UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1 to Form 10-K)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 30, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File No. 001-08772

HUGHES SUPPLY, INC.

(Exact name of registrant as specified in its charter)

Florida	59-0559446
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Hughes Way

Orlando, Florida 32805

(Address of principal executive offices)

(407) 841-4755

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock ($1.00 Par Value)	New York Stock Exchange

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

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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    Yes  x    No  ¨

The aggregate market value of the registrant’s voting stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter ($35.35 per share as of August 1, 2003): $784,386,134.

There were 30,631,377 shares of the registrant’s Common Stock ($1.00 par value) outstanding as of April 9, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Designated portions of the Definitive Proxy Statement for the 2004 Annual Meeting of Shareholders held on May 20, 2004 are incorporated by reference in Part III of this Report.

AMENDMENT NO. 1

TO THE FORM 10-K FILED BY

HUGHES SUPPLY, INC. ON JANUARY 30, 2004

This Form 10-K/A constitutes Amendment No. 1 (“Amendment No. 1”) to Hughes Supply, Inc.’s Annual Report on Form 10-K for the period ended January 30, 2004, which was originally filed on April 14, 2004 (“Original Form 10-K”) . This Amendment No. 1 is being filed solely to amend: (i) Part II, Item 8 Financial Statements and Supplementary Data by deleting the three sentences in Note 2-Business Combinations and Divestitures that reference valuations prepared by an independent third party appraisal firm; and (ii) Part IV, Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K to include a new consent of PricewaterhouseCoopers LLP, as well as currently dated certifications as required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. The remainder of the Original Form 10-K is unchanged and is not reproduced in this Amendment No. 1. This Amendment No. 1 does not reflect events occurring after the filing of the Original Form 10-K, and does not modify or update the disclosures therein in any way other than as required to reflect the amendment described above.

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PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

	Page(s)
Consolidated Statements of Income for Fiscal Years Ended January 30, 2004, January 31, 2003 and January 25, 2002	4
Consolidated Balance Sheets as of January 30, 2004 and January 31, 2003	5
Consolidated Statements of Shareholders’ Equity for Fiscal Years Ended January 30, 2004, January 31, 2003 and January 25, 2002	6
Consolidated Statements of Cash Flows for Fiscal Years Ended January 30, 2004, January 31, 2003 and January 25, 2002	7
Notes to Consolidated Financial Statements	8-31
Report of Independent Registered Certified Public Accounting Firm	32
Management’s Responsibility for Financial Statements	33

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HUGHES SUPPLY, INC.

Consolidated Statements of Income

(in millions, except per share data)

	Fiscal Years Ended
	January 30, 2004			January 31, 2003			January 25, 2002
Net Sales	$	3,253.4		$	3,066.3		$	3,037.7
Cost of Sales		2,519.7			2,356.6			2,340.6
Gross Margin		733.7			709.7			697.1
Operating Expenses:
Selling, general and administrative		589.8			568.0			564.0
Depreciation and amortization		21.2			20.5			31.1
Impairment of long-lived assets		—			—			0.7
Total operating expenses		611.0			588.5			595.8
Operating Income		122.7			121.2			101.3
Non-Operating Income (Expenses):
Interest and other income		6.4			7.3			9.3
Interest expense		(34.6	)		(30.3	)		(35.9	)
		(28.2	)		(23.0	)		(26.6	)
Income Before Income Taxes		94.5			98.2			74.7
Income Taxes		36.8			40.1			30.6
Net Income	$	57.7		$	58.1		$	44.1
Earnings Per Share:
Basic	$	2.52		$	2.50		$	1.90
Diluted	$	2.46		$	2.45		$	1.88
Weighted average Shares Outstanding:
Basic		22.9			23.2			23.2
Diluted		23.5			23.7			23.4

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

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HUGHES SUPPLY, INC.

Consolidated Balance Sheets

(in millions, except share and per share data)

	January 30, 2004			January 31, 2003
Assets
Current Assets:
Cash and cash equivalents	$	8.3		$	1.7
Accounts receivable, less allowance for doubtful accounts of $6.5 and $8.5		493.3			423.1
Inventories		467.0			438.5
Deferred income taxes		19.4			19.7
Other current assets		53.0			47.1
Total current assets		1,041.0			930.1
Property and Equipment, Net		161.8			157.8
Goodwill		609.8			320.1
Other Assets		68.7			26.9
Total assets	$	1,881.3		$	1,434.9
Liabilities and Shareholders’ Equity
Current Liabilities:
Current portion of long-term debt	$	44.6		$	63.8
Accounts payable		308.3			230.0
Accrued compensation and benefits		39.3			43.3
Other current liabilities		45.2			34.2
Total current liabilities		437.4			371.3
Long-Term Debt		368.7			378.1
Deferred Income Taxes		55.4			34.0
Other Noncurrent Liabilities		7.8			6.7
Total liabilities		869.3			790.1
Commitments and Contingencies (Note 10)
Shareholders’ Equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued; preferences, limitations and relative rights to be established by the Board of Directors		—			—
Common stock, par value $1 per share; 100,000,000 shares authorized; 30,795,577 and 23,935,764 shares issued		30.8			23.9
Capital in excess of par value		533.3			222.4
Retained earnings		465.1			416.7
Treasury stock, 216,952 and 245,700 shares, at cost		(5.5	)		(6.8	)
Unearned compensation related to outstanding restricted stock		(11.7	)		(11.4	)
Total shareholders’ equity		1,012.0			644.8
Total liabilities and shareholders’ equity	$	1,881.3		$	1,434.9

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

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HUGHES SUPPLY, INC.

Consolidated Statements of Shareholders’ Equity

(in millions, except share and per share data)

	Common Stock					Capital in Excess of Par Value			Retained Earnings			Treasury Stock					Unearned Compensation
	Shares		Dollars									Shares		Dollars						Total
Balance at January 26, 2001	24,211,485		$	24.2		$	228.1		$	337.1		(576,783	)	$	(13.3	)	$	(6.1	)	$	570.0
Net income	—			—			—			44.1		—			—			—			44.1
Cash dividends—$0.340 per share	—			—			—			(8.0	)	—			—			—			(8.0	)
Purchase of treasury stock	—			—			—			—		(394,700	)		(7.5	)		—			(7.5	)
Shares issued under stock option plans and related tax benefits	—			—			0.3			(1.7	)	265,378			5.6			—			4.2
Purchase and retirement of common shares	(91,322	)		(0.1	)		(0.8	)		(1.1	)	—			—			—			(2.0	)
Retirement of treasury stock	(342,854	)		(0.3	)		(3.2	)		(4.0	)	342,854			7.5			—			—
Issuance of restricted stock, net of cancellations	(2,709	)		—			0.5			1.3		339,000			7.2			(9.5	)		(0.5	)
Amortization of restricted stock	—			—			—			—		—			—			1.5			1.5
Cancellation of stock rights issued to bestroute.com	—			—			(7.3	)		—		—			—			—			(7.3	)
Balance at January 25, 2002	23,774,600		$	23.8		$	217.6		$	367.7		(24,251	)	$	(0.5	)	$	(14.1	)	$	594.5
Net income	—			—			—			58.1		—			—			—			58.1
Cash dividends—$0.355 per share	—			—			—			(8.5	)	—			—			—			(8.5	)
Purchase of treasury stock	—			—			—			—		(257,000	)		(7.1	)		—			(7.1	)
Shares issued under stock option plans and related tax benefits	216,836			0.1			5.8			(0.1	)	15,551			0.3			—			6.1
Purchase and retirement of common shares	(25,784	)		—			(0.5	)		(0.6	)	—			—			—			(1.1	)
Issuance of restricted stock, net of cancellations	(29,888	)		—			(0.5	)		0.1		20,000			0.5			(0.1	)		—
Amortization of restricted stock	—			—			—			—		—			—			2.8			2.8
Balance at January 31, 2003	23,935,764		$	23.9		$	222.4		$	416.7		(245,700	)	$	(6.8	)	$	(11.4	)	$	644.8
Net income	—			—			—			57.7		—			—			—			57.7
Cash dividends—$0.400 per share	—			—			—			(10.1	)	—			—			—			(10.1	)
Purchase of treasury stock	—			—			—			—		(258,600	)		(6.0	)		—			(6.0	)
Shares issued under stock option plans and related tax benefits	—			—			1.2			(0.4	)	199,348			5.1			—			5.9
Issuance of common stock, net	6,900,000			6.9			310.6			—		—			—			—			317.5
Purchase and retirement of common shares	(10,299	)		—			(0.1	)		(0.3	)	—			—			—			(0.4	)
Issuance of restricted stock, net of cancellations	(29,888	)		—			(0.8	)		1.5		88,000			2.2			(3.3	)		(0.4	)
Amortization of restricted stock	—			—			—			—		—			—			3.0			3.0
Balance at January 30, 2004	30,795,577		$	30.8		$	533.3		$	465.1		(216,952	)	$	(5.5	)	$	(11.7	)	$	1,012.0

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

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HUGHES SUPPLY, INC.

Consolidated Statements of Cash Flows

(in millions)

	Fiscal Years Ended
	January 30, 2004			January 31, 2003			January 25, 2002
Cash Flows from Operating Activities:
Net income	$	57.7		$	58.1		$	44.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21.2			20.5			31.1
Provision for doubtful accounts		4.6			9.1			11.1
Amortization of restricted stock		2.7			2.8			1.0
Income tax benefit of stock options exercised		1.2			1.4			0.3
Deferred income taxes		10.7			14.9			10.4
Other		2.9			(1.2	)		0.1
Changes in assets and liabilities, net of businesses acquired:
Accounts receivable		(24.3	)		(24.3	)		50.1
Inventories		16.8			(11.6	)		55.0
Other current assets		(0.8	)		10.6			(12.3	)
Other assets		(3.6	)		(0.4	)		(1.8	)
Accounts payable		63.3			25.2			(41.3	)
Accrued compensation and benefits		(8.5	)		9.0			(0.9	)
Other current liabilities		0.9			(2.3	)		(4.3	)
Other noncurrent liabilities		1.1			0.6			0.4
Net cash provided by operating activities		145.9			112.4			143.0
Cash Flows from Investing Activities:
Capital expenditures		(15.9	)		(15.3	)		(16.9	)
Proceeds from sale of property and equipment		4.0			4.5			8.7
Business acquisitions, net of cash		(279.6	)		(33.4	)		(32.0	)
Proceeds from sale of investment in affiliated entity		—			2.0			—
Purchase of bestroute.com stock rights		—			—			(7.3	)
Proceeds from sale of pool and spa business		—			—			25.0
Net cash used in investing activities		(291.5	)		(42.2	)		(22.5	)
Cash Flows from Financing Activities:
Net borrowings (payments) under short-term debt arrangements		27.7			19.6			(100.3	)
Proceeds from issuance of senior term loan		250.0			—			—
Principal payments on other debt and debt of acquired entities		(422.3	)		(73.0	)		(23.8	)
Proceeds from issuance of common stock, net		317.5			—			—
Change in book overdrafts		(4.6	)		(10.3	)		1.8
Purchase of treasury shares		(6.0	)		(7.1	)		(7.5	)
Dividends paid		(9.4	)		(8.1	)		(8.0	)
Other		(0.7	)		3.6			1.7
Net cash provided by (used in) financing activities		152.2			(75.3	)		(136.1	)
Net (Decrease) Increase in Cash and Cash Equivalents		6.6			(5.1	)		(15.6	)
Cash and Cash Equivalents, Beginning of Year		1.7			6.8			22.4
Cash and Cash Equivalents, End of Year	$	8.3		$	1.7		$	6.8

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

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Note 1—Description of Business and Summary of Significant Accounting Policies

Business

Founded in 1928, we are one of the nation’s largest diversified wholesale distributors of construction, repair and maintenance-related products distributing over 350,000 products to more than 100,000 customers through 486 branches located in 38 states. Our customers include electrical, plumbing and mechanical contractors; public utilities; property management companies; municipalities and industrial companies. Although we have a national presence, we operate principally in the southeastern and southwestern United States.

