family industry or
apartment housing market in the Phoenix area. The purchase price of this
acquisition consisted primarily of cash and common stock of the Company.

In November 1998, Company acquired certain assets of Kurzon Supply Company, Inc.
("Kurzon"), a distributor of janitorial supplies and equipment primarily to the
multi-family industry or apartment housing market in New York City. The purchase
price of this acquisition consisted primarily of cash. The accompanying
financial statements reflect the preliminary allocation of purchase price as the
purchase price allocation has not been finalized.

In July 1998, as specified in the purchase agreement with Management Supply
Company ("MSC"), a distributor of repairs and maintenance supplies, based in
Farmington Hills, MI which the Company acquired in September 1997, the Company
sold back a division of MSC to its former owners. The total assets of this
division were approximately $600,000 and were sold at net book value.
Accordingly, the Company has not recorded a gain or loss on this transaction.

                                       1
<PAGE>
 
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.

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,
appliances, 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 1998, excluding
unassimilated acquisitions, private label products marketed under the "Wilmar"
and "Wilflo" names accounted for 14.4 % of net sales, and no single product
accounted for more than 1 % 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
acquisitions, were as follows:

<TABLE>
<CAPTION>
Product Category                                            FISCAL YEAR
----------------                          --------------------------------------------
                                                1996          1997            1998
                                          --------------------------------------------
<S>                                         <C>           <C>            <C>

Plumbing                                             29%            30%             27%
Electrical                                           20             18              18
Hardware                                             16             15              14
Chemical and janitorial                               6              5               6
Appliances                                           --              5               9
Appliance parts                                       7              5               5
Window and floor coverings                            6              7               6
HVAC                                                  7              8               8
Paint and paint accessories                           3              3               3
Other                                                 6              4               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 same-day or 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 43,000 at December 25, 1998 from
approximately 38,000 at December 26, 1997.  No single property accounted for as
much as 1% of the Company's net sales during fiscal 1998, although approximately
2,300 properties owned or managed by one large property management companies
accounted for an aggregate of 7.9% of the Company's net sales during this
period.

                                       2
<PAGE>
 
     Wilmar maintains one of the largest direct sales forces in its industry.
At December 25, 1998, the Company had 233 field sales representatives covering
173 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, same-day or 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 seven regional sales managers.  The Company also employs nine
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.

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 remaining 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 either the
same day or 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 1998, the Company's
return rate was approximately 4.4 % 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 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 903 people as of December 25, 1998.  Of these, 233
were in sales, 9 in telesales, 96 in customer service, 424 in operations and 141
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 2001.  In October 1998, twenty-eight
of the Company's distribution center employees and truck drivers at the
Washington, D.C. distribution center voted to be part of the Highway Truck
Drivers and Helpers Local 355. These workers are covered by a collective
bargaining agreement which went into effect in March 1999.  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 8 to the
Consolidated Financial Statements).  The Company also leases the following
distribution centers:
<TABLE>
<CAPTION>

                                              CURRENT            YEAR
DISTRIBUTION CENTER                        SQUARE FOOTAGE  OPENED/ACQUIRED
-----------------------------------------  --------------  ----------------
<S>                                        <C>             <C>
Philadelphia, PA.........................          70,000             1978(1)
Washington, D.C..........................          28,500             1982
Houston, TX (Inventory Transfer Center)..          25,000             1987
Indianapolis, IN.........................          16,000             1991
Fresno, CA...............................          14,400             1992
Atlanta, GA..............................          28,800             1993(2)
Tampa, FL................................          36,700             1994
Columbus, OH.............................          20,800             1995
Seattle, WA..............................          16,200             1995
Miami, FL................................          37,200             1995*
Denver, CO...............................          27,100             1996*
Houston, TX..............................          55,000             1996*
San Antonio, TX..........................          19,200             1996(3)
Chicago, IL..............................          18,800             1997*
Dallas, TX...............................          50,400             1997
Charlotte, NC............................          24,000             1997
Phoenix, AZ..............................          24,300             1997
Farmington Hills, MI.....................          70,000             1997*
Berkley, MI (Customer will-call center)..           8,000             1997*
Las Vegas, NV............................          21,600             1998
Boston, MA...............................          48,300             1998
Bronx, NY (Kurzon).......................          18,600             1998*
---------------------------------------------------------------------------
</TABLE>
*    Distribution center acquired.

     (1) In September 1996, the Company moved its Philadelphia distribution
     center 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 8 to the
     Consolidated Financial Statements).

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

     (3) In April 1998, the San Antonio Distribution Center, which was
     originally acquired during the HMA Enterprise, Inc. ("HMA") acquisition,
     was moved 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 34 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 1998.


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 1998, 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 1998
----------------
  First Quarter                                                                      $26.00              $20.50
  Second Quarter                                                                     $25.50              $21.50
  Third Quarter                                                                      $28.25              $18.00
  Fourth Quarter                                                                     $25.38              $16.50
</TABLE>



At March 1, 1999, there were no shares of Preferred Stock outstanding. On March
1, 1999, the closing sale price for a share of Common Stock as reported by The
Nasdaq National Market was $17.50.  As of March 1, 1999, there were
approximately 1,612 holders of the Company's Common Stock. The Company did not
declare dividends on its Common Stock in fiscal year 1998 or in fiscal year 1997
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)
 

