10-K/A 1 d10ka.txt AMENDMENT 1 TO FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2001. [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ___________ Commission File Number: 0-21448 National Home Centers, Inc. (Exact name of registrant as specified in its charter) Arkansas 71-0403343 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Highway 265 North Springdale, Arkansas 72765 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 756-1700 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.01 par value traded on the Nasdaq Small Cap Market 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 ((S) 229.405 of this chapter) 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 of this Form 10-K [_] On April 20, 2001, there were outstanding 7,142,251 shares of the registrant's Common Stock, $.01 par value. The aggregate market value of the 2,301,041 shares of Common Stock held by non-affiliates of the registrant as of April 20, 2001 was $2,508,135. DOCUMENTS INCORPORATED BY REFERENCE National Home Centers, Inc. Annual Report for fiscal year ended January 31, 2001 (certain portions incorporated by reference into Part II) PART I Items 1 and 2. Business and Properties. ----------------------- THE COMPANY Background General. National Home Centers, Inc. ("NHC" or the "Company") started its building supply operations in 1972 and opened its first store, serving primarily professional contractors, in 1977. In 1983, NHC began implementing a dual- customer strategy, serving both professional contractors and retail consumers. Since 1998, NHC has shifted its focus back to professional contractors. Today, the Company operates seven contractor sales locations and one appliance sales warehouse in the State of Arkansas, and approximately 79% of its sales are to contractor consumers. The Company operates its stores in four Arkansas markets: Northwest Arkansas (2 stores); Little Rock (3 stores); Russellville (2 stores); and Fort Smith (1 store). NHC also operates fabrication facilities for value-added conversion products such as countertops, pre-hung door units, and window units. Executive Offices. The Company's executive offices are located at Highway 265 North, Springdale, Arkansas 72765. The Company's telephone number is (501) 756-1700. BUSINESS General The Company is a retailer of home improvement products and building materials with an established core market primarily in Arkansas, but including Oklahoma and Missouri. The Company operates large building supply operations serving both retail consumers and professional contractors. NHC's business strategy capitalizes on professional contractor sales by providing a broad product assortment and a full range of services in each of its four Arkansas markets. The Company operates in the highly competitive home improvement industry. NHC's primary competition comes from other lumberyards, as well as home centers, discount retail stores, supermarkets, warehouse stores, certain specialty stores, traditional hardware, and plumbing and electrical suppliers. The introduction of national and/or regional home improvement stores to NHC's markets has significantly increased competition for market share in recent years. In an attempt to gain market share, these new competitors have offered reduced prices on products similar to those carried by NHC. This has placed pressure on NHC's stores and its prospective sales, gross margins, and operating income. Although NHC's markets are fairly saturated and few national or regional chains are aggressively expanding, it is possible that competition will continue to increase in those markets served by NHC. Such additional competition may adversely affect the Company's future earnings. Single-family building permits in Arkansas were down approximately 12% while multi-family building permits declined about 35% in 2000 compared to 1999. Reduction in Exposure of Retail Assets The Company initially entered the retail segment of the market in the early 1980's primarily as a hedge against rising interest rates and reduced housing starts. As a result of the recent drastic increase in competition for the retail home improvement dollar and a non-inflationary economic environment, NHC has reevaluated its niche in the industry. The Company has reduced its exposure to the retail segment of the home improvement industry. Because regional contractors have long recognized NHC as a quality 2 operation and because the Company has developed a strong, loyal following of contractors, NHC has reemphasized and refocused its efforts on becoming the leader in the professional contractor market. In the year ended January 31, 2001 (fiscal 2000), sales revenues from professional contractors were approximately 79% of the Company's total revenues. The Company expects sales to professional contractors to be over 80% of future revenues. NHC continues to explore industry consolidation possibilities including, but not limited to, acquisition of other contractor-related companies. Capitalization of the Company On July 15, 1998, the Company entered into a loan and security agreement with a financial institution for a $20 million revolving credit agreement, which expires in July, 2002. The agreement provides for interest to be charged at .375% per annum in excess of the Prime Rate (9.00% at January 31, 2001). The agreement limits availability to a borrowing base of 85% of eligible accounts receivable and 65% of eligible inventory, with each capped at $10 million. The facility does not contain any financial covenants. The Company had additional available borrowing capacity of approximately $1.3 million under the revolving credit agreement as of January 31, 2001. The Company also financed approximately $1.0 million of capital equipment purchases during the year ending January 31, 2001. Reduction of Accounts Payable and Long-Term Debt The Company has made significant strides to pay down debt since 1998. By doing so, NHC is now able to focus its efforts on implementing a long-term strategy for continued competition in the home improvement industry. The following highlight these efforts: . Outside of normal operating activities, NHC generated approximately $28,000,000 since fiscal 1998 by refinancing existing debt, reducing inventory balances, and monetizing non-producing assets. The majority of this amount was used to reduce accounts payable and other long-term debt. . Since July, 1998, the Company has been current with all of its trade vendors, has reestablished credit lines, and is taking advantage of vendor discounts. . NHC has improved its capital structure by obtaining more favorable terms on its debt instruments with no financial covenants. Store Properties The following table shows the location, opening date, size, retail/contractor sales mix and approximate number of SKUs of each of the Company's stores:

The Springdale, Bentonville, Fort Smith and North Little Rock stores are leased from the Company's chairman and/or his spouse. The Clarksville, Maumelle and a portion of the Russellville properties are leased from third parties. Lease terms for these properties range from 10 to 15 years and provide for renewal options. The Company owns the Conway contractor property and a portion of the Russellville property. The Company owns the land and building for the closed Conway retail store and leases approximately one-third of the store to Office Depot, Inc. The Rodney Parham store in Little Rock, Arkansas was leased from an unaffiliated third party. The Company bought out of the lease in fiscal 2000 and no longer has an interest in the property. On July 15, 1998, the Company sold the real property and improvements associated with its closed Fayetteville, Arkansas, supercenter to The Home Depot, Inc. On July 30, 1998, the Company sold the real property, improvements and certain fixed assets associated with its closed Rogers, Arkansas, supercenter to Lowe's Companies, Inc. Proceeds of the sales were used to reduce indebtedness associated with the properties and for general working capital. The Company owns a thirty (30) acre parcel in Branson, Missouri. The parcel is owned free of debt and has been placed on the market for sale. Fabrication Facilities NHC maintains fabrication facilities in Springdale, Bentonville, Fort Smith, Russellville, Conway and North Little Rock for value-added conversion products, such as counter tops, pre-hung door units and window units. Management believes that this vertical integration provides an advantage in serving professional contractors by offering them a wide variety of products at competitive prices, thus encouraging increased sales. The Company's door shops are equipped with modern, automated machinery and are capable of producing high- quality interior and exterior door units at competitive prices. The Company manufactures over 9,000 pre-hung door units per month. Door shops, which also are equipped and staffed to custom cut and produce laminated kitchen and bath counter tops, serve both retail customers and professional contractors and enable the Company to provide prompt, local service at lower costs. Management believes that its fabrication facilities are adequate to meet existing and foreseeable needs. 4 Products The Company's stores offer a large selection of lumber, building materials, hardware and tools, electrical and plumbing supplies, paint, lighting, home decor, pre-hung doors, windows, appliances, cabinets, garden supplies and seasonal items. Each store currently stocks between 900 and 27,000 SKUs. Many of the items sold in the Company's stores are nationally advertised, brand-name products. NHC classifies its product offerings into five categories: Building Materials--Dimensional lumber, plywood, roofing, trusses, siding, windows, finish lumber, pre-hung doors and mouldings. Hardware/Plumbing/Electrical--Electrical wire and wiring materials, lighting fixtures, plumbing materials, power and hand tools, and door locks. Home Decor--Paint, wall and floor coverings and housewares. Appliances/Cabinets--Kitchen appliances, washers, dryers, cabinets and fireplaces. Lawn and Garden--Plants, fertilizer, mowers, garden tools and outdoor furniture. The percentage of sales accounted for by the merchandise categories for each of the Company's three most recent fiscal years were as follows: Fiscal Year Ending January 31, Products 2001 2000 1999 -------- ---- ---- ---- Building Materials 66 71 61 Hardware/Plumbing/Electrical 12 11 15 Home Decor 10 8 9 Appliances/Cabinets 10 8 10 Lawn and Garden 2 2 5 ---- ---- ---- Total 100% 100% 100% Purchasing Except for pre-hung doors which are fabricated by the Company, NHC purchases its merchandise from more than 650 manufacturers and suppliers. No single supplier accounted for more than 10% of NHC's total purchases in fiscal 2000. The Company believes it has good relationships with its suppliers and does not consider itself dependent upon any single source for its merchandise. Management does not believe that the loss of any single supplier would have a material adverse effect on the Company. The Company's corporate merchandise buyers, located in the Springdale corporate office, make all decisions on new products to be sold in NHC stores. Once the corporate buyers have selected a new product, they issue initial purchase orders for all NHC stores where that product will be sold. Buyers in each store are responsible for making subsequent orders for all in-stock merchandise. Each store's computer system tracks the quantity of any product sold and automatically generates recommended purchase orders which are edited by store buyers who then issue purchase orders directly to the vendor. Merchandise is typically shipped directly to the store that will stock the product. In addition, sales volumes resulting from successful implementation of the Company's dual-customer strategy permit NHC to maximize economies available from discount purchases. These large volume purchases may be shipped to the Company's Springdale or North Little Rock stores for subsequent distribution to other NHC stores in those markets. 