<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 27, 1996 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)



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

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

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

          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. [_]

As of March 3, 1997, the aggregate market value of the Common Stock held by non-
affiliates of the registrant was $166,127,151.  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 3, 1997, there were 13,048,371 shares of the registrant's Common
Stock outstanding.
<PAGE>
 
                     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 27, 1996

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I
 
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.......................................................... 6
 
Item 6.     Selected financial data .......................................... 7
 
Item 7.     Management's discussion and analysis of financial condition and 
             results of operations............................................ 7
 
Item 8.     Financial statements and supplementary data...................... 13
 
Item 9.     Changes in and disagreements with accountants on accounting and
             financial disclosure............................................ 13
 
 
PART III
 
Item 10.    Directors and executive officers of the registrant .............. 13
 
Item 11.    Executive compensation........................................... 13
 
Item 12.    Security ownership of certain beneficial owners and management... 13
 
Item 13.    Certain relationships and related transactions................... 13
 

PART IV

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



                                    PART I

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


OVERVIEW

     Wilmar Industries, Inc. ("Wilmar" or the "Company") is a national marketer
and direct distributor of repair and maintenance products, principally to the
apartment housing market. Through its 1,000+ page Wilmar Master Catalog, the
Company has become a "one-stop shopping" resource for maintenance managers by
offering the industry's most extensive selection of over 15,000 standard and
specialty plumbing, hardware, electrical, janitorial and related products. By
purchasing directly from domestic and foreign manufacturers in relatively large
volumes, Wilmar is able to offer customers competitive prices on both name brand
and private label products. The Company seeks to win new accounts and increase
sales to existing accounts through direct sales force, outbound telesales
representatives, a national accounts sales program, and monthly direct mail
flyers. Customer service representatives located at Wilmar's centralized call
center use the Company's proprietary software applications to quickly process
orders and answer customer inquiries. The Company provides free, next-day
delivery in local markets served by its distribution centers and ships by parcel
delivery services to other areas. Since 1991, Wilmar has expanded from four
distribution centers located in Philadelphia, Washington, D.C., Houston and
Indianapolis to 16 distribution centers located throughout the United States.
From 1992 to 1996, the Company's net sales increased at a compound annual rate
of 42.3%. From November 1995 through January 1997, Wilmar has acquired six
regional repair and maintenance supply companies with total annualized net sales
of approximately $55 million. References in this report to 1994, 1995 and 1996
mean the fiscal years ended December 30, 1994, December 29, 1995, and December
27, 1996, respectively.

                                      -1-
<PAGE>
 
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 1996,
as described below.

     The Company acquired 100% of the capital stock of HMA Enterprises Inc.
("HMA"), a distributor of repair and maintenance supplies, based in Houston,
Texas, in July 1996. The base purchase price of this acquisition was
approximately $7.6 million, including costs of acquisition, with contingent
consideration of up to $750,000 based on the future performance of HMA. 

     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 Supply ("Aaron") for an aggregate base purchase price 
of approximately $4.3 million, including costs of acquisition, with contingent 
consideration of up to $250,000 based on the future performance of Mile High.

     Each of the acquisitions described above have been accounted for using the 
purchase method. No amounts related to the contingent consideration have been 
recorded in the accompanying consolidated financial statements. Goodwill 
recorded in these transactions totaled approximately $3.9 million and are being 
amortized on a straight-line basis over 30 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.

PRODUCTS AND MERCHANDISING

     Wilmar markets over 15,000 repair and maintenance products. These items
constitute a full range of standard and specialty products in the following
product categories: plumbing, hardware, electrical, chemical and janitorial,
appliance parts, window and floor coverings, heating, ventilating and air
conditioning ("HVAC"), and paint and paint accessories. Wilmar offers a broad
range of name brands such as Kwikset, Insinkerator, Delta Faucet, Moen, Philips
Lighting, and Briggs Plumbingware. In fiscal 1996, excluding HMA, private label
products marketed under the "Wilmar" and "Wilflo" names accounted for 18.3% of
net sales, and no single product accounted for more than 1.3% 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 were as follows:

                                      -2-
<PAGE>
 
<TABLE>
<CAPTION>
                                            FISCAL YEAR       
                                        -------------------   
PRODUCT CATEGORY                        1994   1995   1996    
-----------------------------           -----  -----  -----   
<S>                                     <C>    <C>    <C>     
Plumbing.....................             35%    34%    29%   
Electrical...................             20     19     20    
Hardware.....................             16     18     16    
Chemical and janitorial......              6      6      6    
Appliance parts..............              5      5      7    
Window and floor coverings...              6      7      6    
HVAC.........................              4      5      7    
Paint and paint accessories..              3      3      3    
Other........................              5      3      6    
                                        ----   ----   ----    
                                         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 on the Company's broad product selection, reliable next-day delivery,
high level of customer service and competitive pricing. The Company's base of
active customers (customers that have purchased in the preceding 12 months) has
grown to 28,000 at December 27, 1996. No single property accounted for as much
as 1.0% of the Company's net sales during fiscal 1996 although approximately
1,800 properties managed by two large property management companies accounted
for an aggregate of 10.5% of Wilmar's net sales during this period.

     Wilmar maintains one of the largest direct sales forces in its industry.
The Company currently has 150 field sales representatives covering 80 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, enabling free,
next-day delivery of the Company's entire product line. To generate new
customers, the Company provides its sales representatives with lists of
prospective customers and generally expects them to call on existing customers
approximately every two weeks. In servicing existing customers, local sales
representatives are expected not only to generate orders but also to be problem
solvers. Typical problem solving services include shop organization, special
orders, part identification and complaint resolution. Local sales
representatives are compensated based on a combination of salary and commission.
The Company's sales force is managed by Wilmar's Vice President of Sales and
five regional sales managers. The Company also employs seven 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 centralized customer service center within the
Company's New Jersey headquarters 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 am to 8:00
pm Eastern Standard Time. Once an order is entered into the computer system by a
customer service representative, a picking slip is generated at the 

                                      -3-
<PAGE>
 
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 am to
6:00 pm and all orders received before 3:00 pm are readied for shipment on the
same day. Wilmar uses bar-coding on all orders to track shipment and delivery
status. Most sales are billed on net 30 day terms, with the balance paid by
credit card at the time of sale. The Company seeks to carefully manage inventory
to assure product availability and minimize inventory shrinkage. The Company
regularly cycle counts key inventory items.

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

     The Company arranges for pick-up of returns at no charge to the customer in
local delivery areas. For customers outside local delivery zones, 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 1996, the Company's return rate
was approximately 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 of them operate in a single region (often with a single
distribution center) and have significantly less annual sales than the Company.
In addition, the Company competes with mail order catalog companies, retail
stores including superstores, specialty suppliers and industrial suppliers.
Certain of these companies have greater financial resources and sell more
products than Wilmar.


EMPLOYEES

     The Company employed 606 people as of March 1, 1997. Of these, 150 were in
sales, 7 in telesales, 59 in customer service, 289 in operations and 101 in
management and administration. Fifty-six of the Company's distribution center
employees and truck drivers at the Philadelphia distribution center are covered
by a collective bargaining agreement with Highway Truck Drivers and Helpers
Local 107, which is affiliated with the International Brotherhood of Teamsters.
This agreement expires in May 1998. The Company has never experienced a work
stoppage. The Company 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 11 to the
Consolidated Financial Statements. The Company leases the following
distribution centers:

                                      -4-
<PAGE>
 
<TABLE>
<CAPTION>
                                                 CURRENT             YEAR  
DISTRIBUTION CENTER                           SQUARE FOOTAGE   OPENED/ACQUIRED
-------------------                           ---------------  ---------------
<S>                                           <C>              <C>             
Washington, D.C....................                   28,500           1982   
Houston, TX........................                   25,000           1987   
Indianapolis, IN...................                   16,000           1991   
Fresno, CA.........................                   14,400           1992   
Atlanta, GA........................                   12,200           1993   
Tampa, FL..........................                   36,700           1994   
Columbus, OH.......................                   20,800           1995   
Seattle, WA........................                   16,200           1995   
Miami, FL (One Source).............                   37,000           1995*  
Denver, CO  (Mile High)............                   27,100           1996*  
Las Vegas, NV (Sun Valley).........                    5,400           1996*  
Dallas, TX (HMA)...................                   26,900           1996*  
Houston, TX (HMA)..................                   55,000           1996*   
San Antonio, TX (HMA)..............                    5,700           1996* 
Philadelphia, PA...................                   70,000           1996(1)
Chicago, IL (Pier-Angeli)..........                   18,800           1997*  
Dallas, TX.........................                   50,400           1997   
</TABLE>

______________________________________
*         Distribution center acquired.

(1)       In September 1996, the Company moved its Philadelphia distribution
          center opened in 1978 to a new 70,000 square foot facility which also
          houses the Company's national call center. This distribution center is
          leased from 804 Eastgate Associates LLC, a related party. See Notes 11
          and 13 to the Consolidated Financial Statements.