                                            1994      1995       1996       1997        1998
                                          --------  ---------  ---------  ---------  ----------
<S>                                       <C>       <C>        <C>        <C>        <C>
Statement of Operations Data:
Net Sales                                  $47,679  $ 60,823   $100,644   $150,792    $192,605
Cost of Sales (2)                           32,787    41,835     70,853    106,605     136,488
                                           -------  --------   --------   --------    --------
Gross Profit                                14,892    18,988     29,791     44,187      56,117
Operating and Selling Expenses               7,068     9,099     14,168     21,024      26,357
Corporate General & Admin. Expenses          2,895     3,985      6,718      9,857      11,114
Non-Recurring Severance Expenses                --        --         --        259          --
                                           -------  --------   --------   --------    --------
Operating Income                             4,929     5,904      8,905     13,047      18,646
Interest expense (income), net                 289     1,164       (551)    (1,580)     (1,511)
                                           -------  --------   --------   --------    --------
Income before income taxes                   4,640     4,740      9,456     14,627      20,157
                                           -------  --------   --------   --------    --------
Income tax provision (3)                     1,860     1,896      3,593      5,393       7,692
                                           -------  --------   --------   --------    --------
Net income (3)                             $ 2,780  $  2,844   $  5,863   $  9,234    $ 12,465
                                           =======  ========   ========   ========    ========
Net income per share (3)
  - Basic                                    $0.31     $0.37      $0.53       $.70        $.93
                                           =======  ========   ========   ========    ========
  - Diluted                                  $0.31     $0.36      $0.51       $.69        $.92
                                           =======  ========   ========   ========    ========

Weighted average common shares (4)
  - Basic                                    9,071     7,765     11,105     13,165      13,368
                                           =======  ========   ========   ========    ========
  - Diluted                                  9,071     7,868     11,458     13,335      13,504
                                           =======  ========   ========   ========    ========

Balance Sheet Data
Working capital (deficit)                  $ 4,367  $    (54)  $ 65,300   $ 64,848    $ 72,550
Total assets                                14,561    26,871     88,309    108,115     121,696
Long-term debt, less current position        2,693     5,667         --        500          --
Mandatorily-redeemable preferred stock          --    25,058         --         --          --
Total stockholders' equity (deficit)         2,719   (27,062)    75,500     90,549     103,789

</TABLE>
(1) The Company's fiscal year is based on a 52/53 week fiscal period ending on
 the last Friday in December. All fiscal years shown above 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 1996 through 1998 are actual amounts.

(4) See Note 2 to the Consolidated Financial Statements for description of the
 determination of weighted- average common shares outstanding.

                                       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 eleven distribution centers: Indianapolis (1991), Fresno (1992),
Atlanta (1993), Tampa (1994), Columbus (1995), Seattle (1995), Dallas (February
1997), Charlotte (March 1997), Phoenix (June 1997), Las Vegas (June 1998) and
Boston (July 1998).  From November 1995 through December 1997, the Company has
acquired eight additional distribution centers through acquisitions: Miami
(November 1995), Denver (May 1996), Houston (July 1996), San Antonio (July
1996), Chicago (January 1997), Farmington Hills, Michigan (September 1997),
Berkley, Michigan (September 1997) and New York City (November 1998).  The
Company currently operates twenty distribution centers, as well as an inventory
transfer center and a customer will-call location.

  ACQUISITIONS. During 1998, the Company acquired certain assets of AMS-CA, AMS-
NV, and Kurzon.  All were distributors primarily to the multi-family industry or
apartment housing market. The total purchase price of all these acquisitions was
paid primarily in cash.

In June 1998, the Company acquired certain assets of ACSPS, a distributor of
both janitorial and pool chemicals, supplies and equipment primarily to the
multi-family industry or apartment housing market in the Phoenix area. The
purchase price of this acquisition consisted primarily of cash and common stock
of the Company.

The Company accounted for each of the 1998 acquisitions described above as
purchases for financial reporting purposes. The Company paid an aggregate
purchase price of approximately $7.2 million.  The resulting goodwill of
approximately $ 4.6 million is being amortized on a straight-line basis over 40
years and other intangible assets of approximately $ 800,000 are being amortized
over 5 to 20 years.

In 1997, the Company acquired certain assets of Pier-Angeli Group, Inc. ("Pier-
Angeli") and Lindley Plumbing and Supply Company ("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 primarily 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 of  $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.

                                       7
<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
                                                 ------------------------
<S>                                              <C>     <C>     <C>

                                                  1996    1997      1998
                                                 ------  ------    ------
                                                                 
Net Sales                                        100.0%  100.0%    100.0%
                                                                 
Cost of Sales                                     70.4    70.7      70.9
                                                 -----   -----     -----
                                                                 
Gross Profit                                      29.6    29.3      29.1
                                                                 
Operating and Selling Expenses                    14.1    13.9      13.7
                                                                 
Corporate General and Administrative Expenses      6.7     6.5       5.7
                                                                 
Non-Recurring Severance Expenses                    --     0.2        --
                                                 -----   -----     -----
                                                                 
Operating Income                                   8.8     8.7       9.7
                                                                 
Interest expense (income) net                     (0.6)   (1.0)     (0.8)
                                                 -----   -----     -----
                                                                 
Income before income taxes                         9.4     9.7      10.5
                                                 -----   -----     -----
                                                                 
Income tax provision                               3.6     3.6       4.0
                                                 -----   -----     -----
                                                                 
 Net Income                                        5.8%    6.1%      6.5%
                                                 =====   =====     =====

</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES.  Net sales increased by $41.8 million, or 27.7%, to $192.6 million in
1998 from $150.8 million in 1997.  This increase was attributable to the
maturation of the existing sales force, sales force additions, the Company's
telesales effort, increased sales to national accounts and a substantial
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).  The Company's sales force at the end of 1998 was 233, an
increase of 58 when compared with the end of 1997. Sales attributable to the
existing sales force (salesmen employed for all of both periods) increased 17%.
In addition the acquisitions of MSC and certain assets of AMS-CA, AMS-NV, ACSPS
and Kurzon which occurred in September 1997, March 1998, May 1998, June 1998 and
November 1998, respectively, also contributed significantly to the Company's
growth.  Price increases during both periods were modest and made only on
selected items.  During the year ended December 25, 1998, Wilmar generated
approximately $8.2 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 the first quarter of 1995.