5 Credit NHC offers credit for professional contractors which allows those customers to make purchases at any NHC store. Professional contractors make the majority of their purchases on credit. Subcontractors hired by a professional contractor, as well as the property owner, may charge materials purchased for that job to the professional contractor's account. Credit policies and procedures are established by the Company's credit department, and all professional contractor sales representatives are trained in those policies and procedures. Each of NHC's market areas has a dedicated credit manager who interacts with sales representatives, management and credit agencies to manage and monitor customer credit. The Company also has a Corporate Credit Manager who oversees five area credit managers and activities and policies relating to contractor receivables. NHC's credit policies are designed to maximize extension of credit to professional contractors without unduly risking bad credit. Credit sales accounted for substantially all of NHC's total sales to professional contractors in fiscal 2000, while the Company's credit income (recoveries exceeded bad debts during fiscal 2000) was 0.22% of contractor sales. In addition, NHC accepts third-party credit cards such as MasterCard, Visa, American Express and Discover. Approximately 41% of NHC's retail sales were made on third-party and proprietary credit cards in fiscal 2000. Marketing NHC offers various volume-oriented price levels to professional contractors to promote larger purchases. The Company's computerized pricing system permits sales personnel to provide consistent quantity discounts and immediate response to customer requests for discounts on volume purchases. For over 20 years, the Company has offered professional contractors a travel incentive program in which customers earn, through their purchases, credit toward trips arranged each year by the Company. The program, which has been highly successful in helping the Company increase its share of the professional contractor business, gives the Company an opportunity to present product seminars during each trip. There are currently 310 participants signed up for a November, 2001 trip to Vienna, Austria. Builders qualify for the travel incentive program by purchasing certain volumes of materials and by making timely payments each month. Management believes that its strongest marketing tools are exceptional customer service and everyday low prices. Because many retail customers make buying decisions in the store, NHC focuses its marketing efforts on maintaining a well-stocked inventory and superior service to encourage add-on sales which augment the average purchase. As a result of this approach, NHC spent only 0.09% of sales on advertising in fiscal 2000, primarily on contractor related sales events and a small amount of seasonal direct mail advertising for special promotions and to reinforce customer awareness of its everyday low pricing. Management Information Systems NHC's management information systems have been designed and developed to address a wide range of functions including sales analysis, merchandise ordering and processing, merchandise management and presentation and financial management. Through these systems, management has access to concise, relevant information on performance that includes the daily individual store and department information necessary for financial and merchandising decisions, strategic planning and analysis. The Company maintains a fully computerized point-of-sale retail management system and custom-designed software. The Company utilizes IBM RS-6000 hardware and special building materials software developed by CCI Triad. NHC's system provides (1) point-of-sale scanning, (2) sales and inventory tracking, compiling data by store, employee, product category and individual SKU, (3) receivables tracking, (4) computer generated purchase orders, and (5) other operating and management reports. NHC is currently utilizing Electronic Data Interchange ("EDI") with selected vendors. NHC's point-of-sale system is a fully integrated sales, credit, receivables, inventory, purchasing and data collection system. This system includes UPC scanning for all items sold at NHC stores and provides automatic price check at the register as well as sales audit reporting, advertised item reporting, item sales 6 performance and history, daily computer review and suggested purchase orders. The system also tracks professional contractor receivables and requires management approval for any transaction which would exceed the customer's account credit limit. The Company's payroll, accounts payable and general ledger are also integrated with the point-of-sale system. These functions are centralized at the Company's corporate office. The Company has entered into service contracts with third parties for service and upgrades of computer software. Company policies require daily backup at each store which is maintained at secure off-site locations. In addition, the Company maintains a standby mainframe unit to operate as backup for its primary system. The Company is currently evaluating various internet related software packages for possible future internet acceptance of quote requests, review and pricing of materials, orders and correspondence with contractors. Competition NHC operates its stores in four Arkansas markets. The Company's principal competitors in these markets are Lowe's, Home Depot, Sutherlands, Cameron Ashley, One Source, Meeks, Ridout, and 84 Lumber. Patents and Trademarks The Company has obtained federal trademark registration for the service mark National Home Centers(R). The federal registration covers NHC's use of the mark for retail lumber, building materials and hardware store services, but does not contemplate use of the mark on other products. Employees and Labor Relations As of January 31, 2001, the Company employed 448 persons, consisting of 408 full-time and 40 part-time personnel. Generally, the Company believes that relations with its employees are excellent. None of the Company's employees are represented by a union or covered by a collective bargaining group. Forward Looking Statements Forward-looking statements contained herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are various factors that could cause results to differ materially from those anticipated by such statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes made it clear that any projected results expressed or implied therein will not be realized. Factors that could cause actual results to differ materially include, but are not limited to, the following: the strength and excess of new and existing competition; the Company's ability to maintain competitive pricing in its markets; the Company's ability to increase sales; the Company's ability to attract, train, and retain experienced, quality employees; the Company's ability to dispose of excess