We are organized on a product line basis into six reportable segments: Water & Sewer; Plumbing/Heating and Air Conditioning (HVAC); Maintenance, Repair and Operations (MRO); Utilities; Electrical and Industrial Pipe, Valves and Fittings (PVF). An “All Other” category includes our Building Materials, Fire Protection and Mechanical Industrial product lines.

Principles of Consolidation

Our consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. Significant intercompany balances and transactions have been eliminated. Results of operations of companies acquired are included from their respective dates of acquisition. Investments in 50% or less owned affiliates over which we have the ability to exercise significant influence are accounted for using the equity method. During fiscal years 2004, 2003 and 2002, we did not have any “less than 20% owned” investments in affiliates accounted for under the equity method.

Fiscal Year

Our fiscal year is a 52- or 53-week period ending on the last Friday in January. Fiscal years 2004 and 2002 contained 52 weeks while fiscal year 2003 contained 53 weeks. The additional week in fiscal year 2003 was included in the first quarter.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and the differences could be material.

Cash and Cash Equivalents

We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Allowance for Doubtful Accounts

We evaluate the collectibility of accounts receivable based on numerous factors, including past transaction history with customers, their credit worthiness, and an assessment of our lien and bond rights. Initially, we estimate an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience and on a quarterly basis, we write off uncollectible receivables. This estimate is periodically adjusted when we become aware of a specific customer’s inability to meet its financial obligations (e.g. bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While we have a large customer base that is geographically dispersed, a slowdown in the markets in which we operate may result in higher than expected uncollectible accounts, and therefore, the need to revise estimates for bad debts. To the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, the allowance for doubtful accounts could differ significantly, resulting in either higher or lower future provisions for doubtful accounts. At January 30, 2004 and January 31, 2003, the allowance for doubtful accounts totaled $6.5 million and $8.5 million, respectively.

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Inventories

Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the moving average cost method. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of cost or market. This evaluation includes an analysis of each branch’s physical inventory results over the last two years, a review of potential dead stock based on historical product sales and forecasted sales and an overall consolidated analysis of potential excess inventory. Periodically, the branch’s perpetual inventory records are adjusted to reflect permanent declines in market value. To the extent historical physical inventory results are not indicative of future results and if future events impact, either favorably or unfavorably, the saleability of our products or our relationship with certain key vendors, our inventory reserves could differ significantly, resulting in either higher or lower future inventory provisions. At January 30, 2004 and January 31, 2003, our inventory reserves totaled $4.5 million and $ 6.0 million, respectively.

Consideration Received From Vendors

At the beginning of each calendar year, we enter into agreements with many of our vendors providing for inventory purchase rebates (“vendor rebates”) upon achievement of specified volume purchasing levels. We accrue the receipt of vendor rebates as part of our cost of sales for products sold based on progress towards earning the vendor rebates, taking into consideration cumulative purchases of inventory to date and projected purchases through the end of the year. An estimate of unearned vendor rebates is included in the carrying value of inventory at each period end for vendor rebates received on products not yet sold. While we believe that we will continue to receive consideration from vendors in fiscal year 2005 and thereafter, there can be no assurance that vendors will continue to provide comparable amounts of vendor rebates in the future.

Property and Equipment

Property and equipment are recorded at cost and depreciated using both straight-line and declining-balance methods based on the following estimated useful lives of the assets:

Buildings and improvements	5–40 years
Transportation equipment	2–20 years
Furniture, fixtures and equipment	1–12 years

Maintenance and repair costs are charged to expense as incurred. Renewals and improvements that extend the useful lives of assets are capitalized. Gains or losses are recognized upon disposition. Interest costs related to assets under construction are capitalized during the construction period and totaled $0.6 million, $0.4 million and $0.3 million in fiscal years 2004, 2003 and 2002. Depreciation of property and equipment totaled $16.6 million, $16.1 million and $18.1 million in fiscal years 2004, 2003 and 2002, respectively.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. Effective January 26, 2002, we adopted Statement of Financial Accounting Standards (“FAS”) 142, Goodwill and Other Intangible Assets. FAS 142 requires entities to assess the fair value of the net assets underlying all acquisition-related goodwill on a reporting unit basis effective beginning in fiscal year 2003. When the fair value is less than the related goodwill value, entities are required to reduce the amount of goodwill. The approach to evaluating the recoverability of goodwill as outlined in FAS 142 requires the use of valuation techniques utilizing estimates and assumptions about projected future operating results and other variables. Under the new impairment approach, we may be subject to earnings volatility if additional goodwill impairment occurs at a future date. FAS 142 also requires entities to discontinue the amortization of goodwill, including amortization of goodwill acquired in past business combinations. Accordingly, we no longer amortized goodwill beginning in fiscal year 2003 (see note 4).

At January 30, 2004 and January 31, 2003, goodwill, net of accumulated amortization, totaled $609.8 million and $320.1 million, respectively. Accumulated amortization of goodwill totaled $40.3 million at January 30, 2004 and January 31, 2003.

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Other Assets

We capitalize certain software development costs, which are being amortized on a straight-line basis over the estimated useful lives of the software, ranging from 2 to 7 years. At January 30, 2004 and January 31, 2003, capitalized software development costs totaled $10.6 million and $9.4 million, respectively, net of accumulated amortization of $14.9 million and $11.7 million, respectively. Amortization of capitalized software development costs totaled $3.2 million, $3.9 million and $3.6 million in fiscal years 2004, 2003 and 2002, respectively.

Intangible assets, which principally consist of customer contracts acquired in business combinations, are recorded at their respective fair values in accordance with FAS 141, Business Combinations, and are generally amortized using the straight-line method. Additional disclosure related to acquired other intangible assets as of fiscal year-end 2004 and 2003 are as follows (in millions):

	Fiscal Years Ended
	2004					2003
	Gross Carrying Value		Accumulated Amortization			Gross Carrying Value		Accumulated Amortization
Amortized intangible assets
Acquired customer contracts	$	37.1	$	(1.4	)	$	8.2	$	(0.2	)
Non-compete/employment agreements		3.1		(0.3	)		0.4		(0.1	)
Total		40.2		(1.7	)		8.6		(0.3	)
Unamortized intangible assets
Private label tradenames		5.9		—			—		—
Total	$	46.1	$	(1.7	)	$	8.6	$	(0.3	)

The weighted-average amortization period is 13 years for acquired customer contracts and 5 years for non-compete agreements. The weighted-average period for acquired customer contracts and non-compete agreements on a combined basis is 12 years.

The aggregate amortization expense for fiscal years 2004, 2003 and 2002 was $1.4 million, $0.4 million and $0.2 million, respectively. Total estimated annual amortization expense expected for the next five fiscal years, based on current levels of intangible assets is $3.5 million.

Impairment of Long-Lived Assets Other than Goodwill

Long-lived assets, including property and equipment, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. To analyze recoverability, we project undiscounted future cash flows over the remaining life of the asset. If these projected cash flows are less than the carrying amount, an impairment loss is recognized based on the fair value of the asset less any costs of disposition (see note 6). Our judgments regarding the existence of impairment indicators are based on market and operational performance. Future events could cause us to conclude that impairment indicators exist and that assets are impaired. Evaluating the impairment also requires us to estimate future operating results and cash flows. If different estimates were used, the amount and timing of asset impairments could be affected.

Self-Insurance

We are self-insured for certain losses relating to workers’ compensation, automobile, general and product liability claims. We also maintain stop loss coverage to limit the exposure arising from such claims. Self-insurance losses for claims filed and claims incurred but not reported are accrued based upon our estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and our historical loss development experience. To the extent the projected future development of the losses resulting from workers’ compensation, automobile, general and product liability claims incurred as of January 30, 2004 differs from the actual development of such losses in future periods, our insurance reserves could differ significantly, resulting in either higher or lower future insurance expense. At January 30, 2004 and January 31, 2003, self-insurance reserves totaled $1.0 million and $5.6 million, respectively.

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Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and benefits, and other current liabilities approximate their fair values because of the short-term nature of these instruments. The fair value of our long-term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. The fair value of long-term debt was computed by discounting the remaining cash flows by a rate equal to the estimated constant treasury rate for the remaining life of the debt instrument plus applicable credit spread over the remaining average life of the issue. The fair values of long-term debt approximated $324.3 million and $395.9 million and the related carrying values were $413.3 million and $441.9 million at January 30, 2004 and January 31, 2003, respectively.

Revenue Recognition

We ship products to customers predominantly by our internal fleet and to a lesser extent by third party carriers. We recognize revenues from product sales when title to the products is passed to the customer, which occurs at the point of destination for products shipped by our internal fleet and at the point of shipping for products shipped by third party carriers. Revenues related to services are recognized in the period the services are performed and totaled $2.6 million, $2.4 million and $2.6 million in fiscal years 2004, 2003 and 2002, respectively.

Concentration of Credit Risk

The majority of our sales are credit sales which are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength of the construction industry in the areas where they operate. Concentration of credit, risk with respect to trade accounts receivable, is limited by the large number of customers comprising our customer base. We perform ongoing credit evaluations of our customers and in certain situations obtain collateral sufficient to protect our credit position.

Advertising

Advertising costs are charged to expense as incurred and totaled $6.8 million, $5.1 million and $5.3 million in fiscal years 2004, 2003 and 2002, respectively.

Shipping and Handling Fees and Costs

We include shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are capitalized to inventories and relieved through cost of sales as inventories are sold. Shipping and handling costs associated with outbound freight are included in selling, general and administrative expenses and totaled $25.3 million, $24.1 million and $23.5 million in fiscal years 2004, 2003 and 2002, respectively.

Income Taxes

Income taxes are recorded for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets.

Stock-Based Compensation

We measure compensation expense for employee and director stock options as the aggregate difference between the market and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the purchase price are known. Compensation expense associated with restricted stock grants is equal to the market value of the shares on the date of grant and is recorded pro rata over the required holding period. For purposes of pro forma disclosures under FAS 123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting for Stock-Based Compensation- Transition and Disclosure, the estimated fair value of the stock options is amortized to compensation expense over the options’ vesting period.

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The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period (in millions except per share data):

	Fiscal Years Ended
	2004			2003			2002
Net income as reported:	$	57.7		$	58.1		$	44.1
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects		(3.6	)		(2.0	)		(0.6	)
Pro forma net income	$	54.1		$	56.1		$	43.5
Earnings per share:
Basic —as reported	$	2.52		$	2.50		$	1.90
Basic —pro forma	$	2.36		$	2.42		$	1.88
Diluted —as reported	$	2.46		$	2.45		$	1.88
Diluted —pro forma	$	2.30		$	2.37		$	1.86

Comprehensive Income

We do not have any significant components of comprehensive income.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentation. These reclassifications had no net impact on previously reported results of operations.