Gross Profit.  Cost of sales includes merchandise, freight, distribution center
occupancy and delivery costs.   As a percentage of net sales, gross profit was
29.1% in 1998 compared to 29.3% in 1997.  This expected decrease in the gross
margin resulted from the acquisition of MSC.  MSC's gross margins reflect a
product mix that includes a larger volume of major appliance sales, that yield a
lower gross margin percentage. In addition, 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 Charlotte, San Antonio, Phoenix, Las Vegas and Boston, also
contributed to the decrease in gross margin when compared with 1997.

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
$5.3 million, or 25.4%, to $26.4 million in 1998 from $21.0 million in 1997.  As
a percentage of net sales, these expenses represented 13.7% for 1998 compared to
13.9% for 1997. This decrease was primarily attributable to realizing the 
benefits of economies of scale through the assimilation of the HMA acquisition 
in July 1997 and the assimilation of the MSC acquisition in May 1998.

                                       8
<PAGE>
 
Corporate General and Administrative Expenses.  Corporate general and
administrative expenses increased by $1.3 million or 12.7%, to $11.1 million in
1998 from $9.9 million in 1997. This increase is primarily the result of the
enhanced staffing required to manage a larger volume of business. As a
percentage of net sales, corporate general and administrative expenses
represented 5.8% for  1998 compared to 6.5% for 1997. During 1998, the Company
incurred approximately $182,000 in expenses related to the assimilation of MSC
and pre-opening expenses for its new San Antonio, Las Vegas and Boston
distribution centers,  (the "assimilation and pre-opening expenses"). The
Company expenses all distribution center pre-opening and acquisition
assimilation costs when incurred.  Excluding these expenses, corporate general
and administrative expenses as a percentage of net sales would have been 5.7%
for 1998 compared to 6.3% for 1997.

Operating Income.  Operating income increased by $5.6 million, or 42.9%, to
$18.6 million in 1998 from $13.0 million in 1997.  As a percentage of net sales,
operating income was 9.7% for 1998 compared to 8.7% for 1997. 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, as a percentage of
net sales, excluding these expenses, would have been 9.8% for 1998 compared to
9.0% for 1997.

Interest Income.  Net interest income for 1998 was $1.5 million and $1.6 million
for 1997. The interest income occurred as a result of the investment income from
the proceeds of the secondary public offering completed in July 1996.


FISCAL 1997 COMPARED TO FISCAL 1996

     Net Sales.  Net sales increased by $50.1 million, or 49.8%, to $150.8
million in 1997 from $100.7 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.

     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.

                                       9
<PAGE>
 
     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 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.

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.

On March 19, 1999, the Company announced that its Board of Directors had
approved a stock buyback program whereby it may repurchase up to one million
shares of its common stock. Such repurchases may be made from time to time in
open market transactions at prevailing prices or in privately negotiated
transactions on terms mutually agreed upon.

Cash provided by operating activities was $6.8 million during 1998 compared to
$4.2 million in 1997.  Cash provided by operating activities during 1998
consisted of $12.5 million of net income before adding back depreciation and
amortization and other non-cash charges of $1.7 million. Further offset by the
decrease of $7.4 million of the changes in operating assets and liabilities,
primarily resulting from a $1.3 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 $475,000, net of the
tax benefit from exercise of stock options.

Cash used in investing activities during 1998 was $7.2 million, which consisted
primarily of approximately $1.6 million for the purchase of property and
equipment and $5.6 million relating to the acquisitions of ACSPS, AMS-CA AMS-NV,
and Kurzon.

Cash provided by financing activities during 1998 was approximately $260,000,
consisting of $360,000 of net proceeds received from the exercise of stock
options, offset by repayment of notes payable of $100,000.

Capital expenditures were $1.6 million for 1998 compared to $1.7 million for
1997. The Company spent approximately $ 505,000 during 1998 to equip its new Las
Vegas, San Antonio and Boston distribution centers.  A typical 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.

                                       10
<PAGE>
 
Wilmar's credit facilities consist of two unsecured bank lines of credit
totaling $15 million. These lines of credit had zero balances at December 25,
1998. In 1999, 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, as well as a $5 million unsecured bank line of credit, which bears
interest at the bank's prime rate. These credit facilities expire in September
1999. The Company anticipates renewing these credit facilities as they expire.
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 1999.  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 ("Y2K") poses a
worldwide challenge to the ability of all systems to recognize the date change
from December 31, 1999 to January 1, 2000. The Company continues to assess how
the Y2K problem will impact its operations. Considerable progress has been
achieved in the areas of identifying, remediating, testing, and implementing Y2K
compliant products and services, which are critical to the business computing
systems infrastructure. Inventory of all in-house software has been completed
and is currently being reviewed for compliance. The Company's core business
application software does not utilize a "MMDDYY" date format and is therefore
substantially unaffected by the Y2K issue. The Company is in the process of
attempting to identify critical third party vendors whose inability to reach Y2K
compliance may impact business connectivity and viability. Hardware systems have
been examined and appropriate paths charted to ensure complete Y2K
compatibility. The goal for completing Y2K compliance for all critical computing
system environments is early to mid calendar year 1999.

All costs associated with the Y2K project to date have been expensed as
incurred. These costs have not been and are not anticipated to be material to
the Company's financial position, results of operations or cash flows in any
given year, and such costs have been and are expected to continue to be funded
from the Company's operations.  The Company's total estimated cost of the Y2K
compliance program is approximately $100,000 to $200,000. A significant portion
of these costs are not likely to be incremental costs to the Company, but rather
will represent the redeployment of existing information technology resources.
Based upon current benchmarks, the Company believes that it has the necessary
resources in-house to complete all required Y2K re-mediation. In the event that
internal resources are insufficient to complete the project in a timely manner,
outsourcing the Y2K project, either in part or whole, to a Y2K Service Provider
may be necessary.

