The MRO distribution industry is approximately $300 billion in size and encompasses the supply of a wide range of products, including plumbing and electrical supplies, hand-tools, janitorial supplies, safety equipment and many other categories. Customers served by the MRO distribution industry include heavy industrial manufacturers that use MRO supplies for the repair and overhaul of production equipment and machinery; owners and managers of facilities such as apartment complexes, office buildings, schools, hotels and hospitals that use MRO supplies largely for maintenance, repair and refurbishment; and professional contractors.

The MRO distribution industry is highly fragmented and primarily composed of small, local and regional companies. Increasingly, smaller distributors are unable to satisfy customers' requirements as their limited financial capacity, product offerings and geographic footprint hinder their ability to compete effectively with larger, diversified distributors.

Within the multi-family housing market, the 50 largest apartment owners have increased their holdings to approximately 17.0% of total apartment units in 2003, compared to approximately 12.0% in 1996. These apartment owners prefer to purchase from single-source providers with national delivery capabilities, rather than from smaller distributors in multiple geographic markets.

Professional contractors have found that they are able to realize scale efficiencies by forming large purchasing groups. Similar to national apartment owners, these regional and national purchasing groups prefer to purchase products from single-source providers that are large enough to serve their needs in a variety of geographic markets.

Government initiatives aimed at reducing health care costs have spurred consolidation within the managed care industry. The national managed care organizations favor large MRO distributors, which offer a broad range of competitively-priced products and comprehensive distribution solutions.

The Company sells a broad range of plumbing products, from individual faucet parts to complete bathroom renovation kits. The Company sells a number of brand name products of leading plumbing supply manufacturers, including Delta, Moen and Price Pfister. The Company also sells a number of private label plumbing products under various proprietary trademarks, including Premier faucets and water heaters, DuraPro tubular products and ProPlus retail plumbing accessories.

The Company’s comprehensive selection of electrical products ranges from items such as ceiling fans to light fixtures and light bulbs. The Company offers a number of brand name products of leading electrical supply manufacturers, including Phillips, Westinghouse, Honeywell and General Electric, as well as a number of private label electrical products, such as Powerworks switches and Lumina light bulbs.

The Company offers a variety of HVAC products, including condenser units, thermostats, fans and motors. Some of these are brand name products of manufacturers such as York and Janitrol and some are the Company’s own private label products, such as Centurion air conditioners. The Company’s comprehensive range of appliances and parts includes washer/dryer components, garbage disposers, refrigerators and range hoods. The Company sells a number of brand name products of leading appliance manufacturers, including General Electric and Whirlpool. The Company also sells a number of high-quality generic replacement parts.

The Company sells a broad range of security hardware products, from individual lock-sets to computerized master-key systems. The Company sells a number of brand name products of leading security hardware manufacturers, including Kwikset and Schlage.

Gross profit increased by $7.9 million, or 3.4%, to $244.2 million in fiscal 2003 from $236.3 million in fiscal 2002.

SG&A expenses increased by $6.8 million, or 4.1%, to $171.1 million in fiscal 2003 from $164.3 million in fiscal 2002.

Depreciation and amortization expense decreased $0.4 million to $10.9 million in fiscal 2003 from $11.3 million in fiscal 2002.

Special costs and expenses were $0.6 million during fiscal 2003 compared to $4.9 million in fiscal 2002.

Operating income increased by $5.8 million, or 10.4%, to $61.6 million in fiscal 2003 from $55.8 million in fiscal 2002.