Recent Accounting Pronouncements

FAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, was issued in April 2003 and amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FAS 133, Accounting for Derivative Instruments and Hedging Activities. FAS 149 provides greater clarification of the characteristics of a derivative instrument so that contracts with similar characteristics will be accounted for consistently. In general, FAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. As we do not currently have any derivative financial instruments, the adoption of FAS 149 did not have an impact on our consolidated financial statements.

FAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, was issued in May 2003 and clarifies the accounting for certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as liabilities in statements of financial position. Previously, many of those financial instruments were classified as equity. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. As we did not have any of these financial instruments, the adoption of FAS 150 did not have an impact on our consolidated financial statements.

Financial Accounting Standard Board Interpretation (“FIN”) 46, Consolidation of Variable Interest Entities, was issued in January 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation and disclosure requirements apply immediately to variable interest entities created after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period ending after December 15, 2003. We are not the primary beneficiary of any variable interest entities as of January 30, 2004.

In December 2003, a revision to FIN 46 (“FIN 46R”) was issued to clarify some of the provisions of the interpretation and to exempt certain entities from its requirements. Adoption of the provisions of FIN 46R is required for interim periods ending after March 15, 2004. We are currently evaluating the impact that the adoption of this revision will have on our consolidated financial statements, and do not expect it to have a material impact.

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In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the prescription drug benefit under Medicare. Questions have arisen regarding whether an employer that provides postretirement prescription drug coverage should recognize the effects of the Act on its accumulated postretirement benefit obligation (APBO) and net postretirement benefit costs under FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. While we do offer benefits, including prescription drug coverage, to employees who have attained certain levels of service after they have retired, those benefits are only available to retirees until age 65, at which time Medicare coverage becomes effective. As such, we do not believe that this specific provision of the Act will have a material effect on our consolidated financial statements.

In December 2003, the FASB issued FAS 132 (Revised) (“FAS 132-R”), Employer’s Disclosure about Pensions and Other Postretirement Benefits. FAS 132-R retains disclosure requirements of the original FAS 132 and requires additional disclosures relating to assets, obligations, cash flows, and net periodic benefits cost. FAS 132-R is effective for fiscal years ending after December 15, 2003. Interim period disclosures are effective for interim periods beginning after December 15, 2003. The provisions of FAS 132-R did not have a material effect on our consolidated financial statements.

In December 2003, the Staff of the Securities and Exchange Commission (“SEC” or “the Staff”) issued Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition, which superseded SAB 101, Revenue Recognition in Financial Statements. SAB 104’s primary purpose is to rescind accounting guidance in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of Emerging Issues Task Force Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables which was effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The provisions of SAB 104 did not have a material impact on our financial statements.

Note 2—Business Combinations and Divestitures

Business Combinations

On December 19, 2003, we acquired Century Maintenance Supply, Inc. (“Century”), a leading supplier of MRO products serving the multi-family apartment market throughout the United States. The acquisition will enable us to become a leader in the apartment MRO market and facilitate entry into adjacent customer markets.

The purchase price consisted of $260.0 million cash paid for Century’s net assets, including the assumption of $31.4 million of accounts payable and accrued liabilities and $101.4 million of debt. The results of Century’s operations have been included in our consolidated statements of income since December 19, 2003. The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their respective fair values in accordance with FAS 141. Goodwill, of which approximately $7.1 million is deductible for tax purposes, and other intangible assets recorded in connection with the transaction totaled $271.1 million and $36.4 million, respectively. The goodwill and intangible assets were assigned entirely to our MRO segment. The intangible assets are subject to amortization and consist primarily of customer lists, private label trade names and employment agreements that are amortized on a straight-line basis over a weighted-average useful life of 11.5 years. The estimated annual amortization expense related to these contracts for the next five fiscal years is expected to be $2.8 million. Unaudited pro-forma operating results of operations, assuming the acquisition of Century had been completed as of the beginning of fiscal year 2003, are as follows (in millions except per share data):

	Fiscal Years Ended
	2004		2003
Net sales	$	3,534.4	$	3,357.0
Operating income		153.2		148.3
Net income		67.2		66.0
Earnings per share:
Basic	$	2.93	$	2.85
Diluted	$	2.86	$	2.79

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the period presented or the results which may occur in the future.

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Effective August 4, 2003, we acquired substantially all of the net assets of Marden Susco, LLC (“Marden Susco”), a southern California supplier of underground piping products for use in municipal water, sewer and storm drain systems. As a result of the acquisition, we have expanded the geographical presence of our Water & Sewer business into the state of California.

The purchase price consisted of $19.6 million cash paid for Marden Susco’s net assets, including the assumption of $13.7 million of accounts payable and accrued liabilities and $6.7 million of debt. The results of Marden Susco’s operations have been included in our consolidated statements of income since August 4, 2003. The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their respective fair values in accordance with FAS 141. Goodwill, all of which is deductible for income tax purposes, and other intangible assets recorded in connection with the transaction totaled $18.1 million and $1.0 million, respectively. The goodwill and intangible assets were assigned entirely to our Water & Sewer segment. The intangible assets are subject to amortization and consist primarily of employment agreements, revenue backlog, and customer lists that are amortized on a straight-line basis over a weighted-average useful life of 4.8 years. The estimated annual amortization expense related to these contracts for the next five fiscal years is expected to be $0.1 million. Pro forma results of operations reflecting this acquisition have not been presented because the results of operations of Marden Susco are not material to our consolidated operating results or assets.

On August 9, 2002, we acquired 100% of the capital stock of Utiliserve Holdings, Inc. and its subsidiaries (“Utiliserve”), a wholesale distributor of electrical transmission and distribution products and services to the United States’ electric utility industry. As a result of the acquisition, we are a leading provider of electrical transmission and distribution products and services in the United States. We also expanded our development of customer contracts as a result of Utiliserve’s value-added services, including vendor-managed inventory, collaborative emergency response and job-site delivery. Through its supply chain management solutions, Utiliserve is able to assume full responsibility for its customers’ warehouse, workflow and inventory management needs.

The purchase price consisted of $33.4 million cash paid (net of cash acquired of $1.9 million) for Utiliserve’s net equity along with the assumption of $54.5 million and $33.2 million of debt and other liabilities, respectively. The results of Utiliserve’s operations have been included in our consolidated statements of income since August 9, 2002. The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their respective fair values in accordance with FAS 141. Goodwill, of which approximately $25.7 million is deductible for income tax purposes, and other intangible assets recorded in connection with the transaction totaled $56.3 million and $8.6 million, respectively. The goodwill was assigned entirely to our Utilities segment. The intangible assets are subject to amortization and consist mainly of customer contracts that are being amortized on a straight-line basis over a weighted-average useful life of 14.6 years. The estimated annual amortization expense related to these contracts for the next five fiscal years is expected to be $0.6 million.

During fiscal year 2002, we acquired several other wholesale distributors of materials to the construction and industrial markets that were accounted for as purchases. These acquisitions, individually and in the aggregate, did not have a material effect on the consolidated financial statements. Results of operations of these companies from their respective dates of acquisition have been included in the consolidated financial statements.

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The assets acquired and liabilities assumed for acquisitions are summarized below (in millions):

	Fiscal Years Ended
	2004			2003			2002
Accounts receivable	$	50.4		$	19.9		$	13.5
Inventories		45.3			30.5			9.7
Property and equipment		3.1			2.4			1.0
Goodwill		289.2			56.3			23.7
Other assets (including intangibles)		44.8			13.9			0.1
Assets acquired		432.8			123.0			48.0
Accounts payable and accrued liabilities		(45.1	)		(33.2	)		(8.1	)
Long-term debt		(108.1	)		(54.5	)		(8.6	)
Liabilities assumed		(153.2	)		(87.7	)		(16.7	)
Cash purchase price	$	279.6		$	35.3		$	31.3

Divestitures

On December 30, 2002, we sold our remaining 49.0% equity investment in Anasteel Supply Company, LLC. for $2.3 million. We received cash proceeds of $2.0 million with the remaining $0.3 million of consideration in the form of a note receivable due July 31, 2005. The note receivable bears interest at a fixed rate of 7.0%.

In fiscal year 2000, we invested $1.8 million in bestroute.com (“bestroute”), an e-commerce company founded in 1999 to provide hard-to-find inventory products to wholesale distributors and end-users via the internet. During fiscal year 2001, we were required to fund an additional $6.3 million to bestroute as certain operating thresholds were met. In September 2000, we acquired the remaining 51.0% interest of bestroute in a transaction where the other members of bestroute received 723,183 stock rights of our company. Under the terms of the agreement, the stock rights were exercisable by the holders on or after February 1, 2001 and granted the holders the right to convert their bestroute holdings into our common stock. The agreement also provided a call provision under which we had the ability to call the stock rights in exchange for shares of our common stock. The exercise of a portion of the stock rights issued was contingent upon bestroute meeting its operating plan and demonstrating continued viability as a business. In the fourth quarter of fiscal year 2001, bestroute was not able to meet its operating plan and incurred operating losses of $2.1 million. These losses were attributed to bestroute’s inability to gain market acceptance and generate revenues sufficient to cover its operating costs. As a result of these continued losses and viability concerns, we discontinued bestroute’s operations on March 2, 2001, and entered into an agreement with the holders of the stock rights to cancel 347,541 of the stock rights and redeem the remaining rights for $7.3 million of cash.

Note 3—Property and Equipment

Property and equipment at January 30, 2004 and January 31, 2003 consist of the following (in millions):

	2004			2003
Land	$	37.2		$	34.6
Buildings and improvements		138.3			117.5
Transportation equipment		21.1			24.1
Furniture, fixtures and equipment		86.6			75.9
Construction in progress		1.3			19.9
		284.5			272.0
Less accumulated depreciation		(122.7	)		(114.2	)
	$	161.8		$	157.8

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Note 4—Goodwill

Effective January 26, 2002, we adopted both FAS 141 and FAS 142. FAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. FAS 141 also specifies the criteria, which must be met in order for certain acquired intangible assets to be recorded separately from goodwill. Under FAS 142, goodwill is no longer amortized, but rather tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. This new approach requires the use of valuation techniques and methodologies significantly different from the undiscounted cash flow policy that was previously followed.

Our nine operating segments are also the reporting units defined in FAS 142. The reporting units’ goodwill was tested for impairment during the first quarter of fiscal year 2004 based upon the expected present value of future cash flows approach. As a result of this valuation process, as well as the application of the remaining provisions of FAS 142, we concluded that there was no impairment of goodwill related to any of our reporting units.