Despite the Company's best efforts to make its systems and facilities Y2K
compliant, infrastructure failures, such as, but not limited to, loss of
electrical power, loss of telecommunication services, delays or cancellations of
shipping or transportation, shut-downs of significant suppliers, or computer
errors by vendors and major bank errors could significantly impact on the
Company's ability to service its customers.  Accordingly, if these external
parties do not become Y2K compliant in a timely basis there can be no assurance
that the Company's efforts will prevent a material adverse affect on its results
of operations, financial condition or business.

To date, the Company has not established a formal contingency plan for dealing
with a failure by either the Company or its third party vendors to achieve Year
2000 compliance. However, it recognizes the need to develop contingency plans
and expects to have these plans secured, where applicable by the end of Fiscal
1999.

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.

                                       11
<PAGE>
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-------   ----------------------------------------------------------

The Company does not utilize financial instruments for trading purposes and
holds no derivative financial instruments which could expose the Company to
significant market risk.  The Company's primary market risk exposure with regard
to financial instruments is to changes in interest rates.  Any decrease in
interest rates would affect the amount of interest income earned by the Company.
The Company believes that the affect of any such change would not be material.
In addition, pursuant to the company's lines of credit, a change in the lender's
prime rate would effect the rate at which the Company could borrow funds
thereunder.  As of December 25, 1998, the Company had no amount against these
lines of credit.

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 25, 1998.

    (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.

                                       12
<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.

                                       13
<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 25, 1999         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>
                                          Chairman, President and Chief Executive    March 25, 1999
/s/ William S. Green                      Officer (principal executive officer)
----------------------------------------  and Director
     William S. Green

                                          Executive Vice President and Chief         March 25, 1999
/s/ Michael J. Grebe                      Operating Officer
----------------------------------------
     Michael J. Grebe

                                          Vice President - Corporate Development,    March 25, 1999
/s/ Fred B. Gross                         Secretary and Director
----------------------------------------
     Fred B. Gross

                                          Chief Financial Officer and Treasurer      March 25, 1999
/s/ Michael T. Toomey                     (principal financial and accounting
----------------------------------------  officer)
     Michael T. Toomey


/s/ Martin E. Hanaka                      Director                                   March 25, 1999
----------------------------------------
     Martin E. Hanaka

/s/ Ernest K. Jacquet                     Director                                   March 25, 1999
----------------------------------------
     Ernest K. Jacquet

/s/ Donald M. Wilson                      Director                                   March 25, 1999
----------------------------------------
     Donald M. Wilson
</TABLE>

                                       14
<PAGE>
 
                            WILMAR INDUSTRIES, INC.

 Index to Consolidated Financial Statements and Financial Statement Schedules
 
 
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-7
Schedule II - Valuation and Qualifying Accounts............................ F-16
 
<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 25, 1998
and December 26, 1997, 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 25, 1998.  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 25, 1998 and December 26, 1997, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended December
25, 1998, in conformity with generally accepted accounting principles.



DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania

March 2, 1999
(March 19, 1999 as to Note 11)

                                      F-2
<PAGE>

WILMAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                 December 25, December 26,
                                                                                     1998         1997
                                                                                 ------------ ------------
<S>                                                                               <C>         <C> 
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                                       $30,611,955  $30,723,746
  Cash - restricted                                                                   297,236      283,655
  Accounts Receivable - trade, net of allowance for doubtful accounts
   of $1,399,200 in 1998 and $1,359,800 in 1997.                                   27,535,016   23,801,733
  Inventory                                                                        30,128,680   24,979,935
  Prepaid expenses and other current assets                                           385,992      898,255
  Deferred income taxes                                                             1,498,000    1,227,000
                                                                                 ------------ ------------
          Total current assets                                                     90,456,879   81,914,324

PROPERTY AND EQUIPMENT, net of accumulated depreciation
  of $4,740,501 in 1998 and $3,923,523 in 1997.                                     4,183,348    3,540,889

GOODWILL, net of accumulated amortization of $973,445 in 1998 
 and $426,066 in 1997.                                                             22,133,860   18,121,121

INTANGIBLE ASSETS AND OTHER, Net                                                    4,921,704    4,538,971
                                                                                 ------------ ------------

TOTAL ASSETS                                                                     $121,695,791 $108,115,305
                                                                                 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

  Notes payable                                                                  $  1,208,518 $    725,000
  Accounts payable                                                                 11,991,661   13,244,918
  Accrued expenses and other current liabilities                                    4,294,425    2,875,484
  Income taxes payable                                                                412,160      220,819
                                                                                 ------------ ------------

            Total current liabilities                                              17,906,764   17,066,221

NOTES PAYABLE                                                                              --       500,000
                                                                                ------------- -------------

            Total liabilities                                                      17,906,764   17,566,221


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;
  13,389,827 shares issued and outstanding in 1998
  13,335,754 shares issued and outstanding in 1997                                103,568,743  102,793,984
Retained earnings (Accumulated deficit)                                               220,284  (12,244,900)
                                                                                 ------------ ------------

      Total stockholders' equity                                                  103,789,027   90,549,084
                                                                                 ------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $121,695,791 $108,115,305
                                                                                 ============ ============

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

                                                                F - 3

</TABLE>
<PAGE>

WILMAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 
                                                       Year               Year                Year
                                                      Ended              Ended               Ended
                                                   December 25,       December 26,        December 27,
                                                       1998               1997                1996
                                               -----------------  ----------------    ----------------  
<S>                                            <C>                <C>                 <C>         
NET SALES                                      $     192,605,005  $    150,792,516    $    100,644,167
                                                                                      
COST OF SALES                                        136,488,192       106,604,587          70,852,668
                                               -----------------  ----------------    ----------------  
             Gross profit                             56,116,813        44,187,929          29,791,499
                                                                                      