          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.


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 31 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 1996.

                                      -5-
<PAGE>
 
                                    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 sales
prices for each quarter in 1996 as quoted on The Nasdaq National Market.

<TABLE>
<CAPTION>
Fiscal Year 1996                                  High           Low
----------------                                  ----           ---
<S>                                               <C>            <C>
  First Quarter                                   $22.50         $15.00
  Second Quarter                                  $28.25         $19.50 
  Third Quarter                                   $26.25         $17.75 
  Fourth Quarter                                  $27.75         $20.25  
</TABLE>

          On March 3, 1997, the closing sale price for a share of Common Stock
as reported by The Nasdaq National Market was $18.50. As of March 3, 1997, there
were approximately 1,750 holders of the Company's Common Stock.

          The Company did not declare dividends on its Common Stock in 1996 and
does not intend to declare dividends on its Common Stock in the foreseeable
future.

                                      -6-
<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 1993, 1994, 1995 and 1996 have been
derived from the Company's financial statements which have been audited by
independent auditors. The selected financial data for fiscal 1992 have been
derived from the Company's unaudited financial statements which have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, contain all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for this period.

<TABLE>
<CAPTION>
                                                               FISCAL YEAR (1)
                                                               ---------------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                    -------------------------------------
                                                1992        1993     1994      1995         1996                           
                                                ----        ----     ----      ----         ----                           
<S>                                             <C>         <C>      <C>       <C>          <C>                            
STATEMENT OF OPERATIONS DATA:                                                                                              
  Net Sales..............................       $24,517     $35,640  $47,679   $ 60,823     $100,644                       
  Cost of sales (2)......................        16,847      24,735   32,787     41,835       70,853                       
                                                 ------      ------  -------     ------       ------                       
       Gross Profit......................         7,670      10,905   14,892     18,988       29,791                       
  Operating and selling expenses.........         3,909       5,400    7,068      9,099       14,168                       
  Corporate general and administrative                                                                                     
       expenses..........................         2,054       2,393    2,895      3,985        6,718                       
  Bonuses to S Corporation                                                                                                 
       shareholders (3)..................           644       1,463      ---        ---          ---
                                                  -----       -----    -----      -----        -----
       Operating income..................         1,063       1,649    4,929      5,904        8,905                        
  Interest expense (income), net.........            49         173      289      1,164         (551)                       
                                                  -----       -----    -----      -----        -----                         
       Income before income taxes........         1,014       1,476    4,640      4,740        9,456             
                                                  -----       -----    -----      -----        -----                        
PRO FORMA DATA (4):                                                                                                         
                                                                                                                            
  Income tax provision...................           403         586    1,860      1,896        3,593
                                                -------     -------  -------      -----        -----                         
       Net income........................       $   611     $   890  $ 2,780      2,844        5,863                         
                                                =======     =======  =======      =====        =====                         
  Net income per common share............                              $0.31      $0.36        $0.51                         
                                                                       =====      =====        =====                         
  Weighted average common shares                                                                                             
       outstanding (5)...................                              9,071      7,937       11,557                         
                                                                       =====      =====       ======                         
                                                                                                                             
BALANCE SHEET DATA:                                                                                                           
  Working capital (deficit)..............       $ 2,880     $ 3,818  $ 4,367   $    (54)    $ 65,300
  Total assets...........................         7,192       9,866   14,561     26,871       88,309                         
  Long-term debt, less current portion...           290       1,817    2,693      5,667          ---                         
  Mandatorily redeemable preferred stock.                                        25,058          ---                         
  Total shareholders' equity (deficit)...         3,064       2,468    2,719    (27,062)      75,500                          
</TABLE>                                        

(1)  The Company's fiscal year is based on a 52/53 week fiscal period ending on
     the last Friday in December. Fiscal 1993 was a 53 week year while all other
     fiscal years consist of 52 weeks.
(2)  Cost of sales includes merchandise, freight, distribution center occupancy
     and delivery costs.
(3)  In 1993 and 1992, the Company's stockholder received S Corporation
     stockholder bonuses of approximately $1,463 and $644,000, respectively,
     primarily to pay income taxes on S Corporation Income.
(4)  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 are actual 
     amounts.
(5)  See Note 3 of Notes to Consolidated Financial Statements for description of
     the determination of weighted average common shares outstanding.


 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
------    -------------------------------------------------
          CONDITION AND RESULTS 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 

                                      -7-
<PAGE>
 
in Washington, D.C. in 1982 and its third in Houston in 1987. Since 1991, the
Company has accelerated its growth, opening seven distribution centers:
Indianapolis (1991), Fresno (1992), Atlanta (1993), Tampa (December 1994),
Columbus (July 1995), Seattle (October 1995), and Dallas (February 1997). From
November 1995, through December 1996, the Company has acquired six additional
distribution centers through acquisitions: Miami (November 1995), Denver (May
1996), Las Vegas (May 1996), Houston (July 1996), San Antonio (July 1996), and
Dallas (July 1996). Additionally, in 1997, the Company acquired certain assets
of Pier-Angeli Company, including a distribution center in Chicago.

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

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

     Acquisitions. 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, with contingent consideration of up to $750,000 based on the future
performance of HMA. Also during 1996, the Company completed three additional
acquisitions (Mile High, Sun Valley and Aaron) for an aggregate purchase price
of approximately $4.3 million. The Company accounted for the four 1996
acquisitions as purchases for financial reporting purposes. The resulting
goodwill of approximately $3.9 million is amortized on a straight-line basis
over 30 years and other intangible assets of approximately $1.8 million are
amortized over three to 20 years. In November 1995, the Company acquired One
Source for approximately $3.6 million.

                                      -8-
<PAGE>
 
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                     Fiscal Year Ended
                                                 -------------------------
                                                  1994    1995     1996
                                                 ------  ------  ---------
<S>                                              <C>     <C>     <C>
Net sales.................................       100.0%  100.0%     100.0%

Cost of sales.............................        68.8    68.8       70.4
                                                 -----   -----     ------

     Gross profit.........................        31.2    31.2       29.6

Operating and selling expenses............        14.8    15.0       14.1

Corporate general and administrative 
 expenses.................................         6.1     6.5        6.7
                                                 -----   -----     ------

     Operating income.....................        10.3     9.7        8.8

Interest expense (income) net.............         0.6     1.9       (0.6)
                                                 -----   -----     ------
     Income before income                             
       taxes..............................         9.7     7.8        9.4
                                                 -----   -----     ------ 

Pro forma data (1):                              
     Income tax provision.................         3.9     3.1        3.6
                                                 -----   -----     ------ 

     Net income...........................         5.8%    4.7%       5.8%
                                                 =====   =====     ======
</TABLE> 

___________________________
(1)  The income tax provision and net income for fiscal 1996 are actual amounts
     because the Company was taxed as a C Corporation during 1996.