real estate and other assets; general economic conditions; housing turnover; interest rates; weather; and other factors described from time to time in the Company's Securities and Exchange Commission filings. Item 3. Legal Proceedings. ----------------- On May 24, 2000, Raeleen Ann Barnes Matlock, acting as administratrix for the estate of Jimmy Ray Barnes, filed a lawsuit in the Circuit Court of Pulaski County, Arkansas against W.M. Barr & Co., Inc., Ring Can Corporation, and the Company. The lawsuit alleges negligence, breach of warranty, and product liability acts by the defendants in connection with the manufacture, distribution, and sale of a defective container of paint thinner. The plaintiff is seeking actual damages in an amount of $6,000,000 and punitive damages in the same amount. On June 20, 2000, the Company filed an answer to the complaint, generally denying the allegations with regard to National Home Centers and requesting that the court dismiss the complaint as against the Company. The Company is also, at times, a party to routine litigation incidental to its business. In the opinion of the Company's management, such proceedings should not, individually or in the aggregate, have a material adverse effect on the Company's results of operations or 7 financial condition. The Company maintains insurance in such amounts and with such coverage and deductibles as management believes are reasonable. On November 3, 2000, a judgment was entered against the Company in the Washington County, Arkansas Circuit Court, Case Number CIV 97-1553, in favor of James and Patricia Larson in the amount of $235,000 for damages suffered in a 1997 accident. The Company, along with its insurance provider as surety, has filed an appeal with the Arkansas Court of Appeals and has posted the appropriate bond. The final amount of any potential judgment or settlement will be covered by insurance and management does not believe that the final outcome of these proceedings should have a material adverse effect on the Company. Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. --------------------------------------------------------------------- The Company is authorized to issue 25,000,000 shares of Common Stock, $.01 par value of which 7,142,251 shares were outstanding as of April 20, 2001, and 5,000,000 shares of Preferred Stock, $1.00 par value, of which no shares were outstanding as of April 20, 2001. COMMON STOCK The holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Subject to preferences applicable to any outstanding Preferred Stock, holders of Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefore. Holders of Common Stock have no preemptive or subscription rights and there are no redemption or conversion rights with respect to such shares. The outstanding shares of Common Stock are fully paid and non-assessable. As of January 31, 2001, the Company's Chairman beneficially owned approximately 63.5% of the outstanding Common Stock. The Company has not previously paid any cash dividends on its Common Stock and does not anticipate paying any cash dividends in the future. See "Dividend Policy." At April 20, 2001, the 7,142,251 shares of Common Stock then outstanding were held by approximately 550 persons (excluding persons holding shares in nominee names). The Transfer Agent and Registrar for the Common Stock is UMB Bank of Kansas City. The Company's Common Stock is currently traded on The Nasdaq Small Cap Market under the symbol "NHCI." The following table sets forth the quarterly high and low sales price for the Common Stock as reported on The Nasdaq Small Cap Market. Fiscal 1999 High Low ----------- ---- --- First Quarter $1.63 $1.00 Second Quarter 1.44 1.06 Third Quarter 1.28 1.00 Fourth Quarter 1.31 1.00 Fiscal 2000 ----------- First Quarter 1.87 1.09 Second Quarter 1.75 1.41 Third Quarter 1.72 1.50 Fourth Quarter 1.53 1.06 8 Fiscal 2001 ----------- First Quarter (through April 20, 2001) 1.27 1.09 PREFERRED STOCK The Board of Directors is authorized to provide for the issuance of Preferred Stock in one or more series and to fix the dividend rate, conversion rights, voting rights, rights and terms of redemption, redemption price or prices, liquidation preferences and qualifications, limitations and restrictions thereof with respect to each series. Although the Company has no present intention to issue shares of Preferred Stock, the issuance of shares of Preferred Stock or the issuance of rights to purchase such shares could have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in his or her best interest, including attempts that might result in a premium over the market price for the shares held by such stockholder. DIVIDEND POLICY The Company has not previously paid cash dividends on its Common Stock. The Company intends to retain any earnings for use in its business and therefore does not anticipate paying any cash dividends in the foreseeable future. Item 6. Selected Financial Data. ----------------------- Incorporated by reference from the section captioned "Selected Financial Data," page 2 of the National Home Centers, Inc. 2000 Annual Report (the "2000 Annual Report"). Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations. ------------- Incorporated by reference from the sections captioned "Management's Discussion and Analysis," pages 3 through 5 of the 2000 Annual Report. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. ---------------------------------------------------------- Incorporated by reference from the section captioned "Management's Discussion and Analysis," page 4 of the 2000 Annual Report. Item 8. Financial Statements and Supplementary Data. ------------------------------------------- Incorporated by reference from the sections captioned "Balance Sheets, "Statements of Operations and Accumulated Deficit," "Statements of Cash Flows," "Notes to Financial Statements," and "Report of Independent Public Accountants," pages 6 through 19 of the 2000 Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and --------------------------------------------------------------- Financial Disclosure. -------------------- None. 9 PART III Item 10. Directors and Executive Officers of the Registrant. -------------------------------------------------- DIRECTORS The following table provides certain information regarding the Company's directors.