OPERATING EXPENSES:                                                                   
                                                                                      
   Operating and selling expenses                     26,356,579        21,024,183          14,168,050
                                                                                      
   Corporate general and administrative expenses      11,113,491         9,857,340           6,718,428
                                                                                      
   Non-recurring severance expense                                         259,000    
                                               -----------------  ----------------    ----------------  
                                                                                      
   Total operating expenses                           37,470,070        31,140,523          20,886,478
                                               -----------------  ----------------    ----------------  
             Operating income                         18,646,743        13,047,406           8,905,021
                                                                                      
INTEREST INCOME                                       (1,510,941)       (1,580,056)           (551,351)
                                               -----------------  ----------------    ----------------  

              Income before income taxes              20,157,684        14,627,462           9,456,372
                                                                                      
PROVISION FOR INCOME TAXES                             7,692,500         5,393,200           3,593,280
                                               -----------------  ----------------    ----------------  
                                                                                      
              Net income                          $   12,465,184     $   9,234,262       $   5,863,092
                                               =================  ================    ================  
                                                                                      
                                                                                      
   Net income per share - Basic                   $         0.93     $        0.70       $        0.53
                                               =================  ================    ================
   Net income per share - Diluted                 $         0.92     $        0.69       $        0.51
                                               =================  ================    ================  

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

                                                                F-4
</TABLE>
<PAGE>

WILMAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 -------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                                    (Accumulated
                                                                                      Deficit)/          Total
                                                         Common       Stock           Retained        Stockholders'
                                                         Shares       Amount          Earnings      (Deficit) Equity
                                                       ---------- ---------------  --------------  -----------------  
<S>                                                    <C>        <C>              <C>             <C>      
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 - HMA Acquisition                63,980       1,522,000                        1,522,000

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

 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 - Mangement Supply              151,246       3,749,388                        3,749,388
    Acquisition
 Net income                                                                             9,234,262        9,234,262
                                                       ---------- ---------------  --------------  ---------------  
BALANCE, DECEMBER 26, 1997                             13,335,754 $   102,793,984  $  (12,244,900) $    90,549,084

 Exercised Stock Options                                   48,350         360,446                          360,446

 Tax Benefit from Exercised Stock Options                                 283,600                          283,600

 Issuance of Common Stock - Apartment Cleaning              5,723         130,713                          130,713
    Acquisition
 Net income                                                                            12,465,184       12,465,184
                                                       ---------- ---------------  --------------  ---------------  
BALANCE, DECEMBER 25, 1998                             13,389,827 $   103,568,743  $      220,284  $   103,789,027
                                                       ========== ===============  ==============  ===============

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

                                                                F-5
</TABLE>
<PAGE>
WILMAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 

                                                                                    Year Ending      Year Ending    Year Ending
                                                                                    December 25,     December 26,   December 27,
                                                                                       1998             1997           1996
                                                                                  --------------  ----------------  --------------- 
<S>                                                                               <C>             <C>               <C> 
OPERATING ACTIVITIES :
   Net Income                                                                     $  12,465,184    $    9,234,262   $  5,863,092
   Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                                                     1,971,872         1,391,884        735,345
    Deferred income taxes                                                              (271,000)         (205,000)      (250,000)
    Loss (Gain) on disposition of property and equipment                                 16,504            (2,012)        (3,286)
    Changes in assets and liabilities, net of effects of acquisition:
     Accounts receivable                                                             (2,803,543)       (2,767,229)      (990,023)
     Inventory                                                                       (4,278,081)       (4,342,521)      (245,134)
     Prepaid expenses and other current assets                                          501,327          (623,110)       (17,670)
     Intangible assets and other                                                        (15,432)          121,584        (63,425)
     Accounts Payable                                                                (1,253,257)        2,787,491     (3,857,976)
     Accrued expenses and other current liabilities                                     (29,315)          123,009       (352,850)
     Accrued interest                                                                                                   (212,823)
     Income taxes payable                                                               474,941        (1,524,797)       803,169
                                                                                  --------------  ----------------  --------------- 
          Net cash provided by operating activities                                   6,779,200         4,193,561      1,408,419
                                                                                  --------------  ----------------  --------------- 

INVESTING ACTIVITIES :
                                                                                                                          -
   Purchase of property and equipment                                                (1,559,686)       (1,679,103)    (1,173,048)
   Proceeds from sale of property and equipment                                           4,400             7,958          4,250
   Proceeds from sale (purchase) of short-term investments                                              3,927,276     (3,927,276)
   Acquisition of business, including escrow                                         (5,596,151)      (15,000,452)    (9,111,111)
                                                                                  --------------  ----------------  --------------- 
         Net cash used in investing activities                                       (7,151,437)      (12,744,321)   (14,207,185)
                                                                                  --------------  ----------------  --------------- 
FINANCING ACTIVITIES :
   Repayment of notes payable                                                          (100,000)         (260,000)    (9,922,510)
   Principal payments on long-term debt :
    Banks                                                                                                             (1,499,999)
    Related parties                                                                                                   (2,940,922)
   Repurchase of Series A Preferred Stock, plus accrued dividends                                                    (13,870,928)
   Repurchase of Series B Preferred Stock, plus accrued dividends                                                     (6,343,425)
   Repayment of subordinated debentures                                                                               (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
   Net proceeds from exercise of stock options                                          360,446         1,305,796
                                                                                  --------------  ----------------  --------------- 
          Net cash provided by financing activities                                     260,446         1,045,796     51,002,433
                                                                                  --------------  ----------------  --------------- 
NET INCREASE  (DECREASE) IN CASH                                                       (111,791)       (7,504,964)    38,203,667