A summary of the changes in the carrying amount of goodwill by reportable segment for the period ended January 30, 2004 is as follows (in millions):

	Water & Sewer		Plumbing/ HVAC		MRO		Utilities		Electrical		Industrial PVF		All Other		Total
Balance at January 25, 2002	$	86.6	$	50.1	$	1.7	$	2.5	$	9.0	$	56.4	$	57.5	$	263.8
Goodwill acquired		—		—		—		56.3		—		—		—		56.3
Balance at January 31, 2003		86.6		50.1		1.7		58.8		9.0		56.4		57.5		320.1
Goodwill acquired		18.1		—		271.1		—		—		—		—		289.2
Finalization of purchase accounting		—		—		—		0.5		—		—		—		0.5
Balance at January 30, 2004	$	104.7	$	50.1	$	272.8	$	59.3	$	9.0	$	56.4	$	57.5	$	609.8

Prior to the adoption of FAS 142, we amortized goodwill over estimated useful lives ranging from 15 to 40 years. Had we accounted for goodwill consistent with the provisions of FAS 142 in prior periods, our net income, basic earnings per share and diluted earnings per share would have been affected as follows (in millions except per share data):

	Fiscal Years Ended
	2004		2003		2002
Net income, as reported	$	57.7	$	58.1	$	44.1
Add: goodwill amortization, net of tax		—		—		5.4
Adjusted net income	$	57.7	$	58.1	$	49.5
Basic earnings per share, as reported	$	2.52	$	2.50	$	1.90
Add: goodwill amortization, net of tax		—		—		0.23
Adjusted basic earnings per share	$	2.52	$	2.50	$	2.13
Diluted earnings per share, as reported	$	2.46	$	2.45	$	1.88
Add: goodwill amortization, net of tax		—		—		0.23
Adjusted diluted earnings per share	$	2.46	$	2.45	$	2.11

Note 5—Branch Closure and Consolidation Activities

In the normal course of business, we continually evaluate the operations and performance of our individual branches and identify branches for closure or consolidation. Prior to fiscal year 2002, we approved a plan to close and consolidate 43 branches, including bestroute as discussed in note 2 above, because these branches did not strategically fit into our core businesses and/or they did not perform to our expectations. During fiscal year 2003, we announced the closure of an additional seven branches along with a distribution center in Georgia.

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Effective January 1, 2003, we adopted FAS 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses the recognition, measurement, and reporting of costs that are associated with exit and disposal activities. FAS 146 was effective for exit or disposal activities initiated after December 31, 2002.

We closed seven underperforming Plumbing/HVAC branches and our Texas distribution center during January 2004. Approximately $2.2 million of selling, general and administrative expenses were recorded in connection with these closings.

In addition to our branch closure activities, we relocated our corporate offices during October 2003. As a result of this decision, we recorded approximately $2.0 million of selling, general and administrative expenses during fiscal year 2004 to establish an accrued liability for the fair value of the remaining lease payments due under the previous locations’ leases, net of estimated sublease income. The accrual is expected to be paid out substantially by April 2005.

The following is a summary of the expenses associated with our closure activities (in millions):

	Fiscal Years Ended
	2004		2003			2002
Cost of sales	$	—	$	0.4		$	1.7
Lease expense	$	4.0	$	—		$	1.6
Severance expense		—		0.1			0.5
Professional expense (contractual obligation)		—		—			0.7
Other		0.4		(0.3	)		0.9
Selling, general and administrative expenses	$	4.4	$	(0.2	)	$	3.7
Non-operating expenses	$	—	$	—		$	0.7

The cost of sales amounts represented inventory write-downs of products that will no longer be saleable following the closure of the branches. Severance expense included charges associated with payments owed to employees who have been or will be involuntarily terminated in connection with our branch closures. We have accrued the estimated lease obligations from the planned closure dates through the end of the contractual lease terms, net of any estimated sublease income. Other costs accrued for branches identified for closure were based on amounts due under agreements and/or based on estimates to terminate such agreements as well as certain executory expenses. Non-operating expenses primarily related to write-downs of assets for which we project the undiscounted cash flows to be less than the carrying amount of the related investment.

During the third quarter of fiscal year 2003, we reversed accruals totaling $0.5 million related to previous branch closures, mainly as a result of favorable settlements of lease obligations for less than originally anticipated.

The liability balance, included in other current liabilities, related to our closure activities as of January 30, 2004 and January 31, 2003 was as follows (in millions):

	Fiscal Years Ended
	2004			2003
Beginning balance	$	1.2		$	3.1
Provision (income)		4.4			(0.2	)
Cash expenditures:
Lease		(1.4	)		(1.1	)
Severance		—			(0.1	)
Other		(0.1	)		(0.3	)
Non-cash asset impairments		—			(0.2	)
Ending balance	$	4.1		$	1.2

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Note 6—Impairment of Long-Lived Assets

In the fourth quarter of fiscal year 2002, we recorded an impairment loss of $0.7 million related to goodwill of one entity in our Plumbing/HVAC segment.

Note 7—Total Debt

Total debt at January 30, 2004 and January 31, 2003 consists of the following (in millions):

	Fiscal Years Ended
	2004			2003
8.27% senior notes, due 2003	$	—		$	19.0
8.27% senior notes, due 2005		11.2			16.8
8.42% senior notes, due 2007		82.4			103.0
7.96% senior notes, due 2011		70.0			79.3
7.14% senior notes, due 2012		32.4			36.2
7.19% senior notes, due 2012		40.0			40.0
6.74% senior notes, due 2013		45.2			50.0
Unsecured bank notes under $290.0 revolving credit agreement, payable March 26, 2007, with an interest rate of 2.0% at January 30, 2004		100.0			72.4
Other notes payable with varying interest rates of 2.2% to 7.6% at January 30, 2004 with due dates from 2004 to 2010		32.1			25.2
Total debt		413.3			441.9
Less current portion		(44.6	)		(63.8	)
Total long-term debt	$	368.7		$	378.1

Unsecured Bank Notes and Line of Credit Agreements

On March 26, 2003, we replaced our existing $275.0 million revolving credit agreement, which was scheduled to mature on January 25, 2004, with a new $252.5 million revolving credit agreement (the “new credit agreement”), subject to borrowing limitations, which matures on March 26, 2007. On May 22, 2003, we amended the new credit agreement to increase maximum borrowing capacity from $252.5 million to $290.0 million effective June 9, 2003. The new credit agreement is unsecured and contains financial and other covenants, including limitations on dividends and maintenance of certain financial ratios. Interest is payable at market rates plus applicable margins and commitment fees ranging from 0.15% to 0.30% per annum are paid on the new credit agreement.

We have a commercial paper program backed by our new credit agreement. There were no commercial paper borrowings outstanding at January 30, 2004 or January 31, 2003.

In order to initially fund the acquisition of Century, we borrowed $250.0 million at 3.39% under an interim senior unsecured term loan agreement (the “term loan”). Effective December 19, 2003, the new credit agreement was amended to permit the new term loan borrowings and to make financial and other covenants essentially the same as those in the term loan agreement.

On January 28, 2004, we completed the sale of 6,900,000 shares of common stock in a public offering that generated net proceeds of $317.5 million. The proceeds we received were primarily used to fund the acquisition of Century. At January 30, 2004 there were no outstanding borrowings under the term loan agreement.

We had two short-term lines of credit with borrowing capacities of $10.0 million and $15.0 million, respectively, during fiscal year 2003. On July 25, 2002, both line of credit agreements were amended to extend the maturity dates to June 30, 2003 and the funds under the $15.0 million line were allocated to an operating lease agreement. On August 30, 2002, the operating lease agreement was amended to increase borrowing capacity from $15.0 million to $18.7 million. Under the terms of the operating lease agreement, we lease certain equipment, including vehicles, forklifts and trailers from various companies with funds provided by the $18.7 million line of credit. Monthly payments are made to the bank in accordance with the terms of each specific equipment lease. There was no remaining availability under the operating lease agreement at January 30, 2004. The $10.0 million line of credit was uncommitted and terminated when the new credit agreement was executed.

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Other Notes Payable

On June 22, 2001, we entered into an agreement (“lease facility agreement”) with Atlantic Financial Group, Ltd. (“AFG”), certain financial parties as lenders, and SunTrust Bank as agent (“SunTrust”) in which AFG and SunTrust agreed to fund up to $40.0 million for the acquisition and development of real property projects, including up to $25.0 million for our new corporate headquarters building in Orlando, Florida (“Orlando property”). Concurrently, we entered into an agreement with AFG, certain financial parties as lenders, and SunTrust as agent for the construction of a new multi-branch complex in Miami, Florida (“Miami property”). Pursuant to this agreement, AFG and SunTrust agreed to fund up to $15.0 million for the construction of this facility.

Orlando Property

Under the terms of the loan agreement (“Orlando loan agreement”) between AFG and SunTrust for the Orlando property, AFG was required to fund the lease facility through a nominal equity investment, with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Orlando loan agreement, we executed a master lease agreement (“Orlando lease agreement”) with AFG under which we would lease the Orlando property for a five-year term, including the construction period and a lease period. The Orlando lease agreement required interest only payments that began at the earlier of the completion of construction or eighteen months following the acquisition of the Orlando property. Payments were interest only at LIBOR rates plus applicable credit spreads.

On June 5, 2002, we terminated our Orlando loan agreement with AFG and SunTrust. Concurrently, we executed a new real estate term credit agreement (the “credit agreement”) with SunTrust, and the outstanding principal balance of $1.7 million under the Orlando loan agreement was paid off and rolled into the credit agreement. Under the terms of the credit agreement, SunTrust agreed to fund up to a maximum of $25.0 million for the acquisition and development of our new corporate headquarters building in Orlando, Florida. The credit agreement bears interest based on LIBOR plus applicable credit spreads and matures July 31, 2005. At January 30, 2004 and January 31, 2003, the total outstanding borrowings of $24.4 million and $10.1 million, respectively, under the credit agreement are recorded in long-term debt.

On March 16, 2004, we entered into sale-leaseback transaction in which we sold the Orlando property to a subsidiary of Wachovia Development Corporation and leased the property back for a period of 20 years. The lease expires on March 16, 2024, with five 5-year extensions exercisable at our option upon 12 months notice. We do not have an option to purchase the leased facility at the end of the minimum lease term and have not issued any residual value guarantee of the value of the leased facility. The lease is accounted for as an operating lease.

Miami Property

Under the terms of the loan agreement (“Miami loan agreement”) between AFG and SunTrust for the Miami property, AFG was required to fund the Miami property through an equity investment of approximately 20% with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Miami loan agreement, we executed a master lease agreement (the “Miami lease agreement”) with AFG. Under the terms of the Miami lease agreement, we leased the Miami property with rent payments beginning September 2003. Rent payments for the first four years were to be interest only at a rate based on LIBOR plus applicable credit spreads.

As the lease was treated as a capital lease the outstanding borrowings and related assets were reflected in long-term debt and property and equipment. At January 31, 2003, the total outstanding borrowings of $6.7 million under the Miami loan agreement were recorded in long-term debt. There were no outstanding borrowings under the Miami lease agreement at January 30, 2004 because on January 30, 2004, a subsidiary of SunTrust Bank agreed to purchase the property from AFG and to lease the property to us under a new 20-year term lease expiring in 2024, with 5 year extensions exercisable at our option upon 12 months notice. The future minimum lease payments under the lease are approximately $22.7 million. We do not have an option to purchase the leased facility at the end of the minimum lease term and have not issued any residual value guarantee of the value of the leased facility. The gain on the sale of approximately $0.1 million will be amortized over the minimum term of the lease, which has been accounted for as an operating lease.

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Other

Our debt agreements contain covenants that require that we, among other things, maintain certain financial ratios and minimum net worth levels. The covenants also restrict our activities regarding investments, liens, borrowing and leasing, and payment of dividends other than stock. Under the dividend covenant, approximately $155.4 million was available at January 30, 2004 for payment of dividends. At January 30, 2004, we were in compliance with all financial and other covenants.