10 Dwain A. Newman is the stepfather of Brent A. Hanby; there are no other family relationships among the foregoing nominees. By reason of his ownership, directly and beneficially, of shares of the Company's Common Stock, Dwain A. Newman is deemed to be a control person of the Company. None of the companies or organizations listed opposite the name of any director above is a parent, subsidiary or affiliate of the Company. EXECUTIVE OFFICERS Dwain A. Newman, Danny R. Funderburg, Roger A. Holman, Brent A. Hanby, John Collins, C. Belle Reed and Robert H. Storment serve as executive officers of the Company. The first four named individuals also serve as directors and are described above under the caption "Election of Directors." John Collins, age 42, was promoted to Vice President, Merchandising and Store Planning in February 1995. Previously Mr. Collins served in the capacity of Merchandise Manager and was in charge of store planning. Mr. Collins has been an employee of the Company since November 1987. C. Belle Reed, age 45, has served as the Corporate Controller for the past ten years. Ms. Reed was named Corporate Secretary in 1993 and has been employed by the Company in various positions since August 1979. Robert H. Storment, age 42, was named Vice President, Accounting in February 1995. Mr. Storment joined the Company in November 1992 as Director of Accounting. Prior to joining the Company, Mr. Storment served as a senior manager for the Little Rock, Arkansas office of KPMG Peat Marwick LLP. Mr. Storment is a registered Certified Public Accountant in the State of Arkansas. SECTION 16 REQUIREMENTS Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers. Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it with respect to fiscal 2000, or written representations from certain reporting persons, the Company believes that each such person has timely complied with all filing requirements. Item 11. Executive Compensation. ---------------------- General The Company's compensation policy is based on its belief that total compensation programs for its Chief Executive Officer and other executives should be based upon many of the same criteria used in setting compensation for its other salaried employees -- such as individual experience, initiative and performance -- but that a larger portion of executive compensation should be tied directly to the financial performance of the Company. 11 The Board of Directors has established a Compensation Committee to review and make recommendations regarding executive compensation. Members of the Compensation Committee are Dwain A. Newman, Richard D. Denison and David W. Truetzel, all directors of the Company. Operating within the guidance provided by the Board of Directors, the Compensation Committee's role is to assure that the Company's executive compensation strategy is aligned with the interests of the stockholders, and the Company's compensation structure will allow for fair and reasonable base salary levels and the opportunity for executives to earn compensation that reflects both Company and individual performance. The Compensation Committee determines executive compensation each year after reviewing its annual audit report. Salary and bonus determinations typically are made in March of each year and are based on Company and individual executive performance in the preceding year. Thus, salary and bonus determinations made in fiscal 2000 reflect performance in fiscal 1999. In addition, the Compensation Committee determines the amount of the Company's contribution to its 401(k) Retirement Plan at the end of each fiscal year. The following is a report of the Compensation Committee addressing the compensation policy as it related to the Company's Chief Executive Officer and its other executive officers for fiscal 2000. REPORT OF THE COMPENSATION COMMITTEE Compensation Policy The goal of the Company's executive compensation policy is to ensure that an appropriate relationship exists between executive pay and the creation of stockholder value, while at the same time motivating and retaining key employees. To achieve this goal, the Company's executive compensation policies integrate annual base compensation with bonuses based upon corporate performance and individual initiative and performance. In addition, eligible employees receive a portion of Company profits through the Company's annual contributions to its 401(k) Retirement Plan. Accordingly, in years in which performance goals are achieved or exceeded, total executive compensation tends to be higher than in years in which performance is below expectations. Annual cash compensation, together with the payment of incentive and deferred compensation, is designed to attract and retain qualified executives and to ensure that such executives have a continuing stake in the long-term success of the Company. Net profit is the primary measure of Company performance used to determine executive compensation. In addition, the Company may consider other factors, such as earnings per share and achievement of planned growth. The Company currently does not set any specific performance targets and does not use a set formula for determining executive salaries and bonuses but instead subjectively determines salary and bonus for executives in amounts that reflect consideration of the factors listed above. Executive officers eligible to participate in the Company's 401(k) Retirement Plan receive a pro rata share of the Company's annual contribution to the Plan based on the individual's tenure with the Company and base salary. Section 162(m) of the Internal Revenue Code of 1986, as adopted under the Omnibus Budget Reconciliation Act of 1993, generally limits a corporation's federal tax deduction for compensation paid to certain executive officers in any one year to $1,000,000. Because executive compensation currently falls far below $1,000,000 for each of the named executive officers, the Company does not have a policy on qualifying compensation of its executive officers for deductibility under Section 162(m). The Compensation Committee or the Board will evaluate the need for such a policy in the future in connection with its review of executive compensation. Fiscal 2000 Compensation The Company's executive compensation program for fiscal 2000 consisted of (i) base salary, adjusted from the prior year, (ii) pro rata match distribution under the 401(k) Retirement Plan, (iii) employer match 12 related to the Employee Stock Purchase Plan and (iv) a bonus paid for improved and/or profitable company performance. The determinations of salary for each executive officer were made subjectively, based upon a combination of the performance factors described above and the perception of each executive's level of responsibility in the Company. Likewise, the Board of Directors subjectively determined the Company's total contribution to the 401(k) Retirement Plan for fiscal 2000. Mr. Funderburg's bonus paid in fiscal 2000 was for the performance of the Little Rock area stores for fiscal 1999, where Mr. Funderburg also serves as general manager. CEO Compensation Dwain A. Newman has been Chairman and Chief Executive Officer of the Company since its inception in 1968. Consistent with the other executive officers, the structure of Mr. Newman's compensation package reflects the Company's philosophy of "total compensation and pay for performance." Mr. Newman's salary for fiscal 2000 was based primarily on Mr. Newman's position as Chairman and CEO of the Company. Although net profit was an important factor, the Compensation Committee subjectively determined his salary amount for fiscal 2000. During fiscal 2001, Mr. Newman will not receive a bonus for fiscal 2000. Conclusion The Company believes that linking executive compensation to corporate performance results in a better alignment of compensation with corporate goals and stockholders' interest. The Compensation Committee believes that compensation levels during fiscal 2000 adequately reflect the Company's compensation goals and policies. National Home Centers, Inc. Compensation Committee Dwain A. Newman Richard D. Denison David W. Truetzel 13 Summary Compensation Table The following table sets forth certain summary information concerning the compensation paid by the Company to its Chief Executive Officer and its other officers whose aggregate remuneration exceeded $100,000 during the fiscal years indicated. SUMMARY COMPENSATION TABLE

/(1)/ Bonuses are shown in the years paid; amounts paid are based upon Company performance in the year preceding the year paid. /(2)/ Includes premiums paid on term life insurance policies in the following amounts: $0 (fiscal 2000 & fiscal 1999); $8,130 (fiscal 1998). Also includes Mr. Newman's share (related PS-58 cost) of premiums paid on split-dollar life insurance policies in the following amounts: $4,750 (fiscal 2000); $5,600 (fiscal 1999); $10,180 (fiscal 1998). Under the terms of the split-dollar policies, the Company will be reimbursed in an amount equal to the lesser of premium payments or the cash surrender value. The Company owns one of the split-dollar policies and the other policy is owned by a trust. See "Compensation Plans -- Life Insurance." /(3)/ Includes the named individual's pro rata share of Company contributions to the Company's 401(k) Retirement Plan in the following amounts: Dwain A. Newman, $556 (fiscal 2000); $592 (fiscal 1999), $593 (fiscal 1998); Danny R. Funderburg, $ 1,041 (fiscal 2000) $884 (fiscal 1999); and $619 (fiscal 1998); Roger A. Holman, $687 (fiscal 2000); Brent A. Hanby $689 (fiscal 2000). 14 Option Grants in 1998 The following table sets forth information concerning each grant of stock options to the above named officers during fiscal year 1998. No stock options have been granted to the Company's executive officers since those listed below.