FISCAL 1996 COMPARED TO FISCAL 1995

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

          Gross Profit.  Cost of sales includes merchandise, freight,
distribution center occupancy and delivery costs. As a percentage of net sales,
gross profit was 29.6% in 1996 compared to 31.2% in 1995. This expected decrease
in the gross margin resulted from the acquisition of HMA, whose historic gross
margins have been lower due to increased competition in the Texas market , as
well as a higher volume of less profitable HVAC equipment and major appliance
sales. Increased delivery expenses associated with "line-hauling" (the use of
third party trucks to ship multiple orders from a distribution center to other
markets overnight followed by next day local delivery) to new markets and higher
relative occupancy costs relating to the operation of two immature distribution
centers opened after July, 1995 (Columbus and Seattle) also contributed to the
decrease in gross margin.

          Operating and Selling Expenses.  Operating and selling expenses
consist of labor and other costs associated with opening and operating a
distribution center as well as selling expenses and commissions. The Company
expenses all distribution center pre-opening costs when incurred.

                                      -9-
<PAGE>
Operating and selling expenses increased by $5.1 million, or 55.7%, to $14.2
million in 1996 from $9.1 million in 1995. As a percentage of net sales, these
expenses represented 14.1% in 1996 compared to 15.0% in 1995. The decrease, in
percentage of sales, resulted primarily from the acquisition of HMA which
operates three mature distribution centers and employs a mature sales force.
Historically, the Company's operating and selling expenses as a percentage of
sales have been higher than HMA's due to the Company's investment in new,
immature distribution centers and its rapidly expanding sales force.

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

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

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


FISCAL 1995 COMPARED TO FISCAL 1994

          Net Sales.  Net sales increased by $13.1 million, or 27.5%, to $60.8
million in fiscal 1995 from $47.7 million in fiscal 1994. Of this increase,
51.9% was attributable to higher sales volumes shipped from distribution centers
open for all of both periods, and the balance was attributable to the three
distribution centers (Tampa, Columbus and Seattle) opened between December 1,
1994 and December 29, 1995 and the One Source acquisition which occurred on
November 17, 1995. The higher net sales from distribution centers open during
all of both periods resulted primarily from the increased experience of the
Company's direct sales and telesales forces and increased sales to national
accounts. In addition, the Company added 26 local sales representatives during
fiscal 1995, the majority of whom were hired in the second half of the year and
ten of whom joined the Company as part of the One Source acquisition in November
1995. Price increases during fiscal 1995 were modest and made only on selected
items. During fiscal 1995, Wilmar generated approximately $940,000 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.  As a percentage of net sales, gross profit was 31.2% in
fiscal 1995, which was unchanged from fiscal 1994.

          Operating and Selling Expenses.  Operating and selling expenses
increased by $2.0 million, or 28.2%, to $9.1 million in fiscal 1995 from $7.1
million in fiscal 1994. This increase resulted primarily from increased
commissions related to higher sales volumes, costs associated with the new
Tampa, Columbus and Seattle distribution centers and higher operating costs
associated with increased sales volumes at the other distribution centers. As a
percentage of net sales, these expenses represented 15.0% in fiscal 1995
compared to 14.8% in fiscal 1994, due to the effects of operating three
immature, less efficient distribution centers and higher pre-opening expenses in
fiscal 1995.

          Corporate General and Administrative Expenses.  Corporate general and
administrative expenses increased by $1.1 million, or 37.9%, to $4.0 million in
fiscal 1995 from $2.9 million in fiscal 1994. During fiscal 1995, the Company
incurred $207,000 in expenses related to the 1995 Recapitalization and a full
year of expenses associated with the Company's new corporate headquarters in
Moorestown, New Jersey. Until May 1994, the Company had operated its
headquarters within its Philadelphia distribution center. During fiscal 1995,
the Company significantly increased its corporate staff to manage the Company's
greater base of operations. Excluding the expenses associated with the 1995
Recapitalization, corporate general and administrative expenses as a percentage
of net sales would have increased to 6.2% in fiscal 1995 from 6.1 % in fiscal
1994.

                                     -10-
<PAGE>
 
          Operating Income.  Operating income increased by $975,000, or 19.8%,
to $5.9 million in fiscal 1995 from $4.9 million in fiscal 1994. Excluding the
one-time expenses associated with the 1995 Recapitalization, operating income
would have increased by $1.2 million, or 24.4%, to $6.1 million in fiscal 1995
from $4.9 million in fiscal 1994. As a percentage of net sales, operating income
(excluding the 1995 Recapitalization expenses) would have decreased to 10.0% in
fiscal 1995 from 10.3% in 1994 due primarily to the effects of operating three
immature, less efficient distribution centers, increases in the corporate staff
and the operation of the Company's new corporate headquarters for all of 1995.

          Interest Expense, Net.  Net interest expense increased by $875,000 to
$1.2 million in fiscal 1995 from $289,000 in fiscal 1994 as a result of the
approximately $9.3 million of additional indebtedness incurred in connection
with the 1995 Recapitalization.


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 Years.

                                     -11-
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

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

          Cash provided by operating activities was $1.4 million during 1996
compared to $277,000 in 1995 and $2.3 million in 1994. Cash provided by
operating activities during 1996 consisted of $6.6 million of net income before
depreciation and amortization and other non-cash charges, offset by $5.2 million
of changes in operating assets and liabilities primarily resulting from a $3.9
million decrease in accounts payable and increases in the Company's accounts
receivable and inventory of $1.2 million, consistent with its higher volume of
business. Charges in other operating assets and liabilities resulted in a net
use of cash of approximately $100,000 for 1996. Cash provided by operating
activities was $277,000 during 1995 compared to $2.3 million during 1994. The
1995 decline was primarily the result of a $616,000 increase in income taxes
paid because the Company terminated its S Corporation status in March 1995 and
increases in the Company's accounts receivable and inventory, net of accounts
payable, consistent with its higher volume of business.

          Cash used in investing activities in 1996 was $14.2 million, related
to the purchase of short-term investments, acquisitions of businesses, and the
purchase of property and equipment compared to $4.1 million in 1995. Cash
provided by financing activities during 1996 was $51.0 million, consisting
primarily of the net proceeds of the two public offerings less the repayment of
all debt and the redemption of the outstanding preferred stock, compared to $3.7
million in 1995.

          Capital expenditures were $1.2 million in 1996 compared to $507,000 in
1995 and $768,000 in 1994. The Company spent approximately $673,000 on capital
expenditures in 1996 primarily for office, computer and distribution center
equipment. Additionally, the Company spent approximately $500,000 in 1996 to
equip its new Philadelphia distribution center in connection with a lease
agreement entered into on April 29, 1996. A typical distribution center requires
a capital investment of approximately $75,000 to $80,000 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 $50,000 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 proceeds of future equity offerings, term debt or capital leases.

          During the first quarter of 1996, the Company completed an initial
public offering of 4,600,000 shares of its Common Stock for $11.00 per share,
resulting in net proceeds of $47,058,000. During the third quarter of 1996, the
Company completed a public offering of 4,335,500 shares of its Common Stock for
$17.875 per share, of which the Company sold 2,565,500 shares, resulting in
additional net proceeds to the Company of $43,575,000. A portion of the net
proceeds of the initial public offering was used to repay the outstanding 
balance under the Company's revolving bank line of credit and the term debt with
the Company's bank and to redeem the $4.0 million of 11.5% Subordinated
Debentures issued to certain of the Summit Investors.

          Wilmar's credit facility currently consists of a $10.0 million
unsecured bank line of credit, which bears interest at three quarters of one
percent below the bank's prime rate and expires on April 1, 1997. The line of
credit had a zero balance as of December 27, 1996. The Company expects to renew
its revolving line of credit when it expires in April 1997 and believes it could
increase the amount of this credit facility 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 revolving line of credit, are adequate to meet planned
operating and capital expenditure needs at least through 1997. 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.