CASH, BEGINNING OF PERIOD                                                            30,723,746        38,228,710         25,043
                                                                                  --------------  ----------------  --------------- 
CASH, END OF PERIOD                                                                 $30,611,955    $   30,723,746   $ 38,228,710
                                                                                  ==============  ================  =============== 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   Cash paid during the period for :
    Interest                                                                        $    11,328    $       35,329   $    392,801
                                                                                  ==============  ================  =============== 
    Income taxes                                                                    $ 5,765,843    $    6,872,600   $  3,048,802
                                                                                  ==============  ================  =============== 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

   Issuance of Common Stock in connection with the purchase of :
     Apartment Cleaning Supply and Pool Supply, Inc.                                $     130,713
     Managament Supply Company                                                                     $    3,749,388
     Mile High Maintenance Supply, Inc.                                                            $      100,024
     HMA Enterprises, Inc.                                                                                          $  1,522,000
     Aaron Distributing, Inc.                                                                                       $  1,000,000

   Issuance of Notes and other liabilities recorded in connection with the purchase of :
     Apartment Cleaning Supply and Pool Supply, Inc.                                $   529,350
     Kurzon Supply Company                                                          $   658,125
     American Maintence Supply, Inc. - CA                                           $   109,164
     American Maintence Supply, Inc. - NV                                           $   150,013
     Pier-Angeli Group, Inc.                                                                       $       75,000
     Managament Supply Company                                                                     $    1,125,000
     Aaron Distributing, Inc.                                                                                       $    285,000

   Accretion of mandatorily redeemable Series A Senior and
     Series B Junior Preferred Stock redemption values                                                              $    155,932

   Conversion of Series B Junior Preferred stock into
    454,545 shares of Common stock                                                                                  $  5,000,000

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

                                                                              F - 6
 </TABLE>
<PAGE>
 
WILMAR INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE FISCAL YEARS IN THE PERIOD ENDED DECEMBER 25, 1998
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE BUSINESS

   Wilmar Industries, Inc. ("Wilmar" or the "Company") is a national marketer
   and distributor of repair and maintenance products with twenty 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. 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 25, 1998 were fifty-two week years.  References herein to
   1998, 1997 and 1996 are for the fiscal years ended December 25, 1998,
   December 26, 1997 and December 27, 1996, 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.

   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 25, 1998.

   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 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.

                                      F-7
<PAGE>
 
   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 and cash
   equivalents, accounts receivable, notes payable and accounts payable
   approximate fair value because of the short maturities 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.
   Advertising expenses were approximately $ 492,500, $ 448,000 and $ 368,000 in
   1998, 1997 and 1996, 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 9).

   INCOME TAXES - Taxes on income are provided in accordance with 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.

   NET INCOME PER SHARE DATA - Net income per share for all periods have been
   computed in accordance with SFAS No. 128, "Earnings per Share." 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.

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

<TABLE>
<CAPTION>
                                                          1998            1997             1996
                                                      -----------      -----------      -----------
<S>                                                   <C>              <C>              <C>
Net Income                                            $12,465,184      $ 9,234,262      $ 5,863,092
                                                      ===========      ===========      ===========
Weighted Average Shares Outstanding - Basic            13,367,815       13,165,416       11,104,618
Effect of Dilutive Stock Options                          136,140          169,214          353,849
                                                      -----------      -----------      -----------
Weighted Average Shares Outstanding - Diluted          13,503,955       13,334,630       11,458,467
                                                      ===========      ===========      ===========
</TABLE>

   Options to purchase 90,625 and 25,900 shares of common stock were outstanding
   during 1998 and 1997, respectively, 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.

                                      F-8
<PAGE>
 
   SEGMENT INFORMATION - The Company is in one industry, the distribution of
   repair and maintenance products.  In accordance with SFAS No. 131
   "Disclosures about Segments of an Enterprise and Related Information", the
   Company aggregates all of it's distribution centers and reports one operating
   segment.

   Approximate sales by product category are as follows:

                             1998              1997             1996


   Plumbing               $  55,855,000     $  45,238,000    $  27,174,000  
   Electrical                38,521,000        27,143,000       18,116,000 
   Hardware                  30,817,000        22,619,000       14,090,000  
   Other                     67,412,005        55,792,516       41,264,167
                          ------------------------------------------------
                          $ 192,605,005     $ 150,792,516    $ 100,644,167
                          ================================================    


   RECENT ACCOUNTING PRONOUNCEMENTS  - In June 1998, the Financial Accounting
   Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
   Instruments and Hedging Activities", which establishes accounting and
   reporting standards for derivative instruments, including certain derivative
   instruments embedded in other contracts, (collectively referred to as
   "derivatives") and for hedging activities. It requires that an entity
   recognize all derivatives as either assets or liabilities in the statement of
   financial position and measure those instruments at fair value.  This
   statement is effective for all fiscal quarters of fiscal years beginning
   after June 15, 1999.  Management has not yet determined what effect, if any,
   this statement will have on the Company.

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.

   ACQUISITIONS - During 1998, the Company completed four acquisitions (The
   California-based American Maintenance Supply, Inc., Apartment Cleaning Supply
   and Pool Supply, Inc., the Nevada-based American Maintenance Supply, Inc.,
   and Kurzon Supply Company, Inc.) for an aggregate base purchase price of
   approximately $7.2 million, including costs of acquisition.  Goodwill
   recorded in connection with these acquisitions was approximately $ 4.6
   million. The accompanying financial statements reflect the preliminary
   allocation of purchase price for Kurzon, as the purchase price allocation has
   not been finalized.

   During 1997, the Company completed three acquisitions (Management Supply
   Company, Pier-Angeli Group, Inc. 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.

   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.