Maturities of debt for each of the five years subsequent to January 30, 2004 and in the aggregate are as follows (in millions):

Fiscal Years Ending
2005	$	44.6
2006		68.8
2007		45.0
2008		151.1
2009		24.1
Thereafter		79.7
Total	$	413.3

Note 8—Income Taxes

The consolidated provision for income taxes consists of the following (in millions):

	Fiscal Years Ended
	2004		2003		2002
Currently payable:
Federal	$	26.5	$	23.3	$	17.8
State		2.7		2.1		2.3
		29.2		25.4		20.1
Deferred:
Federal		6.9		13.2		11.0
State		0.7		1.5		(0.5	)
		7.6		14.7		10.5
Income taxes	$	36.8	$	40.1	$	30.6

The following is a reconciliation of tax computed at the statutory federal rate to the income tax expense in the consolidated statements of income (dollars in millions):

	Fiscal Years Ended
	2004				2003				2002
	Amount		%		Amount		%		Amount		%
Tax computed at statutory federal rate	$	33.1	35.0	%	$	34.4	35.0	%	$	26.1	35.0	%
Effect of:
State and local income tax, net of federal income tax benefit		2.2	2.3	%		2.3	2.4	%		1.5	2.0	%
Nondeductible expenses		0.9	1.0	%		1.3	1.3	%		2.4	3.1	%
Other, net		0.6	0.6	%		2.1	2.2	%		0.6	0.9	%
Income taxes	$	36.8	38.9	%	$	40.1	40.9	%	$	30.6	41.0	%

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The components of deferred tax assets and liabilities at January 30, 2004 and January 31, 2003 are as follows (in millions):

	Fiscal Years Ended
	2004			2003
Deferred tax assets:
Allowance for doubtful accounts	$	3.1		$	1.9
Inventories		7.4			6.2
Accrued vacation		0.3			2.5
Other accrued liabilities		7.2			4.5
State net operating losses		2.5			4.7
Deferred compensation		5.3			4.7
Gross deferred tax assets		25.8			24.5
Valuation allowance		(0.6	)		(0.2	)
Total deferred tax assets		25.2			24.3
Deferred tax liabilities:
Capitalized software development costs		2.9			2.7
Goodwill and intangible assets		33.2			16.6
Deferred revenue		11.6			9.7
Prepaid expenses and other current assets		11.3			9.4
Property and equipment		1.4			0.1
Other		0.8			0.1
Total deferred tax liabilities		61.2			38.6
Net deferred tax liabilities	$	(36.0	)	$	(14.3	)

At January 30, 2004, we had federal and state net operating loss carryforwards of $2.5 million, which expire between 2012 and 2024. A valuation allowance has been provided on certain of the state net operating losses at January 30, 2004 as full realization of these assets is not considered more likely than not.

Note 9—Employee Benefit Plans

Profit Sharing Plan

We have a 401(k) profit sharing plan, which provides benefits for substantially all of our employees who meet minimum age and length of service requirements. The maximum percentage of each eligible employee’s contribution to be matched by the Company was increased from 5% to 6% on February 1, 2001. Additional annual contributions may be made at the discretion of the board of directors. Amounts charged to expense for this plan totaled $4.6 million, $4.9 million and $5.0 million in fiscal years 2004, 2003 and 2002, respectively.

Bonus Plans

We have bonus plans, based on growth, profitability formulas, and return on assets, which provide incentive compensation for key officers and employees. Amounts charged to expense for bonuses to executive officers totaled $3.4 million, $2.8 million and $1.3 million in fiscal years 2004, 2003 and 2002, respectively.

Deferred Executive Compensation Plan

A non-qualified executive deferred compensation plan established on March 1, 2002 allows eligible employees to defer up to 90.0% of their cash compensation through the plan. We do not match employees’ contributions under the current plan.

Supplemental Executive Retirement Plan

We have a defined benefit retirement plan, which provides supplemental benefits for certain key executive officers, generally for periods up to 15 years, upon retirement, disability, or death. The obligations are not funded separately from our general assets. At January 30, 2004 and January 30, 2003, the liability under the plan, as determined in accordance with FAS 87, Employers’ Accounting for Pensions, was $5.7 million and $5.1 million, respectively. The liability in each year is recorded in other noncurrent liabilities. Amounts charged to expense under the plan totaled $0.9 million, $0.6 million and $0.5 million in fiscal years 2004, 2003 and 2002, respectively.

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Note 10—Commitments and Contingencies

Lease Commitments

We occupy certain facilities and operate certain equipment and vehicles under leases that expire at various dates through the year 2024. In addition to minimum rentals, there are certain executory costs such as real estate taxes, insurance, and common area maintenance on most of our facility leases. Rent expense under these leases totaled $57.3 million, $51.5 million and $51.6 million in fiscal years 2004, 2003 and 2002, respectively. Future minimum annual rental payments under non-cancelable operating leases as of January 30, 2004 are as follows (in millions):

Fiscal Years Ending
2005	$	52.7
2006		41.4
2007		29.8
2008		21.4
2009		10.8
Thereafter		25.3
Total	$	181.4

Certain operating leases for vehicles and equipment expiring in fiscal year 2009 contain residual value guarantee provisions and other guarantees which would become due in the event of a default under the operating lease agreement, or at the expiration of the operating lease agreement if the fair value of the leased properties is less than the guaranteed residual value. The maximum amount of our guarantee obligation at January 30, 2004 is approximately $3.0 million.

As indicated in Note 7 above, we entered into an agreement to lease our newly constructed multi-branch complex in Miami, Florida from AFG beginning in September 2003. As the lease was treated as a capital lease, the outstanding borrowings and related assets were reflected in our long-term debt and property and equipment. On January 30, 2004, a subsidiary of SunTrust Bank agreed to purchase the property from AFG and to lease the property to us under a new 20-year term lease expiring in 2024, with 5-year extensions exercisable at our option upon 12 months notice. The future minimum lease payments under the lease are approximately $22.7 million. We do not have an option to purchase the leased facility at the end of the minimum lease term and have not issued any residual value guarantee of the value of the leased facility. As such, the gain on the sale of approximately $0.1 million will be amortized over the minimum term of the lease, which has been accounted for as an operating lease.

Legal Matters

We are involved in various legal proceedings arising in the normal course of our business. In our opinion, none of the proceedings are material in relation to our consolidated operations, cash flows, or financial position.

Note 11—Stock Option Plans

Stock Plans

The 1997 Executive Stock Plan (the “1997 Stock Plan”) is our only currently active stock plan at January 30, 2004. The Directors’ Stock Option Plan established for non-employee board of directors members became inactive in May 2003. The 1997 Stock Plan authorizes the granting of both incentive and non-incentive stock options for an aggregate of 3,250,000 shares of common stock, to key employees. Options are granted at prices not less than the market value on the date of grant, and the maximum term of an option may not exceed ten years. Prices for incentive stock options granted to employees who own 10% or more of our stock are at least 110% of market value at date of grant. Options may be granted from time to time until December 31, 2006 with respect to the 1997 Stock Plan. An option becomes exercisable at such times and in such installments as set forth by the compensation committee of the board of directors (the “compensation committee”). Under the 1997 Stock Plan, we can grant up to 1,625,000 shares of the authorized options as restricted stock to certain key employees. These shares are subject to certain transfer restrictions, and vesting may be dependent upon continued employment, the satisfaction of performance objectives, or both.

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In May 2002, the shareholders approved an amendment to the 1997 Stock Plan allowing the compensation committee to make grants of performance-based restricted shares to senior executives. Performance-based shares are used as an incentive to increase shareholder returns with actual awards based on various criteria, including increases in the price of our common shares, earnings per share, shareholder value and net income. Compensation expense for the number of shares issued is recognized over the vesting period. On August 21, 2002, March 18, 2003, and September 15, 2003, target awards of 125,000 shares, 35,000 shares, and 15,000 shares, respectively, were made to senior executives. These shares are to be issued in five separate tranches if the price of our common shares achieves certain price levels. During fiscal year 2004, 88,000 shares were issued with a market value at the date of grant of $3.8 million. The market value of the restricted stock at the date of grant was recorded as unearned compensation, a component of shareholders’ equity, and is being charged to expense over the respective vesting periods. In fiscal year 2004 this expense totaled $0.2 million. In fiscal year 2003, none of the stock price achievement levels had been attained and accordingly, no restricted shares were issued to participants.

During fiscal year 2002, we granted certain senior executives 410,000 restricted shares in accordance with a stock performance award under the 1997 Stock Plan. The shares were awarded in five separate tranches as the price of our common shares achieved certain levels as determined by the compensation committee. At January 25, 2002, all such stock price achievement levels had been met. The shares vest five years from the award date, and are subject to certain other vesting and forfeiture provisions contained in the 1997 Stock Plan. The market value of the restricted shares was $10.7 million at the date of the grant and was recorded as unearned compensation, a component of shareholders’ equity. This amount is being charged to expense over the respective vesting period and totaled $2.2 million, $2.2 million and $0.7 million in fiscal years 2004, 2003 and 2002, respectively.

During fiscal year 2003 and fiscal year 2002, we granted certain employees 20,000 shares and 11,000 shares of restricted stock, with market values at the date of grant of $0.6 million and $0.3 million, respectively. There were no non-performance shares granted to employees during fiscal year 2004. In fiscal years 2004, 2003 and 2002, we cancelled 29,888 shares, 29,888 shares and 84,709 shares, respectively, of the restricted shares granted, with market values at the date of grant of $0.5 million, $0.5 million and $1.5 million, respectively, according to the provisions of the grant. The market value of the restricted stock at the date of grant was recorded as unearned compensation, a component of shareholders’ equity, and is being charged to expense over the respective vesting periods. In fiscal years 2004, 2003 and 2002, this expense totaled $0.7 million, $0.7 million and $0.8 million, respectively.

The 1997 Stock Plan also permits the granting of stock appreciation rights (“SARs”) to holders of options. Such rights permit the option holder to surrender an exercisable option, in whole or in part, on any date that the fair market value of our common stock exceeds the option price for the stock and receive payment in common stock or, if the board of directors approves, in cash or any combination of cash and common stock. Such payment would be equal to the excess of the fair market value of the shares under the surrendered option over the option price for such shares. The change in value of SARs would be reflected in income based upon the market value of the stock. No SARs have been granted or issued through January 30, 2004.