INFLATION

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

                                     -12-
<PAGE>
 
ITEM 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 1997 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 Schedule.  Financial Statement Schedule
              ----------------------------                                
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 27, 1996.

                                     -13-
<PAGE>
 
     (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.

<TABLE> 
<CAPTION> 
EXHIBIT NO.  DESCRIPTION
-----------  ------------
<S>          <C>   
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 Green.

11           Statement re: Computation of Per Share Earnings.
 
21           Subsidiaries of the Company.

23           Consent of Deloitte & Touche, LLP

27           Financial Data Schedule.
</TABLE> 

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

                                     -14-
<PAGE>
 
                                  SIGNATURES
                                  ----------

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

                                    WILMAR INDUSTRIES, INC.


Date:  March 27, 1997               By /s/ William S. Green
                                       -------------------------------
                                       William S. Green
                                       Chairman, President and Chief Executive
                                       Officer


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

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

<TABLE>
<CAPTION>
       Signature                         Capacity                          Date
       ---------                         --------                          ----
<S>                            <C>                                         <C>
/s/ William S. Green           Chairman, President and Chief               March 27, 1997
------------------------       Executive Officer (principal executive
   William S. Green            officer) and Director
                        

/s/ Fred B. Gross              Vice President - Corporate                  March 27, 1997
------------------------       Development, Secretary and Director
    Fred B. Gross      
                        

/s/ Michael T. Toomey          Chief Financial Officer and Treasurer       March 27, 1997
------------------------       (principal financial and accounting
    Michael T. Toomey           officer)
                        

/s/ Martin Hanaka              Director                                    March 27, 1997
------------------------
    Martin Hanaka      
                        

/s/ Ernest K. Jacquet          Director                                    March 27, 1997
------------------------
    Ernest K. Jacquet  
                        

/s/ Donald M. Wilson           Director                                    March 27, 1997
------------------------
    Donald M. Wilson    
</TABLE>
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

<TABLE> 
<CAPTION> 
EXHIBIT NO.  DESCRIPTION
-----------  ------------
<S>          <C> 
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 Green.

11           Statement re: Computation of Per Share Earnings.
 
21           Subsidiaries of the Company.
 
23           Consent of Deloitte & Touche, LLP
 
27           Financial Data Schedule.
</TABLE> 

________________
+    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.

                                     -16-
<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

Independent Auditors' Report.............................................S-1
Schedule II - Valuation and Qualifying Accounts..........................S-2

                                     F-1 
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Wilmar
Industries, Inc. and its subsidiaries (the "Company") as of December 27, 1996
and December 29, 1995, 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 27, 1996.  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 27, 1996 and December 29, 1995, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended December
27, 1996, in conformity with generally accepted accounting principles.



DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania


March 13, 1997

                                      F-2
<PAGE>
WILMAR INDUSTRIES, INC.

<TABLE> 
<CAPTION> 

CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------
                                                                                       December 27,        December 29,
                                                                                           1996                1995
                                                                                    ---------------     ---------------
<S>                                                                                 <C>                 <C> 
ASSETS

CURRENT ASSETS
  Cash                                                                              $    38,228,710     $        25,043
  Cash - restricted                                                                         719,185             200,000
  Investments                                                                             3,927,276
  Accounts receivable - trade, net of allowance for doubtful accounts
   of $ 806,300  in 1996  and $ 236,700  in 1995.                                        16,140,693           9,575,307
  Inventory                                                                              17,669,441          12,699,376
  Prepaid expenses and other current assets                                                 656,588             244,798
  Deferred income taxes                                                                     768,000             408,000
                                                                                    ---------------     ---------------
          Total current assets                                                           78,109,893          23,152,524

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,486,092 
  in 1996 and $1,117,441 in 1995                                                          2,460,748           1,337,308

GOODWILL, net of accumulated amortization of $100,756 in 1996 and $3,078 
  in 1995                                                                                 4,932,050           1,105,412 

OTHER ASSETS                                                                              2,806,452           1,275,260
                                                                                    ---------------     ---------------
TOTAL ASSETS                                                                        $    88,309,143     $    26,870,504
                                                                                    ===============     ===============
                                                                                          

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
   STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

  Demand notes payable - bank                                                       $                   $     9,922,510
  Notes payable                                                                             285,000
  Current portion of long-term debt:
    Banks                                                                                                       666,668
    Related parties                                                                                           2,107,050
  Accounts payable                                                                        8,537,019           7,889,405
  Accrued expenses and other current liabilities                                          2,053,350           1,387,524
  Accrued interest                                                                                              212,823
  Income taxes payable                                                                    1,934,160           1,020,991
                                                                                    ---------------     ---------------
            Total current liabilities                                                    12,809,529          23,206,971

LONG-TERM DEBT - Net of current portion:
  Banks                                                                                                         833,331
  Related parties                                                                                               833,872
  Subordinated debentures                                                                                     4,000,000
                                                                                    ---------------     ---------------
              Total liabilities                                                          12,809,529          28,874,174
                                                                                    ---------------     ---------------

COMMITMENTS AND CONTINGENT LIABILITIES
Mandatorily Redeemable Series A Senior Preferred Stocks, $.01 par value;
  129,450 shares, authorized, issued and outstanding with a  redemption
  value of $100 per share, plus accrued dividends                                                            13,782,110

Mandatorily Redeemable Series B Junior Preferred Stocks, $.01 par value;
  105,914 shares, authorized, issued and outstanding with a  redemption
  value of $100 per share, plus accrued dividends                                                            11,276,311

STOCKHOLDERS' EQUITY (DEFICIT) 
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued
Common stock, no par value - 50,000,000 shares authorized;
  13,048,371 shares issued and outstanding in 1996
  5,320,000 shares issued and outstanding in 1995                                        96,978,776             124,231
Retained earnings (accumulated deficit)                                                 (21,479,162)        (27,186,322)
                                                                                    ---------------     ---------------
      Total stockholders' equity (deficit)                                               75,499,614         (27,062,091)
                                                                                    ---------------     ---------------

TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
   STOCK AND STOCKHOLDERS' EQUITY                                                   $    88,309,143     $    26,870,504
                                                                                    ===============     ===============

See notes to consolidated financial statements.
</TABLE> 

                                      F-3
<PAGE>

WILMAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                     Year               Year              Year
                                                                    Ended              Ended             Ended
                                                                 December 27,       December 29,      December 30,
                                                                     1996               1995              1994
                                                              ---------------    ---------------   ---------------
<S>                                                           <C>                <C>               <C> 
SALES                                                         $   100,644,167    $    60,823,188   $    47,679,227

COST OF SALES                                                      70,852,668         41,835,284        32,786,779
                                                              ---------------    ---------------   ---------------

             Gross profit                                          29,791,499         18,987,904        14,892,448

OPERATING EXPENSES:

   Operating and selling expenses                                  14,168,050          9,098,440         7,067,785

   Corporate general and administrative expenses                    6,718,428          3,984,873         2,895,180

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

                                                                   20,886,478         13,083,313         9,962,965
                                                              ---------------    ---------------   ---------------

             Operating income                                       8,905,021          5,904,591         4,929,483

INTEREST (INCOME)  EXPENSE, NET                                      (551,351)         1,164,129           289,372
                                                              ---------------    ---------------   ---------------

              Income before income taxes                            9,456,372          4,740,462         4,640,111

PROVISION FOR INCOME TAXES                                          3,593,280          1,623,580            40,056
                                                              ---------------    ---------------   ---------------

              Net income                                      $     5,863,092    $     3,116,882   $     4,600,055
                                                              ===============    ===============   ===============

   Net income per share                                       $          0.51
                                                              ===============   

   Weighted average shares outstanding                             11,557,316
                                                              ===============   

UNAUDITED PRO FORMA DATA:

   Income before income taxes                                                    $     4,740,462   $     4,640,111

   Provision for income taxes                                                          1,896,000         1,860,000
                                                                                 ---------------   ---------------

   Pro forma net income                                                          $     2,844,462   $     2,780,111
                                                                                 ===============   ===============

   Pro forma net income per share                                                $          0.36   $          0.31
                                                                                 ===============   ===============

   Pro forma shares outstanding                                                        7,937,266         9,071,327
                                                                                 ===============   ===============
</TABLE> 


See notes to consolidated financial statements.