   The following table presents the unaudited results of operations of the
   Company for each of the three fiscal years in the period ended December 25,
   1998 as if the acquisitions had been consummated as of the beginning of the
   prior 

                                      F-9
<PAGE>
 
   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>
<CAPTION>
                                         1998           1997             1996
                                    -------------    ------------     ------------
<S>                                   <C>            <C>              <C>
Revenues                             $195,909,000    $172,376,000     $153,980,000
Net income                             12,904,000      10,018,000        6,950,000
                                                                      
Net income per share - Basic                 0.97            0.75             0.61
Net income per share - Diluted               0.96            0.75             0.60
</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.

<TABLE>
<C> <S>
4.  INTANGIBLE ASSETS AND OTHER
</TABLE>

   Intangible assets and other consist of the following:

<TABLE>
<CAPTION>
                                                                                   1998                    1997
                                                                          ---------------------   ---------------------
                                                                                                 
<S>                                                                       <C>                     <C>
Intangible assets                                                                    $5,502,000              $4,952,950
Less accumulated amortization                                                          (829,887)               (634,967)
                                                                          ---------------------   ---------------------
                                                                                      4,672,113               4,317,983
                                                                                                 
Deposits                                                                                249,591                 217,219
Other                                                                                        --                   3,769
                                                                          ---------------------   ---------------------
                                                                                     $4,921,704              $4,538,971
                                                                          =====================   =====================
</TABLE>

5. BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
PROPERTY AND EQUIPMENT                                                             1998                     1997
                                                                         ---------------------     --------------------
<S>                                                                     <C>                                <C>
Machinery and equipment                                                            $ 3,513,458              $ 2,577,015
Office furniture and equipment                                                       3,489,494                3,093,290
Vehicles                                                                               953,282                  948,844
Leasehold improvements                                                                 967,615                  845,263
                                                                                   -----------              -----------
                                                                                     8,923,849                7,464,412
Less accumulated depreciation and amortization                                      (4,740,501)              (3,923,523)
                                                                                   -----------              -----------
                                                                                   $ 4,183,348              $ 3,540,889
                                                                                   ===========              ===========
                                                                                                            
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES                                                              
                                                                                                            
Sales tax payable                                                                  $   759,798              $   575,524
Accrued compensation and related benefits                                              934,320                1,101,257
Other accrued liabilities                                                            2,600,307                1,198,703
                                                                                   -----------              -----------
                                                                                   $ 4,294,425              $ 2,875,484
                                                                                   ===========              ===========
 
</TABLE> 

   Depreciation expense was approximately $1,005,000, $786,000 and $521,000 for
   1998, 1997 and 1996, respectively.

                                      F-10
<PAGE>
 
6. NOTES PAYABLE

   NOTES PAYABLE -At December 25, 1998 and December 26, 1997, the Company had
   notes payable to the former shareholders of Management Supply Company, which
   total $625,000, and will be paid in 1999.  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 25, 1998 and December 26, 1997, the Company had current
   notes payable to former shareholders of acquired companies, totaling $83,518
   and $100,000, respectively. Each of these notes bear interest at 8%.

   LINES OF CREDIT - At December 25, 1998, the Company has a $10,000,000
   unsecured bank line of credit, which bears interest at 3/4% below the bank's
   prime rate (7.0% at December 25, 1998), and expired in December 1998.

   At December 25, 1998, the Company also has a $5,000,000 unsecured bank line
   of credit, which bears interest at the bank's prime rate (7.75% at December
   25, 1998), and expired in December 1998.

   No amounts were outstanding against these lines of credit at December 25,
   1998.  Management renewed the lines of credit in 1999. These lines of credit 
   expire in September 1999.

7. 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 $208,600, $151,300 and $102,600 for 1998, 1997
   and 1996, respectively.

8. 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 25, 1998 are as follows:


<TABLE>
<S>                                                    <C>
1999                                                             $ 3,456,216
2000                                                               3,038,427
2001                                                               2,599,288
2002                                                               1,912,964
2003                                                                 935,223
Thereafter                                                           780,977
                                                                 -----------
                                                                 
Total                                                            $12,723,095
                                                                 ===========
 
</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,  $289,000 and $74,000 for 1998, 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, for
   1998, 1997, and 1996.  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-11
<PAGE>
 
   Rent expense under all operating leases was $3.9 million, $2.2 million and
   $1.3 million for 1998, 1997 and 1996, 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 25,1998, the Company was contingently
   liable for unused letters of credit aggregating approximately $1,099,765.

   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.

9. 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 25, 1998, 75,412 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
 
1998:
  Granted                                               291,138     $ 16.50 - $25.88                    $19.96
  Exercised                                             (48,350)    $  4.23 - $21.00                    $ 7.46
  Forfeited                                             (35,050)    $ 15.50 - $29.75                    $21.93
                                                       --------
 
Outstanding at December 25, 1998:                       644,753     $  4.23 - $29.75                    $14.33
                                                       ========
</TABLE>

                                      F-12
<PAGE>
 
   The following table summarizes information about the stock options
   outstanding under the Option Plans as of December 25, 1998:

<TABLE>
<CAPTION>
                                                      Options                                      Options
                                                    Outstanding                                  Exercisable
                                       --------------------------------------  --------------------------------------------
                         Number        Weighted Average                              Number            
Range of Exercise    Outstanding at        Remaining       Weighted- Average       Exercisable         Weighted- Average
     Prices             12/25/98       Contractual Life      Exercise Price        at 12/25/98          Exercise Price  
------------------  ----------------  ------------------  -------------------  -------------------  -----------------------
<S>                  <C>               <C>                <C>                   <C>               <C>
$  4.23                  206,470           6.2 years            $ 4.23                69,265                $ 4.23
$11.00 - $16.50           98,145           8.1 years             14.84                47,545                 14.08
$16.88 - $25.25          332,438           9.3 years             20.17                65,250                 21.35
$25.38 - $28.75            7,700           8.9 years             26.31                     -                     -
                         -------                                                     -------
                         644,753                                                     182,060
                         =======                                                     =======
</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 1998, 1997 and 1996 were $10.70, $10.06 and
   $5.67, 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 1998, 1997
   and 1996:


<TABLE>
<CAPTION>
                                                      1998                    1997                    1996
                                             -------------------     -------------------     -------------------
<S>                                            <C>                     <C>                     <C>
Risk-free interest rate                                    5.1 %                   6.5 %                   5.5 %
Expected volatility                                       60.0 %                  57.3 %                  74.2 %
Expected life                                          4.5 years               4.5 years               2.3 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 25,
   1998,December 26, 1997 and December 27, 1996 would have been as follows (in
   thousands, except per share amounts):


<TABLE>
<CAPTION>
                                                        1998                       1997                      1996
                                             ------------------------    -----------------------    --------------------
Net Income:
<S>                                            <C>                         <C>                        <C>
     As reported                                              $12,465                     $9,234                  $5,863
     Pro forma                                                $11,765                     $8,579                  $5,485
Net Income per share:
     As reported                                              $  0.93                     $ 0.70                  $ 0.53
     Pro forma                                                $  0.88                     $ 0.65                  $ 0.49
Net Income per share, assuming dilution:
     As reported                                              $  0.92                     $ 0.69                  $ 0.51
     Pro forma                                                $  0.87                     $ 0.64                  $ 0.48
</TABLE>

                                      F-13
<PAGE>
 
10. PROVISION FOR INCOME TAXES

   The income tax provision for each of the fiscal years in the period ended
   December 25, 1998 is as follows:

<TABLE>
<CAPTION>
                                                   1998            1997            1996   
                                             ---------------------------------------------
Current:                                                                                  
<S>                                            <C>             <C>             <C>        
     Federal                                    $6,812,800      $4,733,500      $3,110,000
     State                                       1,150,700         864,700         733,280
                                                ----------      ----------      ----------
                                                                                          
                                                 7,963,500       5,598,200       3,843,280
                                                ----------      ----------      ----------
                                                                                          
Deferred:                                                                                 
     Federal                                      (247,600)       (181,000)       (209,000)
     State                                         (23,400)        (24,000)        (41,000)
                                                ----------      ----------      ----------
                                                                                          
                                                  (271,000)       (205,000)       (250,000)
                                                ----------      ----------      ----------
                                                                                          
                                                $7,692,500      $5,393,200      $3,593,280
                                                ==========      ==========      ==========
 
</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>
                                                     1998                   1997                   1996
                                             ------------------     ------------------     ------------------
 
<S>                                            <C>                    <C>                    <C>  
Federal statutory tax rate                               34.0 %                 34.0 %                 34.0 %
State income taxes, net of federal benefit                3.8                    4.8                    5.1
Non-deductible expenses                                   1.1                    1.0                    2.2
Non-taxable investment income                            (0.7)                  (2.3)                  (4.6)
Other                                                       -                   (0.6)                   1.3 
                                             ------------------     ------------------     ------------------
 
                                                         38.2 %                 36.9 %                 38.0 %
                                             ==================     ==================     ==================
</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 25,            DECEMBER 26,      
                                                                         1998                    1997          
                                                               ---------------------    ---------------------  
<S>                                                              <C>                      <C>                  
Inventory                                                                 $  935,000               $  722,000  
Bad debt reserves                                                            483,000                  394,000  
State taxes                                                                  146,000                  108,000  
Other                                                                        (66,000)                   3,000  
                                                               ---------------------    ---------------------  
                                                                                                               
                                                                          $1,498,000               $1,227,000  
                                                               =====================    =====================  

</TABLE>

                                      F-14
<PAGE>
 
11.  SUBSEQUENT EVENT

   On March 19, 1999, the Company announced that its Board of Directors had
   approved a stock buyback program whereby it may repurchase up to one million
   shares of its common stock. Such repurchases may be made from time to time in
   open market transactions at prevailing prices or in privately negotiated
   transactions on terms mutually agreed upon.

12.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

   Unaudited quarterly financial information for 1998 and 1997 are as follows
   (amounts are in thousands, except per share data):


<TABLE>
<CAPTION>
                                                                              1998
                                             -------------------------------------------------------------------
                                                    FIRST           SECOND            THIRD           FOURTH
                                                 (13 WEEKS)       (13 WEEKS)       (13 WEEKS)       (13 WEEKS)
<S>                                            <C>              <C>              <C>              <C>
Net sales                                             $43,545          $49,659          $52,093          $47,308
Gross profit                                           12,609           14,303           15,063           14,142
Operating income                                        3,854            4,662            5,542            4,589
Net income                                              2,673            3,109            3,631            3,052
 
Net income per share - Basic                          $  0.20          $  0.23          $  0.27          $  0.23
Net income per share - Diluted                        $  0.20          $  0.23          $  0.27          $  0.23
 
                                                                              1997
                                             -------------------------------------------------------------------
                                                   FIRST            SECOND           THIRD            FOURTH
                                                 (13 WEEKS)       (13 WEEKS)       (13 WEEKS)       (13 WEEKS)
 
Net sales                                             $33,209          $36,409          $40,184          $40,990
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
 
</TABLE>

   The total of the quarterly net income per share 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.

                                      F-15
<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 27, 1996:
       Allowance for doubtful accounts         $  236,070     364,500        37,481  243,211 2   $  806,300
                                              -----------  ----------  ------------  ---------  ===========
 
Year ended December 26, 1997:
       Allowance for doubtful accounts         $  806,300     586,025       525,675  493,150 3   $1,359,800
                                              -----------  ----------  ------------  ---------  ===========
 
Year ended December 25, 1998:
       Allowance for doubtful accounts         $1,359,800     305,002       265,602          -   $1,399,200
                                              -----------  ----------  ------------  ---------  ===========
</TABLE>

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

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

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

                                      F-16