/(1)/ Options granted during fiscal year 1998 were 20% vested upon issuance, with an increase in vesting of 20% per year beginning one year after the date of issuance, and have remaining contractual lives of 4.3 years. As permissible under Statement of Financial Accounting Standards (SFAS) No. 123, the Company accounts for stock options granted under the provisions of Accounting Principles Board Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity award. Accordingly, no compensation expense was recognized in the statement of operations during fiscal year 1998. Had compensation cost for the company's stock option plan been determined based on the fair value at the grant date for awards for fiscal year 1999 and 1998 consistent with the provisions of SFAS No. 123, the effect on the Company's net earnings (loss) and earnings (loss) per share would not be materially different from the amounts reported. No options were granted in fiscal 2000 or fiscal 1999. Compensation of Directors The Company pays each of its outside directors $15,000 per year, regardless of the number of meetings attended. During fiscal 2000, the Company paid no additional compensation for committee participation except for travel reimbursement for Mr. Truetzel and Mr. Denison. Members of the Board who also serve as officers of the Company are not compensated for their services as directors. 15 COMPANY PERFORMANCE The following graph shows a comparison of cumulative total returns for the Company, the Standard & Poor's 500 Stock Index ("S&P 500") and an index of peer companies selected by the Company for the five year period ending January 31, 2001. [GRAPH]

The total cumulative return on investment (change in the year end stock price plus reinvested dividends) for each of the periods for the Company, the peer group and the S&P 500 is based on the stock price or composite index for the five-year period ending January 31, 2001. The above graph compares the performance of the Company with that of the S&P 500, and a group of peer companies with the investment weighted on market capitalization. Companies in the peer group are as follows: BMC West Corp.; DIY Home Warehouse, Inc.; The Home Depot, Inc.; Lowes Companies, Inc.; HomeBase, Inc.; and Wolohan Lumber Co. Inclusion of these companies in the peer group index was approved by the Board of Directors. 16 Item 12. Security Ownership of Certain Beneficial Owners and Management. -------------------------------------------------------------- PRINCIPAL STOCKHOLDERS The following table sets forth, as of May 31, 2001, the beneficial ownership of the Company's outstanding Common Stock by each of the Company's directors, each executive officer listed in the Summary Compensation Table, all directors and officers of the Company as a group, and each person other than a director known by the Company to be the beneficial owner of more than 5% of its outstanding Common Stock.