                                      F-4
<PAGE>

WILMAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

-------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 
                                                                                        Retained                          Total
                                                                                        Earnings                      Stockholders'
                                                       Common          Stock          (Accumulated       Treasury        Equity
                                                       Shares          Amount           Deficit)          Stock         (Deficit)
                                                   -------------    -----------     ----------------   ------------ ----------------
<S>                                                   <C>           <C>             <C>                <C>           <C> 
BALANCE, DECEMBER 31, 1993                            5,824,000     $   100,000     $     4,368,432    $ (2,000,000) $   2,468,432
                                                                                                                      
  Net Income                                                                              4,600,055                      4,600,055
                                                                                                                      
  Distributions to stockholders                                                          (4,349,329)                    (4,349,329)
                                                   -------------    -----------     ----------------   ------------ ----------------
                                                                                                                      
BALANCE, DECEMBER 30, 1994                            5,824,000         100,000           4,619,158      (2,000,000)     2,719,158
                                                                                                                      
  Distributions to stockholders                                                          (3,722,710)                    (3,722,710)
                                                    
  Capital contribution                                                                      694,000        (694,000)
                                                    
  Redemption of common stock                         (3,584,000)        (30,769)        (17,086,231)                   (17,117,000)
                                                                                                                       
  Dividend of Series B Preferred Stock                                                  (10,591,400)                   (10,591,400)
                                                                                                                       
  Issuance of common stock                            3,080,000          55,000                                             55,000
                                                                                                                       
  Accretion of Mandatorily Redeemable                                                                                  
     Preferred Stock                                                                     (1,522,021)                    (1,522,021)
                                                                                                                       
  Retirement of treasury shares                                                          (2,694,000)      2,694,000     
                                                                                                                       
  Net income                                                                              3,116,882                      3,116,882
                                                   -------------    -----------     ----------------   ------------ ----------------
                                                    
BALANCE, DECEMBER 29, 1995                            5,320,000         124,231         (27,186,322)             --    (27,062,091)
                                                    
  Accretion of Mandatorily Redeemable               
     Preferred Stock                                                                       (155,932)                      (155,932)
                                                                                                                    
  Conversion of Series B Preferred Stock                454,545       5,000,000                                          5,000,000
                                                                                                                    
  Issuance of Common Stock - Initial 
     Public Offering                                  4,600,000      46,152,891                                         46,152,891
                                                                                                                    
  Issuance of Common Stock - Secondary Offering       2,565,500      43,179,654                                         43,179,654
                                                    
  Issuance of Common Stock - HMA Acquisition             63,980       1,522,000                                          1,522,000
                                                                                                                  
  Issuance of Common Stock - Aaron Acquisition           44,346       1,000,000                                          1,000,000
                                                                                                                  
  Net income                                                                              5,863,092                      5,863,092
                                                   -------------    -----------     ----------------   ------------ ----------------
                                                    
BALANCE, DECEMBER 27, 1996                           13,048,371     $96,978,776     $   (21,479,162)   $         --  $  75,499,614
                                                   =============    ===========     ================   ============ ================
</TABLE> 


See notes to consolidated financial statements.

                                      F-5
<PAGE>

WILMAR INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                              Year Ended         Year Ended         Year Ended
                                                                             December 27,       December 29,       December 30,
                                                                                 1996               1995               1994
                                                                          ---------------    ---------------    --------------- 
<S>                                                                       <C>                <C>                <C> 
OPERATING ACTIVITIES:  
  Net Income                                                              $     5,863,092    $     3,116,882    $     4,600,055
  Adjustments to reconcile net income to net cash provided by           
    operating activities:                                     
    Depreciation and amortization                                                 735,345            330,480            211,941
    Deferred income taxes                                                        (250,000)          (408,000)
    Gain on disposition of property and equipment                                  (3,286)                               (2,000)
    Changes in assets and liabilities, net of effects of acquisitions:   
      Accounts receivable                                                        (990,023)        (2,640,523)        (1,476,186)
      Inventory                                                                  (245,134)        (4,327,986)        (2,585,454)
      Prepaid expenses and other current assets                                   (17,670)           (66,361)           (69,867)
      Other assets                                                                (63,425)          (315,966)           (20,536)
      Accounts payable                                                         (3,857,976)         2,887,101          1,625,995
      Accrued expenses and other current liabilities                             (352,850)           483,574             55,497
      Accrued interest                                                           (212,823)           196,901
      Income taxes payable                                                        803,169          1,020,991
                                                                          ---------------    ---------------    --------------- 
           Net cash provided by operating activities                            1,408,419            277,093          2,339,445
                                                                          ---------------    ---------------    --------------- 
                                                                        
INVESTING ACTIVITIES:                                                  
  Purchase of property and equipment                                           (1,173,048)          (507,272)          (768,472)
  Proceeds from sale of property and equipment                                      4,250                                 2,000
  Purchase of short-term investments                                           (3,927,276)
  Acquisitions of businesses, including escrow                                 (9,111,111)        (3,572,796)
                                                                          ---------------    ---------------    --------------- 
          Net cash used in investing activities                               (14,207,185)        (4,080,068)          (766,472)
                                                                          ---------------    ---------------    --------------- 
                                                                        
FINANCING ACTIVITIES:                                                  
  Net proceeds (repayments) of demand notes payable - Bank                     (9,922,510)         6,408,510          1,682,000
  Proceeds of long-term debt - Bank                                                                2,000,000          1,600,000
  Principal payments on long-term debt:                                
    Banks                                                                      (1,499,999)        (2,729,635)          (422,077)
    Related parties                                                            (2,940,922)          (102,264)           (97,286)
  Issuance of common stock                                                                            55,000
  Repurchase of common stock                                                                     (15,117,000)
  Repurchase of Series A Preferred Stock, plus accrued dividends              (13,870,928)
  Repurchase of Series B Preferred Stock, plus accrued dividends               (6,343,425)
  Proceeds from the issuance (repayment) of subordinated debentures            (4,000,000)         4,000,000
  Net proceeds from issuance of Common Stock - Initial Public Offering         46,152,891
  Net proceeds from issuance of Common Stock - Secondary Public Offering       43,427,326
  Issuance of Series A Preferred Stock                                                            12,945,000
  Distributions to stockholders                                                                   (3,722,710)        (4,349,329)
                                                                          ---------------    ---------------    --------------- 
           Net cash provided by (used in) financing activities                 51,002,433          3,736,901         (1,586,692)
                                                                          ---------------    ---------------    --------------- 
NET INCREASE (DECREASE)  IN CASH                                               38,203,667            (66,074)           (13,719)
                                                                        
CASH, BEGINNING OF YEAR                                                            25,043             91,117            104,836
                                                                          ---------------    ---------------    --------------- 
CASH, END OF YEAR                                                         $    38,228,710    $        25,043    $        91,117
                                                                          ===============    ===============    =============== 
                                                                        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                        
                                                                        
  Cash paid during the year for:                                     
    Interest                                                              $       392,801    $       967,228    $      $299,338
                                                                          ===============    ===============    =============== 
                                                                        
    Income taxes                                                          $     3,048,802    $       642,279    $       $25,851
                                                                          ===============    ===============    =============== 

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
  Accretion of mandatorily redeemable Series A Senior and               
    Series B Junior Preferred Stock redemption values                     $       155,932    $     1,522,021
                                                                        
  Distribution of mandatorily redeemable Series B Junior                
     Preferred Stock to stockholders                                                         $    10,591,400
                                                                        
  Issuance of note payable - Related party                                                   $     2,000,000
                                                                        
  Conversion of Series B Junior Preferred stock into                      $     5,000,000     
    Common Stock                                      
                                                                        
  Issuance of Common Stock in connection with the purchase of:
      HMA Enterprises, Inc.                                               $     1,522,000     
      Aaron Supply, Inc.                                                  $     1,000,000     
                                                                        
  Issuance of Notes in connection with the purchase of:                
      Aaron Supply, Inc.                                                  $       285,000     
</TABLE> 


See notes to consolidated financial statements.