Stock Options

Stock options and restricted stock activity and information about the 1997 Stock Plan and the Directors’ Stock Plan are follows:

Stock Options	Shares Subject To Option		Weighted- Average Option Price
Balance at January 26, 2001 (1,098,789 shares exercisable)	1,123,889		$	21.21
Granted	167,500			20.71
Exercised	(255,425	)		14.63
Cancelled	(80,600	)		26.91
Balance at January 25, 2002 (695,664 shares exercisable)	955,364			22.40
Granted	672,200			33.91
Exercised	(232,387	)		20.97
Cancelled	(30,400	)		31.40
Balance at January 31, 2003 (544,277 shares exercisable)	1,364,777			28.11
Granted	661,150			34.68
Exercised	(199,348	)		23.44
Cancelled	(40,400	)		32.07
Balance at January 30, 2004 (704,729 shares exercisable)	1,786,179		$	30.85

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Restricted stock	Shares Outstanding		Shares Available for Issuance
Balance at January 26, 2001	342,521		518,979
Granted	421,000		(421,000	)
Cancelled	(84,709	)	84,709
Vested	(36,000	)	—
Balance at January 25, 2002	642,812		182,688
Additional authorized	—		250,000
Shares transferred to stock option pool	—		(288,900	)
Shares assigned but not issued	—		(125,000	)
Granted	20,000		(20,000	)
Cancelled	(29,888	)	29,888
Vested	—		—
Balance at January 31, 2003	632,924		28,676
Additional authorized	—		500,000
Shares transferred to stock option pool	—		(118,750	)
Issuance of assigned shares	—		38,000
Granted	88,000		(88,000	)
Cancelled	(29,888	)	29,888
Vested	(15,000	)	—
Balance at January 30, 2004	676,036		389,814

Outstanding options at January 30, 2004 have expiration dates ranging from August 17, 2004 to January 5, 2014.

The following table summarizes information about stock options outstanding at January 30, 2004:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Number Exercisable	Weighted- Average Exercise Price
$12.83–$18.75	298,068	5.3	$	16.85	280,568	$	16.95
21.00– 28.75	117,941	6.3		24.35	98,441		24.79
30.90– 36.05	1,236,670	8.6		34.05	321,720		33.58
38.01– 49.65	133,500	8.2		38.17	4,000		39.33
$12.83–$49.65	1,786,179	7.8	$	30.85	704,729	$	25.76

Stock-Based Compensation

We account for our stock option plans using the intrinsic value based method of accounting, under which no compensation expense has been recognized for stock option awards granted at fair market value. For purposes of pro forma disclosures under FAS 123, as amended by FAS 148, the estimated fair value of the stock options is amortized to compensation expense over the options’ vesting period. Pro forma information relating to the fair value of stock-based compensation is presented in Note 1 under Stock-Based Compensation.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for grants:

	Fiscal Years Ended
	2004		2003		2002
Risk-free interest rates	3.1	%	4.6	%	4.7	%
Dividend yield	1.1	%	1.1	%	1.5	%
Expected volatility	45.1	%	40.3	%	38.3	%
Expected stock option lives	5		8		8

The weighted average estimated fair value of employee stock options granted during 2004, 2003 and 2002 was $13.61, $15.94 and $9.16 per share, respectively. The pro forma calculations above do not include the effects of options granted prior to fiscal year 1996.

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The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option-pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions could materially affect the fair value estimate, in our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

Note 12—Capital Stock

On January 28, 2004, we completed the sale of 6,900,000 shares of common stock in a public offering that generated net proceeds of $317.5 million. The proceeds were primarily used to fund the acquisition of Century and to repay indebtedness under our revolving credit agreement.

Treasury Stock

On March 15, 1999, our board of directors authorized the repurchase of up to 2,500,000 shares of our outstanding common stock to be used for general corporate purposes. Since March 15, 1999, we have repurchased 1,831,400 shares at an average price of $22.91 per share, of which 258,600 shares at an average price of $23.39 were purchased in fiscal year 2004, 257,000 shares at an average price of $27.78 per share were repurchased in fiscal year 2003 and 394,700 shares at an average price of $19.10 per share were repurchased in fiscal year 2002.

Preferred Stock

Our board of directors established Series A Junior Participating Preferred Stock (“Series A Stock”) consisting of 75,000 shares. Each share of Series A Stock will be entitled to 1,000 votes on all matters submitted to a vote of shareholders. Series A Stock is not redeemable or convertible into any other security. Each share of Series A Stock shall have a minimum cumulative preferential quarterly dividend rate equal to the greater of $1.00 per share or 1,000 times the aggregate per share amount of the dividend declared on common stock in the related quarter. In the event of liquidation, shares of Series A Stock will be entitled to the greater of $1,000 per share plus any accrued and unpaid dividends or 1,000 times the payment to be made per share of common stock. No shares of Series A Stock are presently outstanding, and no shares are expected to be issued except in connection with the shareholder rights plan referred to below.

We have a shareholder rights plan. Under the plan, we distributed to shareholders a dividend of one right per share of our common stock. When exercisable, each right will permit the holder to purchase one one-thousandth of a share (a “unit”) of Series A Stock at a purchase price of $200 per unit from the Company. The rights generally become exercisable if a person or group acquires 15% or more of our common stock or commences a tender offer that could result in such person or group owning 15% or more of our common stock. If certain subsequent events occur after the rights first become exercisable, the rights may become exercisable for the purchase of shares of our common stock, or of an acquiring company, having a value equal to two times the exercise price of the right. In general, the rights may be redeemed by the Company at $0.01 per right at any time prior to the latter of (a) ten days after 20% or more of our stock is acquired by a person or group and (b) the first date of a public announcement that a person or group has acquired 15% or more of our stock. The rights expire on June 2, 2008 unless terminated earlier in accordance with the shareholder rights plan.

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Note 13—Earnings Per Share

Basic earnings per share are calculated by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share includes the additional dilutive effect of our potential common shares, which includes certain employee and director stock options, unvested shares of restricted stock and stock rights issued in connection with the bestroute acquisition in fiscal year 2001. The following summarizes the incremental shares from these potentially dilutive common shares, calculated using the treasury method, as included in the calculation of diluted weighted-average shares:

	Fiscal Years Ended
	2004	2003	2002
Basic weighted-average number of shares	22,927,656	23,212,392	23,175,025
Incremental shares resulting from:
Stock options	187,787	153,011	96,062
Restricted stock	379,722	299,208	84,986
Stock rights issued in connection with bestroute acquisition	—	—	67,550
Diluted weighted-average number of shares	23,495,165	23,664,611	23,423,623

Excluded from the above computations of diluted weighted-average number of shares were unvested shares of restricted common stock of 10,000 shares and 82,000 shares at average prices of $31.35 and $31.27 per share for fiscal years 2003 and 2002, respectively, because their effect would have been anti-dilutive. No unvested shares of restricted common stock were considered to have an anti-dilutive effect for fiscal year 2004. Options to purchase 183,820 shares, 821,020 shares and 280,114 shares of common stock at average exercise prices of $37.50, $33.95 and $32.34 per share for fiscal years 2004, 2003 and 2002, respectively, were excluded from the above computations of diluted weighted-average number of shares because their effect would have been anti-dilutive.

Note 14—Supplemental Cash Flows

Additional supplemental information related to the consolidated statements of cash flows is as follows (in millions):

	Fiscal Years Ended
	2004		2003		2002
Income taxes paid	$	13.1	$	10.3	$	36.6
Interest paid		31.3		29.9		35.8
Property acquired with debt		21.7		17.9		6.9
Debt paid with sale-leaseback proceeds		13.8		—		—
Note receivable from sale of investment in affiliated entity		—		0.3		—

During fiscal years 2004, 2003 and 2002, we awarded certain key employees 88,000 restricted shares, 20,000 restricted shares and 421,000 restricted shares of our common stock, respectively, in accordance with the 1997 Executive Stock Plan.

During fiscal year 2002, we retired 342,854 shares of our common stock previously held in treasury. Dividends declared but not paid totaled $3.1 million and $2.4 million at January 30, 2004 and January 31, 2003, respectively. See note 2 for the net assets acquired and liabilities assumed for acquisitions recorded using the purchase method of accounting.

Note 15—Related Party Transactions

We lease several buildings and properties from certain related parties, including our chairman of the board, two other members of the board of directors, and an executive officer. The leases generally provide that all expenses related to the properties are to be paid by us. Rents paid under these leases totaled $2.5 million, $2.1 million and $2.1 million in fiscal years 2004, 2003 and 2002, respectively.

We made donations totaling $0.3 million, $0.9 million and $0.1 million to Hughes Supply Foundation, Inc. (“HSF”), a not-for-profit charitable organization, in fiscal years 2004, 2003 and 2002, respectively. The board of directors of HSF is comprised of certain executives of our company, including our chairman of the board, president and chief executive officer, and executive vice president and chief financial officer.

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Note 16—Segment Information

During the third quarter of fiscal year 2004, we revised our reporting structure to provide additional disclosure by realigning our previously reported operating segments, Electrical/Plumbing, Industrial PVF, and Water & Sewer/Building Materials on a more disaggregated basis by product line into six operating segments and an All Other category. The revised operating segments are: Water & Sewer, Plumbing/HVAC, MRO, Utilities, Electrical and Industrial PVF. The All Other category includes our Building Materials, Fire Protection, and Mechanical Industrial product lines. The Industrial PVF segment remains unchanged.

The Corporate category includes corporate level expenses not allocated to our operating segments. Inter-segment sales are excluded from net sales presented for each segment. Operating income for each segment includes certain corporate expense allocations for employee benefits, corporate overhead expenses, data processing expenses, and property/casualty insurance. These allocations are based on consumption or at a standard rate determined by management.

In connection with the change of our reporting structure mentioned above, we changed our method of allocating corporate overhead expenses to the segments. All prior period segment results have been reclassified to reflect these changes.

The following is a description of our operating segments:

Water & Sewer

The Water & Sewer segment provides a complete line of water, sewer and storm-drain products to serve the needs of both contractors and municipalities in all aspects of the water and wastewater industries. Our waterline products transmit potable and non-potable water from the source to treatment plants, storage towers and pumping stations and ultimately to homes and businesses. Also included in this product category is our concrete business, which complements our Water & Sewer business by manufacturing prefabricated concrete vaults used for sewer and storm drain applications

Plumbing/HVAC

The Plumbing/HVAC segment includes both our plumbing and HVAC products. Our plumbing products are sold primarily to contractors and homebuilders for bathroom and kitchen installation. Our HVAC business distributes air conditioning and heating equipment to contractors for the installation and repair of central air conditioners, furnaces and refrigeration systems.

MRO

The MRO segment serves the multi-family housing market through customers such as apartment property management companies. The products in the MRO segment include the items needed to maintain an apartment unit or complex in good working condition, such as plumbing, electrical, appliances/parts, hardware, door/window parts, HVAC equipment/parts and janitorial supplies.

Utilities

The Utilities segment distributes products that electric utilities need to bring power from the generating plants through the transmission and distribution lines directly to the meters. In addition, the Utilities segment offers supply chain management services, including warehouse integration and outsourcing, meter testing and repair and product assembly. These products and services allow us to provide the electric utility companies with the products they need in order to keep their systems operational.

Electrical

The electrical segment serves the commercial, residential and industrial markets with customers including electrical contractors, industrial companies, original equipment manufacturers (“OEMs”) and commercial businesses. The products and services in our Electrical product line include wire management products, electrical distribution equipment, wire and cable, automation equipment, tools and fasteners, light bulbs, light fixtures, motor controls, energy products, wiring devices, data/communications products and storeroom/job trailer management.

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Industrial PVF

The Industrial PVF segment distributes specialty stainless and high nickel alloy industrial PVF products for industrial, mechanical and specialty uses. The segment primarily serves industrial customers such as petrochemical, food and beverage, pulp and paper, mining, marine and pharmaceutical customers, industrial and mechanical contractors, fabricators, wholesale distributors, exporters and OEMs.

All Other

The “All Other” category includes our Building Materials, Fire Protection, and Mechanical Industrial businesses. In addition, the All Other category included revenues and expenses related to bestroute, an e-commerce company for which operations were discontinued during fiscal year 2002.