* Less than 1 percent /(1)/ Based on 7,142,251 shares of Common Stock outstanding as of May 31, 2001. /(2)/ Dwain A. Newman holds 4,466,264 shares of Common Stock in his own name. Mr. Newman's wife holds 16,628 shares of Common Stock in her own name and Mr. and Mrs. Newman own 4,100 shares jointly. Mr. Newman holds 36,891 under the Dwain A. Newman IRA Rollover Account. Mr. Newman also holds in his name 5,000 shares each for Jay Jackson Newman and Shelby Lee Newman, as custodian under the Arkansas Uniform Transfer To Minors Act. Because of Mrs. Newman's stock ownership and the custodian relationship, Mr. Newman is considered beneficially to own 4,533,883 shares of Common Stock. Mr. Newman has disclaimed beneficial ownership of the shares held in Mrs. Newman's name and the shares held as custodian. The address of Mr. Newman is P.O. Box 789, Highway 265 North, Springdale, Arkansas 72765. /(3)/ Shares held beneficially in the Richard D. Denison IRA, of which Mr. Denison is sole beneficiary and trustee Item 13. Certain Relationships and Related Transactions. ---------------------------------------------- Dwain A. Newman has assigned the leases on the Springdale and North Little Rock properties to the Arkansas Teacher Retirement System ("ATRS") as security for a $7 million loan obtained by Mr. Newman during the year ended January 31, 1993. Proceeds from this loan were used by Mr. Newman to finance the purchase of the Springdale and Fort Smith properties from the Company, to retire his mortgage indebtedness on the North Little Rock property and to pay off other loans to the Company for various real estate financing. The ATRS loan is also secured by a mortgage and security agreement on these properties and an assignment of a $1 million life insurance policy on Mr. Newman. In fiscal 2000, the Company paid Mr. Newman rent in the aggregate amount of $264,000 on the Springdale property, $144,000 on the Fort Smith property, and $504,000 on the North Little Rock property. 17 Mrs. Newman's trust also owns and leases to the Company a store located in Bentonville. The Company paid the trust a total of $84,000 in rent on the property during fiscal 2000. The real estate transactions with Mr. Newman have simultaneously provided the Company working capital and satisfactory long-term access to the related facilities. In addition, the transactions with Mr. Newman are at rates comparable to rentals charged the Company under its third-party leases and, therefore, have had no distinguishable impact on the Company's results of operations and financial condition. All of the transactions between Mr. Newman and the Company were approved by the Board of Directors. All future transactions between the Company and its officers, directors, principal stockholders and affiliates will be reviewed and approved by a majority of the disinterested directors of the Company's Board, or a committee thereof, and will be on terms and conditions no less favorable to the Company than could be obtained from unaffiliated third parties. The Company does not intend to make any loans in the future to its officers, directors, principal stockholders or affiliates for the purchase of shares of its Common Stock. To the extent the Company makes loans to such persons for other purposes, those loans will be reviewed and approved by a majority of disinterested directors of the Company's Board, or a committee thereof, and will be on terms and conditions no less favorable to the Company than could be obtained from unaffiliated third parties. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. ---------------------------------------------------------------- (a) Documents filed as a part of this report. 1. Financial Statements. -------------------- The following financial statements of National Home Centers, Inc. have been incorporated by reference from the 2000 Annual Report into Item 8 of this Report. Description ----------- Balance Sheets Statements of Operations and Accumulated Deficit Statements of Cash Flows Notes to Financial Statements Report of Independent Public Accountants 2. Financial Statement Schedules. ----------------------------- The information required to be presented in Schedule II Valuation and Qualifying Accounts is presented in Note 9 of the Notes to Financial Statements. 3. Exhibits required by Item 601 of Regulation S-K. ----------------------------------------------- Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company./1/ 3.2 Amended and Restated By-Laws of the Company./1/ 18 Exhibit No. Description ----------- ----------- 4.1 Form of the Company's Common Stock Certificate./1/ 4.2 Amended and Restated Articles of Incorporation of the Company, Sections 5 through 7./1/ 10.1 Split Dollar Insurance Agreement dated September 24, 1999 between the Company and the Newman 1994 Family Trust./2/ 10.2 Assignment of Policy dated September 24, 1999 between the Company and the Newman 1994 Family Trust./2/ 10.3 Amendment to Guaranty dated September 24, 1999, amending Guaranty Agreement dated May 20, 1994./2/ 10.4 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Springdale, Arkansas store./1/ 10.5 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the North Little Rock, Arkansas store./1/ 10.6 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Fort Smith, Arkansas store./1/ 10.7 Lease Agreement dated June 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Bentonville, Arkansas store./1/ 10.8 Master Security Agreement dated November 16, 2000 between General Electric Capital Corporation and the Company.* 10.9 Lease Agreements dated December 22, 1992 between Valley Park Limited Partnership and the Company for the Russellville, Arkansas store./1/ 10.10 Subordination, Attornment and Non-Disturbance Agreement and Estoppel Certificate dated September 10, 1992 between ATRS, the Company, and Dwain A. Newman and Glenda R. Newman for the Springdale, North Little Rock and Fort Smith Leases./1/ 10.11 Form of the 1993 Employee Stock Purchase Plan of National Home Centers, Inc./1/ 10.12 Form of the Company's 1993 Incentive Compensation Plan./1/ 10.13 Promissory note dated November 16, 2000 between General Electric Capital Corporation and the Company.* 10.14 Guaranty Agreement effective May 20, 1994./2/ 10.15 Promissory note dated December 19, 2000 between General Electric Capital Corporation and the Company.