                                      F-6
<PAGE>
 
WILMAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE FISCAL YEARS IN THE PERIOD ENDED DECEMBER 27, 1996
--------------------------------------------------------------------------------

1. DESCRIPTION OF THE BUSINESS

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

2. PUBLIC OFFERINGS

   On January 24, 1996, the Company completed an initial public 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.

   The proceeds of the offering were used as follows:

<TABLE>
         <S>                                                      <C>
         Redemption of Preferred Stock and accumulated dividends  $20,188,000
         Repayment of bank debt and interest                       12,987,000
         Repayment of Subordinated Debentures and interest          4,037,000
         Repayment of notes payable and interest                    2,967,000
         Working capital and IPO costs                              6,879,000
                                                                   ----------
                                                                  $47,058,000
                                                                  ===========
</TABLE>

   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 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.

   The proceeds of the offering were used as follows:

<TABLE> 
         <S>                                                      <C> 
         Repayment of bank debt and interest                      $  2,012,000
         Working capital and offering costs                         41,563,000
                                                                    ----------
                                                                   $43,575,000
                                                                   ===========
</TABLE> 

                                      F-7
<PAGE>
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Principles of Consolidation - The consolidated financial statements include
   the accounts of Wilmar Industries, Inc. ("Wilmar" or the "Company") and its
   subsidiaries. Material intercompany 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 27, 1996 were fifty-two week years. References herein to 1996,
   1995 and 1994 are for the fiscal years ended December 27, 1996, December 29,
   1995 and December 30, 1994, 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 retirements or disposal of assets, the cost and
   accumulated depreciation or amortization are 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 - On December 30, 1995, the Company adopted SFAS No. 121,
   "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
   to Be Disposed Of". This statement requires that long-lived assets and
   certain identifiable intangibles to be held and used by an entity be reviewed
   for impairment whenever events or circumstances indicate that the carrying
   amount of an asset may not be recoverable. Adoption of this standard had no
   impact on the Company's financial statements.

   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 retentions, 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 27, 1996.

   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
   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.

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

   Fair Value of Financial Instruments - The carrying value of cash, accounts
   receivable, notes payable and accounts payable approximate fair value because
   of the short 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.

                                      F-8
<PAGE>
 
   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.

   Stock-Based Compensation - 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 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 14).

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

   Income Taxes - Prior to February 24, 1995, the Company had elected to be
   taxed as an S Corporation under provisions of the Internal Revenue Code.  As
   such, current taxable income had been included on the income tax returns of
   the sole stockholder for federal income tax purposes and no provision had
   been made for federal income taxes (see pro forma presentation and Note 16).
   In anticipation of consummating the Recapitalization, the Company changed its
   election to be taxed as a C Corporation under the Internal Revenue Code.
   Taxes on income are provided based upon Statement of Financial Accounting
   Standards 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  - Net income per share data presented for 1996
   represents net income divided by the weighted average number of shares of
   Common Stock and Common Stock equivalents outstanding during the period. Net
   income is not reduced by the $155,932 provision for accretion of Preferred
   Stock redemption values because the calculation assumes the related Common
   Stock was outstanding in lieu of the Preferred Stock  (see Note 15).  Common
   Stock equivalents include shares from the exercise of stock options (using
   the treasury stock method).

   Unaudited Pro Forma Net Income and Pro Forma Net Income Per  Share - Pro
   forma net income per share data presented for 1995 and 1994 represent pro
   forma net income (after a pro forma provision for income taxes as if the
   Company had been subject to federal and state income taxation as a C
   Corporation since inception) divided by the weighted average number of shares
   of Common Stock and Common Stock equivalents outstanding during the periods
   plus the number of shares of Common Stock required to be sold at the assumed
   initial public offering price to raise sufficient proceeds to redeem the
   mandatorily redeemable Preferred Stock (including accrued but unpaid
   dividends thereon).  Net income is not reduced by the $1,522,021 provision
   for accretion of Preferred Stock redemption values because the calculation
   assumes the related Common Stock was outstanding in lieu of the Preferred
   Stock (see Note 15).

                                      F-9
<PAGE>
 
   Common Stock equivalents include shares from the exercise of stock options
   (using the treasury stock method).  Common stock issued and stock options
   granted at prices lower than the assumed initial public offering price within
   a one year period prior to an initial public offering are included in the
   calculation (using the treasury stock method and the assumed initial public
   offering price) as if they were outstanding for all periods presented  (see
   Notes 5 and 14).

   Historical net income per share data has not been presented for 1995 or 1994
   in view of the S Corporation status of the Company for those periods and the
   change in capital structure upon the closing of the initial public offering.

4. ACQUISITIONS

   The Company acquired 100% of the capital stock of HMA Enterprises Inc.
   ("HMA"), a distributor of repair and maintenance supplies, based in Houston,
   Texas, in July 1996.  The base purchase price of this acquisition was
   approximately $7.6 million, including costs of acquisition, with contingent
   consideration of up to $750,000  based on the future performance of HMA.

   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 Supply ("Aaron") for an aggregate base purchase
   price of approximately $4.3 million, including costs of acquisition, with
   contingent consideration of up to $250,000 based on the future performance of
   Mile High.

   Each of the acquisitions described above have been accounted for using the
   purchase method.  No amounts related to the contingent consideration have
   been recorded in the accompanying consolidated financial statements.
   Goodwill recorded in these transactions totaled approximately $3.9 million
   and is being amortized on a straight-line basis over 30 years.

   In November 1995, the Company acquired One Source Supply, Inc., a supplier of
   repair and maintenance products to multi-unit apartment complexes in the
   South Florida market, for an aggregate consideration of approximately $3.6
   million.  This acquisition has been accounted for under the purchase method.
   Goodwill recorded in connection with this acquisition was approximately $1.1
   million and is being amortized on a straight-line basis over 30 years.

   The following presents the unaudited results of operations of the Company for
   the three fiscal years ended December 27, 1996 as if the 1996 acquisitions
   had been consummated as of the beginning of 1995 and as if the 1995
   acquisition had been consummated as of the beginning of 1994, 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>
 
                               1996          1995         1994
                               ----          ----         ---- 
   <S>                     <C>           <C>           <C>
   Revenues..............  $118,313,000  $106,374,000  $56,990,000
   Net income............     6,134,000     3,798,000    2,755,000
   Net income per share..          0.53          0.47         0.30
 
</TABLE>

                                     F-10
<PAGE>
 
   The unaudited pro forma results of operations are prepared for comparative
   purposes only and do not necessarily reflect the results that would have
   occurred had the acquisitions occurred at the dates described above or the
   results which may occur in the future.  The above acquisitions have been
   accounted for by 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 30 years.


5. STOCKHOLDERS' EQUITY

   Authorized Shares  -  On November 20, 1995, the Company's stockholders
   approved an increase in authorized shares of common stock to 50,000,000
   shares and preferred stock to  5,235,364 shares.

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

   Distribution to Stockholders - In 1994, the stockholder received compensation
   and S Corporation distributions of $156,340 and $4,349,329, respectively. In
   1995, the stockholder received compensation and bonuses of $249,340 and S
   Corporation distributions of $3,722,710.

6. INVESTMENTS

   At December 27, 1996, the Company holds investment in debt securities
   designated as available-for-sale. These debt securities are stated at fair
   value based upon market quotes and consist of debt securities issued by
   municipalities, and are due within one year. The amortized cost of debt
   security investments at December 27, 1996, which approximates market value,
   is $3,927,276.