The Building Materials business distributes products including concrete and masonry supplies and accessories, lumber, bridge rail, overhang brackets, erosion control products, bearing pads, tilt-up bracing rental, lifting and bracing inserts, sealants, waterproofing and fireproofing materials, commercial washroom specialties, tools and accessories primarily to the commercial, industrial and public infrastructure markets, with customers such as general contractors and subcontractors.

The Fire Protection branches and fabrication facilities are located strategically within our large network of Water & Sewer branches, giving our customers, contractors and builders in the commercial, residential and industrial markets, access to the materials for both aboveground and underground applications. Products and services provided include sprinkler heads and devices, steel pipe and fittings, backflow prevention devices, valves, hydrants, air compressors and fabrication.

The Mechanical Industrial business offers a complete inventory of valves, actuators and accessories in addition to a variety of consulting services and serves the commercial and industrial markets, with customers including fabricators, OEMs, industrial subcontractors, mechanical contractors, exporters, purchasing agents, maintenance departments, engineering departments and planners.

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The following table presents net sales and other financial information by segment for fiscal years 2004, 2003 and 2002, as reclassified for the changes discussed above (in millions):

	Water & Sewer		Plumbing/ HVAC			MRO		Utilities			Electrical		Industrial PVF			All Other		Corporate			Total
Net sales
2004	$	922.4	$	842.1		$	158.7	$	363.8		$	362.8	$	283.2		$	320.4	$	—		$	3,253.4
2003		877.2		826.9			118.9		248.3			375.5		313.9			305.6		—			3,066.3
2002		833.1		855.3			110.5		144.9			430.6		330.4			332.9		—			3,037.7
Depreciation and amortization
2004	$	3.2	$	3.3		$	1.0	$	1.5		$	1.0	$	0.7		$	1.9	$	8.6		$	21.2
2003		3.1		3.7			0.4		0.9			1.3		0.8			2.4		7.9			20.5
2002		6.8		6.4			0.7		0.4			2.0		2.8			4.9		7.1			31.1
Provision for doubtful accounts
2004	$	1.8	$	0.8		$	0.4	$	(0.9	)	$	0.8	$	0.6		$	1.1	$	—		$	4.6
2003		3.6		2.5			0.1		—			1.3		0.4			1.2		—			9.1
2002		3.1		6.3			—		—			0.7		0.3			0.3		0.4			11.1
Operating income (loss)
2004	$	45.1	$	8.4		$	10.1	$	13.7		$	8.2	$	23.0		$	14.2	$	—		$	122.7
2003		40.4		14.0			8.8		10.2			8.1		31.7			8.0		—			121.2
2002		38.9		(2.8	)		5.8		7.2			12.8		29.1			10.3		—			101.3
Interest and other income (expense)
2004	$	2.7	$	2.2		$	0.2	$	—		$	0.6	$	(0.1	)	$	0.7	$	0.1		$	6.4
2003		2.8		2.0			0.3		0.1			0.8		(0.1	)		1.4		—			7.3
2002		3.2		3.1			0.2		0.1			0.7		—			1.1		0.9			9.3
Interest expense
2004	$	—	$	—		$	—	$	—		$	—	$	—		$	0.1	$	34.5		$	34.6
2003		—		—			—		—			—		—			0.1		30.2			30.3
2002		—		—			—		—			—		—			—		35.9			35.9
Income (loss) before income taxes
2004	$	47.8	$	10.7		$	10.3	$	13.7		$	8.8	$	22.9		$	14.7	$	(34.4	)	$	94.5
2003		43.2		16.0			9.1		10.2			8.9		31.6			9.4		(30.2	)		98.2
2002		42.1		(0.7	)		6.0		7.4			13.5		29.1			11.2		(33.9	)		74.7
Capital expenditures
2004	$	2.5	$	1.2		$	1.8	$	0.1		$	0.1	$	0.3		$	0.3	$	9.6		$	15.9
2003		2.3		0.8			0.1		0.3			0.1		0.5			0.7		10.5			15.3
2002		3.2		1.7			0.6		0.2			0.3		0.7			2.8		7.4			16.9

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The following table includes our investment in assets (accounts receivable less allowance for doubtful accounts, inventories and goodwill) and accounts payable for each segment at January 30, 2004 and January 31, 2003 (in millions):

	Fiscal Year 2004
	Accounts Receivable		Inventories		Goodwill		Segment Assets		Accounts Payable
Water & Sewer	$	161.4	$	92.8	$	104.7	$	358.9	$	78.8
Plumbing/HVAC		106.8		114.4		50.1		271.3		79.1
MRO		48.7		52.6		272.8		374.1		16.4
Utilities		30.9		46.8		59.3		137.0		22.2
Electrical		51.6		28.4		9.0		89.0		28.1
Industrial PVF		40.5		103.3		56.4		200.2		27.8
All Other		53.4		28.7		57.5		139.6		18.8
Corporate		—		—		—		—		37.1
	$	493.3	$	467.0	$	609.8		1,570.1	$	308.3
Cash and cash equivalents								8.3
Deferred income taxes								19.4
Other current assets								53.0
Property and equipment								161.8
Other assets								68.7
Total Assets							$	1,881.3
	Fiscal Year 2003
	Accounts Receivable		Inventories		Goodwill		Segment Assets		Accounts Payable
Water & Sewer	$	133.8	$	81.5	$	86.6	$	301.9	$	50.5
Plumbing/HVAC		100.9		116.9		50.1		267.9		57.0
MRO		13.1		16.8		1.7		31.6		3.6
Utilities		30.6		42.1		58.8		131.5		22.9
Electrical		57.4		37.5		9.0		103.9		28.1
Industrial PVF		41.2		117.3		56.4		214.9		19.1
All Other		46.1		26.4		57.5		130.0		17.5
Corporate		—		—		—		—		31.3
	$	423.1	$	438.5	$	320.1	$	1,181.7	$	230.0
Cash and cash equivalents								1.7
Deferred income taxes								19.7
Other current assets								47.1
Property and equipment								157.8
Other assets								26.9
Total Assets							$	1,434.9

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Note 17—Quarterly Financial Information (Unaudited)

The following is a summary of the unaudited results of operations for each quarter in fiscal years 2004 and 2003 (in millions except per share data):

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
Fiscal 2004
Net sales	$	782.8	$	815.1	$	859.5	$	796.0	$	3,253.4
Gross margin		175.4		184.5		193.5		180.3		733.7
Net income		11.8		18.7		17.8		9.4		57.7
Earnings per share:
Basic	$	0.52	$	0.82	$	0.78	$	0.41	$	2.52
Diluted		0.51		0.80		0.76		0.39		2.46
Average shares outstanding:
Basic		22.8		22.8		22.9		23.2		22.9
Diluted		23.1		23.3		23.4		24.0		23.5
Dividends per share	$	0.100	$	0.100	$	0.100	$	0.100	$	0.400
Fiscal 2003
Net sales	$	790.0	$	774.7	$	804.0	$	697.6	$	3,066.3
Gross margin		181.1		180.6		188.4		159.6		709.7
Net income		12.4		18.5		19.8		7.4		58.1
Earnings per share:
Basic	$	0.54	$	0.80	$	0.85	$	0.32	$	2.50
Diluted		0.52		0.78		0.84		0.31		2.45
Average shares outstanding:
Basic		23.2		23.3		23.3		23.2		23.2
Diluted		23.6		23.8		23.6		23.5		23.7
Dividends per share	$	0.085	$	0.085	$	0.085	$	0.100	$	0.355

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Report of Independent Registered Certified Public Accounting Firm

To the Shareholders and Board of Directors of Hughes Supply, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Hughes Supply, Inc. and its subsidiaries at January 30, 2004 and January 31, 2003, and the results of their operations and their cash flows for each of the three years in the period ended January 30, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those situations require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 4 to the consolidated financial statements, effective January 26, 2002, the Company changed its method of accounting for goodwill and certain intangible assets as a result of adopting Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orlando, Florida

April 14, 2004

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Management’s Responsibility for Financial Statements

The consolidated financial statements and related information included in this Annual Report were prepared in conformity with accounting principles generally accepted in the United States of America. Management is responsible for the integrity of the financial statements and for the related information. Management has included in the Company’s consolidated financial statements amounts that are based on estimates and judgments, which it believes are reasonable under the circumstances. The responsibility of the Company’s independent accountants is to express an opinion on the fairness of the consolidated financial statements. Their opinion is based on an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) as further described in their report.

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

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report (the page number references for the information listed under this Item 15(a) relate to the Company’s Form 10-K for the year ended January 30, 2004 as originally filed on April 14, 2004):

(1) Financial Statements

The consolidated financial statements of the Company and its subsidiaries are included in Item 8 on pages 35 – 65.

(2) Financial Statement Schedules

The financial statement schedules are included on page 72. All other schedules have been omitted as they are either not applicable, not required or the information is given in the financial statements or related notes thereto.

(3) Exhibits Filed

A substantial number of the exhibits listed below in the index to the exhibits on page 68 – 71 are indicated as having been previously filed as exhibits to other reports under the Securities Exchange Act of 1934, as amended, or as exhibits to registration statements under the Securities Act of 1933, as amended. Such previously filed exhibits are incorporated by reference in this Form 10-K. Exhibits not incorporated by reference herein are filed with this report.

(b) Reports on Form 8-K

Hughes Supply filed or furnished the following current reports on Form 8-K during the quarter ended January 30, 2004:

On November 25, 2003, Hughes Supply, Inc. furnished a Current Report on Form 8-K dated November 25, 2003 that included information relating to our third quarter operating results.

On November 26, 2003, Hughes Supply, Inc. filed a Current Report on Form 8-K dated November 26, 2003 that included information relating to the announcement of our definitive all cash merger agreement with Century Maintenance Supply, Inc.

On December 18, 2003, Hughes Supply, Inc. filed a Current Report on Form 8-K dated December 17, 2003 that included information relating to our revised segment presentation.

On January 5, 2004, Hughes Supply, Inc. filed a Current Report on Form 8-K dated December 19, 2003 that included information relating to our acquisition of Century Maintenance Supply, Inc.

On January 8, 2004, Hughes Supply, Inc. filed an amendment to its Current Report on Form 8-K dated December 19, 2003 that included certain financial information relating to Century Maintenance Supply, Inc.

On January 23, 2004, Hughes Supply, Inc. filed a Current Report on Form 8-K dated January 22, 2004 that included information relating to the pricing and offering for sale of shares of our common stock.

On February 2, 2004, Hughes Supply, Inc. furnished a Current Report on Form 8-K dated January 30, 2004 that included information relating to investor presentation materials used in meetings related to the sale of shares of our common stock.

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INDEX TO EXHIBITS

(Item 14(a)3 – Exhibits Required by Item 601

of Regulation S-K and Additional Exhibits)

(2) Plan of acquisition.

2.1 Agreement and Plan of Merger dated as of November 26, 2003, among Hughes Supply, Inc., MRO Merger Corp., Century Maintenance Supply, Inc., FS Equity Partners IV, L.P., Century Airconditioning Holdings, Inc., and Dennis C. Bearden, incorporated by reference to Exhibit 2.1 Form 8-K filed on January 5, 2004 (Commission File No. 001-08772).