* 19 Exhibit No. Description ----------- ----------- 10.16 Promissory Note and Mortgage dated May 5, 1995 to Simmons First Bank of Arkansas for Conway, Arkansas Store./4/ 10.17 Form of the Company's 401(k) Adoption Agreement with Morgan Stanley Dean Witter as Trustee.* 10.18 1996 Long-Term Performance Plan./4/ 10.19 Loan and Security Agreement with NationsCredit Commercial Funding./6/ 10.20 Amendment No. 1 to Loan Documents /8/ 10.21 Summary of Material Modification to the National Home Centers, Inc. 401(K) Retirement Plan.* 11.1 Computation of Earnings (loss) Per Share.* 13.1 National Home Centers, Inc. 2000 Annual Report (only those portions specifically incorporated herein by reference shall be deemed filed with the Commission).* 23.1 Consent of Arthur Andersen LLP.* * Previously filed with the Company's Annual Report on Form 10-K on April 27, 2001. /1/ Incorporated by reference from National Home Centers, Inc. Form S-1 Registration Statement No. 33-60078, as amended, filed with the Securities and Exchange Commission on March 26, 1993. /2/ Incorporated by reference from National Home Centers, Inc. Quarterly Report on Form 10-Q for the period ended October 31, 1994, filed with the Securities and Exchange Commission on December 15, 1994. /3/ Incorporated by reference from National Home Centers, Inc. Quarterly Report on Form 10-Q for the period ended April 30, 1995, filed with the Securities and Exchange Commission on June 12, 1995. /4/ Incorporated by reference from National Home Centers, Inc. Annual Report on Form 10-K for the period ending January 31, 1996, filed with the Securities and Exchange Commission on April 30, 1996. /5/ Incorporated by reference from National Home Centers, Inc. Annual Report on Form 10-K for the period ending January 31, 1997, filed with the Securities and Exchange Commission on May 1, 1997. /6/ Incorporated by reference from National Home Centers, Inc. Quarterly Report on Form 10-Q for the period ending July 31, 1998, filed with the Securities and Exchange Commission on September 15, 1998. /7/ Incorporated by reference from National Home Centers, Inc. Annual Report on Form 10-K for the period ending January 31, 2000, filed with the Securities and Exchange Commission on May 1, 2000. /8/ Incorporated by reference from National Home Centers, Inc. Quarterly Report on Form 10-Q for the period ending October 31, 2000, filed with the Securities and Exchange Commission on December 12, 2000. (b) Reports on Form 8-K. The Company did not file any Current Reports on Form 8-K during fiscal 2000. 20 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. NATIONAL HOME CENTERS, INC. May 31, 2001 By: /s/ DWAIN A. NEWMAN ---------------------------------- Dwain A. Newman Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. May 31, 2001 By: /s/ DWAIN A. NEWMAN ---------------------------------- Dwain A. Newman Chairman of the Board and Chief Executive Officer May 31, 2001 By: /s/ DANNY R. FUNDERBURG ---------------------------------- Danny R. Funderburg President, Chief Operating Officer and Director May 31, 2001 By: /s/ ROGER A. HOLMAN ---------------------------------- Roger A. Holman Vice President, Purchasing - Marketing and Director May 31, 2001 By: /s/ BRENT A. HANBY ---------------------------------- Brent A. Hanby Executive Vice President, Chief Financial Officer and Director May 31, 2001 By: /s/ RICHARD D. DENISON ---------------------------------- Richard D. Denison Director May 31, 2001 By: /s/ DAVID W. TRUETZEL ---------------------------------- David W. Truetzel Director 21 INDEX OF EXHIBITS Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company./1/ 3.2 Amended and Restated By-Laws of the Company./1/ 4.1 Form of the Company's Common Stock Certificate./1/ 4.2 Amended and Restated Articles of Incorporation of the Company, Sections 5 through 7./1/ 10.1 Split Dollar Insurance Agreement dated September 24, 1999 between the Company and the Newman 1994 Family Trust./2/ 10.2 Assignment of Policy dated September 24, 1999 between the Company and the Newman 1994 Family Trust./2/ 10.3 Amendment to Guaranty dated September 24, 1999, amending Guaranty Agreement dated May 20, 1994./2/ 10.4 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Springdale, Arkansas store./1/ 10.5 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the North Little Rock, Arkansas store./1/ 10.6 Lease Agreement dated September 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Fort Smith, Arkansas store./1/ 10.7 Lease Agreement dated June 1, 1992 between Dwain A. Newman and Glenda R. Newman and the Company for the Bentonville, Arkansas store./1/ 10.8 Master Security Agreement dated November 16, 2000 between General Electric Capital Corporation and the Company.* 10.9 Lease Agreements dated December 22, 1992 between Valley Park Limited Partnership and the Company for the Russellville, Arkansas store./1/ 10.10 Subordination, Attornment and Non-Disturbance Agreement and Estoppel Certificate dated September 10, 1992 between ATRS, the Company, and Dwain A. Newman and Glenda R. Newman for the Springdale, North Little Rock and Fort Smith Leases./1/ 10.11 Form of the 1993 Employee Stock Purchase Plan of National Home Centers, Inc./1/ 10.12 Form of the Company's 1993 Incentive Compensation Plan./1/ 10.13 Promissory note dated November 16, 2000 between General Electric 22 Exhibit No. Description ----------- ----------- Capital Corporation and the Company.* 10.14 Guaranty Agreement effective May 20, 1994./2/ 10.15 Promissory note dated December 19, 2000 between General Electric Capital Corporation and the Company.* 10.16 Promissory Note and Mortgage dated May 5, 1995 to Simmons First Bank of Arkansas for Conway, Arkansas Store./4/ 10.17 Form of the Company's 401(k) Adoption Agreement with Morgan Stanley Dean Witter as Trustee.* 10.18 1996 Long-Term Performance Plan./4/ 10.19 Loan and Security Agreement with NationsCredit Commercial Funding./6/ 10.20 Amendment No. 1 to Loan Documents /8/ 10.21 Summary of Material Modification to the National Home Centers, Inc. 401(K) Retirement Plan.* 11.1 Computation of Earnings (loss) Per Share.* 13.1 National Home Centers, Inc. 2000 Annual Report (only those portions specifically incorporated herein by reference shall be deemed filed with the Commission).* 23.1 Consent of Arthur Andersen LLP.* 23

NATIONAL HOME CENTERS INC 10-K/A