                                     F-11
<PAGE>
 
7.   OTHER ASSETS

     Other assets consist of the following:

<TABLE> 
<CAPTION> 

                                           1996            1995
                                           ----            ----
                <S>                     <C>             <C> 
                Intangible assets       $2,742,000      $  920,052
                Less-amortization         (122,241)         (5,560)
                                        ----------      ----------
                                         2,619,759         914,492
                Deferred IPO costs            ---          247,672
                Deposits                   180,857         112,043
                Other                        5,836           1,053
                                        ----------      ----------
                                        $2,806,452      $1,275,260
                                        ==========      ==========
</TABLE> 

8.   BALANCE SHEET COMPONENTS

<TABLE> 
<CAPTION> 
                                                         1996            1995
                                                         ----            ----
     <S>                                               <C>            <C> 
     Property and Equipment                  

     Machinery and equipment                           $2,098,731     $  952,348
     Office furniture and equipment                     1,391,807      1,070,080
     Vehicles                                             709,438         ---
     Leasehold improvements                               746,864        432,321
                                                       ----------     ----------

                                                        4,946,840      2,454,749
     Less accumulated depreciation and amortization     2,486,092      1,117,441
                                                       ----------     ----------

                                                       $2,460,748     $1,337,308
                                                       ==========     ==========

     Accrued Expenses and Other Current Liabilities

     Sales tax payable                                 $  515,342     $  349,991
     Accrued compensation and related benefits            664,508        507,193
     Other accrued liabilities                            873,500        530,340
                                                       ----------     ----------

                                                       $2,053,350     $1,387,524
                                                       ==========     ==========
</TABLE> 


Depreciation expense was approximately $521,000, $322,000 and $212,000 for 1996,
1995 and 1994, respectively.

                                     F-12
<PAGE>
 
9.   NOTES PAYABLE

     At December 27, 1996, the Company has an 8% note payable to the former
     sole stockholder of Aaron Distributing , Inc. in the amount of $285,000.
     The principal balance of the note and accrued interest were paid on the
     due date of February 28, 1997.

     In March 1996, the Company obtained a $10,000,000 unsecured bank line of
     credit, which bears interest at 3/4% below the bank's prime rate (8.25% at
     December 27, 1996) and expires in April 1997.  No amounts were outstanding
     against this line of credit at December 27, 1996.  Management anticipates
     that this line of credit will be renewed in April 1997.

     At December 29, 1995, the Company had a $10,000,000 (increased to
     $12,000,000 from November 16, 1995 to February 16, 1996) revolving credit
     facility with a bank which refinanced the existing $4,000,000 line of
     credit. This credit facility was replaced in March 1996 with the unsecured
     bank line of credit. Interest was payable monthly at the bank's prime rate.
     The credit facility was collateralized by substantially all assets of the
     Company. Borrowings under the line of credit were limited to the sum of 85%
     of eligible accounts receivable plus the lesser of 50% of inventory or
     $4,500,000. Amounts outstanding under the line was $9,922,510 at December
     29, 1995, and were repaid on January 29, 1996 with proceeds from the
     initial public offering (see Note 2).

10.  LONG-TERM DEBT
 
     At December 29, 1995, the Company had outstanding two 11.5% Subordinated
     Debentures of $2,000,000 each. These debentures were due on March 9, 2000
     and 2001, with interest payable quarterly on the last day of March, June,
     September and December of each year, commencing June 30, 1995. The Company
     also had outstanding a term loan to a bank in the amount of $1,499,999 at
     December 29, 1995. This term loan was payable in quarterly installments of
     $166,667, plus accrued interest at 8.5% annually, commencing in May 1995.
     The loan was collateralized by substantially all assets of the Company. The
     current portion of total long-term debt at December 29, 1995 was $666,668,
     and $4,833,331 was due after one year. Such amounts were repaid and
     satisfied on January 29, 1996 with proceeds from the Company's initial
     public offering.

11.  TRANSACTIONS WITH RELATED PARTIES

     At December 29, 1995, the Company had a 5% note payable to the father of
     the Company's former sole stockholder, pursuant to a stock redemption
     agreement.  The principal balance on the notes as of December 29, 1995
     was $940,922.  Such amounts were repaid and satisfied on January 29, 1996,
     with proceeds from the initial public offering.

     The stock redemption agreement also provided for an increase in the
     purchase price of the shares if the remaining stockholder of the Company
     sells all or substantially all of the Company's assets or all or
     substantially all of his stock in the Company prior to July 1997 (see Note
     5). In connection with the Recapitalization, the former sole stockholder
     made a $694,000 capital contribution to the Company in order for the
     Company to satisfy its obligation under the stock redemption agreement to
     the former sole stockholder's father.

                                      F-13
<PAGE>
 
     In November 1995, the Company issued a $2,000,000 subordinated note to the
     former sole stockholder, which represented the deferred payments for the
     redemption of this stockholder's common stock in connection with the
     Recapitalization (see Note 5). The note was repaid and satisfied on January
     29, 1996 with proceeds from the initial public offering.

     The Company leases its executive offices from a stockholder of the Company
     and one distribution center from an entity controlled by two officers of
     Company (See Note 13).

12.  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 $102,600, $59,600 and $11,100 for 1996, 1995
     and 1994, respectively.

13.  COMMITMENTS AND CONTINGENT LIABILITIES

     Lease Commitments - The Company leases its facilities under operating
     leases expiring at various dates through 2004.  Minimum future rental
     payments under these leases as of December 27, 1996 are as follows:

<TABLE>
<CAPTION>
                         <S>          <C> 
                               1997   $1,481,000 
                               1998    1,387,000 
                               1999    1,255,000 
                               2000      980,000 
                               2001      651,000 
                         Thereafter    1,563,000 
                                      ---------- 
                                                 
                              Total   $7,317,000 
                                      ==========  
</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 $288,624, plus all real estate taxes and assessments,
     utilities and insurance related to the premises. Total rent expense for
     this lease was $74,000 for 1996. 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.

     In April 1994, the Company moved its executive office to a building which
     is leased from a stockholder of the Company. In 1994, in lieu of rental
     payments, the Company directly paid and expensed the mortgage payments to
     the bank which financed the purchase by the stockholder. Such payments
     amounted to approximately $5,300 monthly and aggregated approximately
     $42,500 in 1994. As amended in March 1995, under the new 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. 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.

     Rent expense under all operating leases was $1,409,000, $806,000 and
     $555,000 for 1996, 1995 and 1994, respectively. Certain of the leases
     provide that the Company pay taxes, insurance and other operating expenses
     applicable to the leased premises.

                                      F-14
<PAGE>
 
     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 27,1996, the Company was contingently
     liable for unused letters of credit aggregating approximately $ 649,000.

     Employment Tax Audit - In March 1995, the Internal Revenue Service (the
     "IRS") indicated to the Company that it intends to examine the Company's
     employment tax returns for 1992 and 1993.  The IRS has not asserted any
     employment tax deficiencies for such years as of the current date.  If the
     IRS asserts any employment tax deficiencies with respect to such years, the
     Company intends to vigorously pursue all available remedies and defenses.
     The Company does not believe that the outcome of any such examination will
     have a material effect on the Company's financial position or results of
     operations.

     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.

14.  STOCK OPTION PLAN

     In March 1995, the Company adopted a stock option plan (the "Stock Option
     Plan") under which employees may be granted options to purchase shares of
     Common Stock. Options granted were issued at prices equal to at least fair
     market value, become exercisable not earlier than one year after the grant
     date, and expire ten years after the grant date. The stock option plan is
     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. In January 1996, the Company increased the
     maximum number of shares to be reserved under the Stock Option Plan from
     392,000 to 800,000 shares. At December 27, 1996, 401,800 shares were
     available for future grants. Stock options transactions are summarized as
     follows:

<TABLE>
<CAPTION>
                                                  Exercise      Weighted Average
                                   Number of        Price        Exercise Price
                                     Shares       Per Share        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
                                     =======
</TABLE>

     All stock options are granted at fair market value of the Common Stock at
     the grant date. The weighted average fair value of the stock options
     granted during 1996 and 1995 were $5.67 and $0.80, respectively. The fair
     value of each stock option granted is estimated on the date of grant using
     the Black-Scholes option pricing model with the following weighted average
     assumptions used for grants in 1996 and 1995:

                                      F-15
<PAGE>
 
<TABLE>
<CAPTION>
 
                              1996        1995
                          ------------------------
<S>                       <C>         <C>

Risk-free interest rate      5.46 %       5.25% 
Expected volatility          74.20%         -   
Expected life             2.3 years   4.5 years 
Contractual life           10 years    10 years  
 
</TABLE>

     There were no stock option shares exercisable in 1996 or 1995.