2.2 First Amendment to Agreement and Plan of Merger, incorporated by reference to Exhibit 2.2 to Form 8-K filed on January 5, 2004 (Commission File No. 001-08772).

(3) Articles of incorporation and by-laws.

3.1 Restated Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended April 30, 1997 (Commission File No. 001-08772).

3.2 Amended and Restated By-Laws of Hughes Supply, Inc. (As Amended and Restated on May 20, 2003), incorporated by reference to Exhibit 3.2 to Form 10-Q for the quarter ended May 2, 2003 (Commission File No. 001-08772).

3.3 Form of Articles of Amendment of series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 99.3 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772).

(4) Instruments defining the rights of security holders, including indentures.

4.1 Form of Common Stock Certificate representing shares of the Registrant’s common stock, $1.00 par value, incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772).

4.2 Rights Agreement dated as of May 20, 1998 between Hughes Supply, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772).

(10) Material contracts.

10.1 Amended and restated lease agreements with Hughes, Inc. dated April 1, 2003, incorporated by reference to Exhibit 10.1 to Form 10Q for the quarter ended May 2, 2003 (Commission File No. 001-08772):

Sub-Item	Property
(a)	521 West Central Blvd, Orlando, FL
(b)	1010 Grand Avenue, Orlando, FL
(c)	2018 Lucerne Terrace, Orlando, FL
(d)	335 N. Ingraham Avenue, Lakeland, FL
(e)	951 Pierce Street, Clearwater, FL
(f)	903 Brentwood Drive Daytona, FL
(g)	401 Angle Road, Fort Pierce, FL
(h)	576 NE 23rd Street, Gainesville, FL
(i)	2525 12th Street, Sarasota, FL
(j)	341 South Seaboard Avenue, Venice, FL
(k)	2439 7th Street SW, Winter Haven, FL

10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended March 12, 1996 incorporated by reference to Exhibit to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772).

10.3 Real Estate Term Credit Agreement, dated as of May 31, 2002, by and among Hughes Supply Shared Services, Inc. as borrower, Hughes Supply, Inc. as parent, and SunTrust Bank as lender incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended May 3, 2002 (Commission File No. 001-08772).

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10.3 (a) First Amendment to Real Estate Term Credit Agreement, dated as of March 26, 2003, by and among Hughes Supply Shared Services, Inc. as borrower, Hughes Supply, Inc. as parent and SunTrust Bank as lender, incorporated by reference to Exhibit 10(a) to Form 10Q for quarter ended August 1, 2003 (Commission File No. 001-08772).

10.4 Hughes Supply, Inc. Amended and Restated Directors’ Stock Option Plan with amendments approved through May 21, 2002, incorporated by reference to Exhibit 10.4 to form 10-K for the fiscal year ended January 31, 2003 (Commission File No. 001-08772).

10.5 Hughes Supply, Inc. Amended Senior Executives’ Long-Term Incentive Bonus Plan, adopted January 25, 1996, incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772).

10.6 Note Purchase Agreement, dated as of August 28, 1997, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772).

10.7 Hughes Supply, Inc. 1997 Executive Stock Plan, Amended and Restated Plan (as amended on April 9, 2003), incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended May 2, 2003 (Commission File No. 001-08772).

10.8 Note Purchase Agreement, dated as of May 29, 1996, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772).

10.9 Note Purchase Agreement, dated as of May 5, 1998, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended April 30, 1998 (Commission File No. 001-08772).

10.10 Revolving Credit Agreement dated as of March 26, 2003 amount Hughes Supply, Inc. as borrower, and the Lenders from time to time party hereto and SunTrust Bank as administrative agent, incorporated by reference to Exhibit 10.10 to Form 10-K for the fiscal year ended January 31, 2003 (Commission File No. 001-08772).

10.10 (a) Lender Joinder Agreement dated May 22, 2003 executed by BNP PARIBAS in favor of Hughes Supply, Inc., the borrower, and SunTrust Bank, as administrative agent, for the lenders from time to time party to the revolving credit agreement dated as of March 26, 2003, among the borrowers, lenders and administrative agent, incorporated by reference to Exhibit 10.10 (a) to Form 10-Q for the quarter ended May 2, 2003 (Commission File No. 001-08772).

10.10 (b) Lender Joinder agreement dated May 22, 2003 executed by CommerceBank N.A. in favor of Hughes Supply, Inc., the borrower, and SunTrust Bank, as administrative agent, for the lenders from time to time party to the revolving credit agreement dated as of March 26, 2003, among the borrowers, lenders and administrative agent, incorporated by reference to Exhibit 10.10 (b) to Form 10-Q for the quarter ended May 2, 2003 (Commission File No. 001-08772).

10.11 Loan and Aircraft Security Agreement dated as of November 12, 2002 between Juno Industries, Inc. (d/b/a Hughes Aviation), customer, and SunTrust Leasing Corporation, lender, CESSNA 560 XL M/S No. 560-5119, FAA Registration Mark N357 WC incorporated by reference to Exhibit 10.11 to form 10-K for the fiscal year ended January 31, 2003 (Commission File No. 001-08772).

10.12 Note Purchase Agreement, dated as of December 21, 2000 and amended January 19, 2001, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended January 26, 2001 (Commission File No. 001-08772).

10.15 Master Lease Agreement, dated as of June 22, 2001 between Atlantic Financial Group, Ltd, as Lessor and Hughes Supply, Inc. and Certain Subsidiaries of Hughes Supply, Inc., as Lessees – Operating Lease incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

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10.15 (a) Loan Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, as Lessor and Borrower, the financial institutions party hereto as Lenders and SunTrust Bank, as Agent – Operating Lease incorporated by reference to Exhibit 10.15 (a) to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (b) Construction Agency Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, and Hughes Supply, Inc. as Construction Agent – Operating Lease incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (c) Guaranty Agreement from Hughes Supply, Inc., dated as of June 22, 2001 – Operating Lease incorporated by reference to Exhibit 10.15 (c) to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (d) Appendix A to the Operative Documents, Definitions and Interpretation – Operating Lease incorporated by reference to Exhibit 10.15 (d) to Form 10-Q for The quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (e) First Amendment to Master Agreement incorporated by reference to Exhibit 10.15 (e) to form 10-K for the fiscal year ended January 31, 2003 (Commission File No. 001-08772).

10.16 (a) Amendment to Uncommitted Guidance and Swing Line Demand Promissory Note dated July 26, 2002 by the Company and SunTrust Bank, Inc. incorporated by reference to Exhibit 10.16 (a) to Form 10-Q for the quarter ended August 2, 2002 (Commission File No. 001-08772).

10.17 Senior Term Loan Agreement dated as of December 19, 2003, among Hughes Supply, Inc., Lehman Commercial Paper, Inc. SunTrust Bank, and each of the several other banks and financial institutions from time to time party thereto, Lehman Brothers, Inc. and SunTrust Robinson Humphrey, as exclusive joint advisors, joint book managers and joint lead arrangers and SunTrust Bank, as administrative agent, incorporated by reference to Exhibit 10.1 to Form 8-K filed January 5, 2004 (Commission File No. 001-08772).

10.18 First Amendment to Revolving Credit Agreement dated as of December 19, 2003, among Hughes Supply, Inc., the several banks and other financial institutions from time to time party thereto, and SunTrust Bank as administrative agent, incorporated by reference to Exhibit 10.2 to Form 8-K filed January 5, 2004 (Commission File No. 001-08772).

10.19 Lease agreements with SJ Limited Partnership, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772):

Sub-Item	Property
(a)	7311 Galveston Road, #800, Houston, TX
(b)	7311 Galveston Road, #510, Houston, TX

10.20 Lease agreement with SJ Partnership for 7311 Gavleston Road, #710, Houston, TX, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772).

10.21 Lease agreement with Stanwood Limited Partnership for 2751 Miller Road, Decatur, GA, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772).

10.22 Lease agreement with SWS-GA Realty, Inc. and Stanwood Interests Limited Partnership for 2331 Varkel Way, Lithonia, GA, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772).

10.23 Lease agreements with SWS-TX Realty, Inc., incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772):

Sub-Item	Property
(a)	8511 Monroe Boulevard, Houston, TX
(b)	8505 Monroe Boulevard, Houston, TX

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10.24 Lease agreements with JEM-Realty, Inc. and Stanwood Interests Limited Partnership, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772):

Sub-Item	Property
(a)	629 Pressley Road, Charlotte, NC
(b)	11835 West Fairmont Parkway, LaPorte, TX
(c)	Tract 26 South Houston Gardens, No. 6, Harris County, TX

(21)	Subsidiaries of the Registrant, incorporated by reference to Form 10-K for the fiscal year ended January 30, 2004 (Commission File No. 001-08772).
(23)	Consent of PricewaterhouseCoopers LLP.
(31.1)	Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
(31.2)	Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer.
(32.1)	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the President and Chief Executive Officer.
(32.2)	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the Executive Vice President and Chief Financial Officer.

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FINANCIAL STATEMENT SCHEDULE

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended January 30, 2004, January 31, 2003 and January 25, 2002

(in millions)

Description	Balance at Beginning of Period		Additions Charged to Income			Deductions			Balance at End of Period
2004
Allowance for doubtful accounts	$	8.5	$	8.1	(a)	$	(10.1	)(b)	$	6.5
Inventory reserves		6.0		7.8	(c)		(9.3	)(d)		4.5
Deferred income taxes		0.2		0.4			—			0.6
2003
Allowance for doubtful accounts	$	8.4	$	10.8	(a)	$	(10.7	)(b)	$	8.5
Inventory reserves		9.8		0.9	(c)		(4.7	)(d)		6.0
Deferred income taxes		0.1		0.1			—			0.2
2002
Allowance for doubtful accounts	$	6.1	$	13.4	(a)	$	(11.1	)(b)	$	8.4
Inventory reserves		10.4		8.0	(c)		(8.6	)(d)		9.8
Deferred income taxes		0.7		—			(0.6	)		0.1

(a) Represents gross bad debt expense, excluding recoveries of bad debts, which totaled $3.5 million, $1.7 million and $2.3 million in fiscal 2004, fiscal 2003 and fiscal 2002, respectively.

(b) Represents write-offs of uncollectible receivable amounts.

(c) Represents amounts charged for provision for inventory loss, including book to physical inventory adjustments and estimated dead stock write-offs.

(d) Deductions represent the net difference between the original inventory provisions recorded and actual book to physical adjustments, dead stock write-offs, and reductions in calculated reserve requirements.

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Report of Independent Registered Certified Public Accounting Firm on Financial Statement Schedule

To the Shareholders and Board of Directors

of Hughes Supply, Inc.

Our audits of the consolidated financial statements referred to in our report dated April 14, 2004 appearing in the 2004 Annual Report on Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orlando, Florida

April 14, 2004

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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.

	HUGHES SUPPLY, INC.
September 14, 2004	By:	/s/ Thomas I. Morgan
		Thomas I. Morgan
		President and Chief Executive Officer
September 14, 2004	By:	/s/ David Bearman
		David Bearman
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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INDEX OF EXHIBITS FILED WITH THIS REPORT

(23)	Consent of PricewaterhouseCoopers LLP.
(31.1)	Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
(31.2)	Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer.
(32.1)	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the President and Chief Executive Officer.
(32.2)	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the Executive Vice President and Chief Financial Officer.

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