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

<TABLE>
<CAPTION>
 
 
                        1996     1995
                    ---------------------    
<S>                      <C>      <C>
 
Net Income:
   As reported            $5,863   $2,844
   Pro forma              $5,485   $2,540
Net Income per share:
   As reported            $ 0.51   $ 0.36
   Pro forma              $ 0.48   $ 0.32
</TABLE>

15.  MANDATORILY REDEEMABLE PREFERRED STOCK

     At December 29, 1995, there were 5,235,364 shares of preferred stock     
     authorized.  At December 29, 1995, 129,450 shares were  designated as    
     Series A Senior Preferred Stock ("Series A") and 105,914 shares were     
     designated as Series B Junior Preferred Stock ("Series B") (see Note 2).  


                                      F-16
<PAGE>
 
     The Series A and Series B ("Outstanding Preferred Stock") 
     were entitled to dividends of $8.00 per share per annum compounded annually
     prior and in preference to holders of Common Stock. In addition, the
     holders of Series A were entitled to dividends prior and in preference to
     the holders of Series B. All dividends were cumulative whether or not
     declared by the Board of Directors ("Cumulative Dividends").

     During 1996 and 1995, Cumulative Dividends totaling $155,932 and
     $1,522,021, respectively, were charged as an accretion of the Outstanding
     Preferred Stock Redemption Value with a corresponding increase in the value
     of the Outstanding Preferred Stock. On January 29, 1996 all of the Series A
     Senior Preferred Stock and accumulated dividends were redeemed from
     proceeds of the initial public offering. In addition, $5,591,400 of the
     Series B Junior Preferred Stock and accumulated dividends were redeemed.
     The $5,000,000 balance of the Series B Junior Preferred Stock was converted
     into 454,545 shares of Common Stock (at the $11.00 public offering price)
     immediately prior to the initial public offering (see Note 2).

16.  PROVISION FOR INCOME TAXES

     The corporate income tax provision for 1996 and the period from February
     24, 1995 through December 29, 1995 (see Note 3) is as follows:

<TABLE>
<CAPTION>
                                                    1996         1995
                                                 -----------  -----------
<S>                                              <C>          <C>
Current:       
   Federal                                       $3,110,000   $1,723,680
   State                                            733,280      307,900
                                                 ----------   ----------
                                                  3,843,280    2,031,580
                                                 ----------   ----------
               
Deferred:      
   Federal                                         (209,000)    (365,000)
   State                                            (41,000)   (  43,000)
                                                 ----------   ----------
                                                   (250,000)    (408,000)
                                                 ----------   ----------
                                                 $3,593,280   $1,623,580
                                                 ==========   ==========
<CAPTION>  
 
The reconciliation of the provision for income taxes at the federal statutory 
tax rate to the provision for income taxes is as follows:

                                                    1996         1995
                                                 ----------   ----------
<S>                                              <C>          <C>  

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

                                      F-17
<PAGE>
 
     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 27,    December 29,
                              1996            1995  
                              ----            ----   
   <S>                    <C>             <C>       
   Inventory                $436,000        $285,000
   Bad debt reserves         234,000          61,000
   State taxes                93,000          43,000
   Other                       5,000          19,000
                            --------        --------
                            $768,000        $408,000
                            ========        ======== 
</TABLE>

     Prior to February 24, 1995, the Company elected to be taxed under
     Subchapter S of the Internal Revenue Code. An S Corporation is a
     corporation which generally does not pay income taxes but whose income is
     passed on through to its shareholders who report such amounts on their
     individual tax returns. Effective February 24, 1995 the Company's
     Subchapter S status was terminated and, as a result of such change in
     status, the Company established a deferred tax asset of approximately
     $230,000, which is reflected in the deferred provision for the year ended
     December 29, 1995.


17.  SUBSEQUENT EVENTS

     In January 1997, the Company acquired certain assets of Pier-Angeli Company
     ("Pier-Angeli"), a distributor of plumbing and electrical supplies
     primarily to the multi-family industry or apartment house market. The total
     purchase price of the acquisition was approximately $4 million, including
     costs of acquisition. Goodwill and other intangibles recorded in connection
     with this acquisition totaled approximately $2 million, and will be
     amortized on a straight-line basis over 3 to 30 years.

                                      F-18
<PAGE>
 
18.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                     1996             
                                  ----------------------------------------------
 
                                    First       Second      Third       Fourth
                                  ----------  ----------  ----------  ----------
                                  (13 weeks)  (13 weeks)  (13 weeks)  (13 weeks)
<S>                               <C>         <C>         <C>         <C> 
Net sales                           $19,309     $21,415     $30,712     $29,208
Gross profit                          5,936       6,553       8,718       8,584
Operating income                      1,707       1,952       2,774       2,472
Net income                              960       1,218       1,857       1,828
Net income per share                $   .10     $   .11     $   .15     $   .14

<CAPTION> 
  
                                                     1995
                                  ----------------------------------------------
                                    First       Second      Third       Fourth
                                  ---------   ---------   ---------   ----------
                                  (13 weeks)  (13 weeks)  (13 weeks)  (13 weeks)
<S>                               <C>         <C>         <C>         <C> 
Net sales                           $13,458     $14,625     $16,381     $16,359
Gross profit                          4,246       4,534       5,107       5,101
Operating income                      1,171       1,455       1,838       1,440
Pro forma net income                    581         689         920         654
Pro forma net income per share      $   .07     $   .09     $   .12     $   .08
 
</TABLE>

     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 1996 included
     sales of HMA, which was acquired in July 1996. The fourth quarter of 1995
     included sales of One Source, which was acquired in November 1995.

                                      F-19
<PAGE>
 
INDEPENDENT AUDITORS' REPORT


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

We have audited the consolidated financial statements of Wilmar Industries,
Inc. and its subsidiaries (the "Company") as of December 27, 1996 and December
29, 1995, and for each of the three fiscal years in the period ended December
27, 1996, and have issued our report thereon dated March 13, 1997; such report
is included elsewhere in this Form 10-K. Our audits also included the
consolidated financial statement schedule of the Company referred to in Item 8.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.



DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania

March 13, 1997

                                      S-1
<PAGE>
 
SCHEDULE II

WILMAR INDUSTRIES, INC.

VALUATION ACCOUNTS

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

                                     Balance                                           
                                       at          Charged                                  Balance   
                                     Beginning        to                         Other      at End    
                                     of Year       Expense       Deductions     Changes     of Year   
                                     -------       -------       ----------     -------     -------   
<S>                                  <C>           <C>           <C>         <C>         <C>       
                                                                                                      
Year ended December 30, 1994:                                                                         
 Allowance for doubtful accounts    $105,000       163,407          133,407                $135,000   
                                    --------       -------        ---------                ========    

Year ended December 29, 1995:
 Allowance for doubtful accounts    $135,000       186,727          167,657  $ 82,000/2/   $236,070
                                    --------       =======          =======  -----------  ---------
 
Year ended December 27, 1996:
 
 Allowance for doubtful accounts    $236,070       364,500           37,481   243,211/3/   $806,300
                                    --------       -------          -------   ---------    ========
 
</TABLE>
1.  Accounts receivable written off as uncollectible, net of recoveries.

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

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

                                      S-2