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National Home Centers, Springdale

OUTSTANDING SHARES: (as of April 7, 1997): 7,142,251

COMPANY MARKET VALUE (based on June 13 closing stock price of $1.75 ): $12,498,939


Name & TitletShares Beneficially OwnedtValue

Dwain A. Newman, chairman/CEOt4,491,885t$7,860,799

Danny R. Funderburg, president/COOt107,067t187,367

Larry C. Chumley, president Contractor Divisiont36,179t63,313

Roger A. Holman, president Home Center Divisiont27,930t48,878

Brent A. Hanby, EVP/CFOt17,788t31,129

David W. Truetzel, dire ctort500t875

R. Dick Denison, directort5,000t8,750

Name & TitletttAll Other

YeartSalarytBonustStock OptionstCompensation

Dwain A. Newman, chairman/CEO


1995t 80,000t-0-t-0-t 12,773


Danny R. Funderburg, president/COO




Larry C. Chumley, president Contractor Division





The company’s net sales increased 14.4 percent to $177 million for the year ended Jan. 31 from $154.7 million for the year ended Jan. 31, 1996. Comparable store sales in fiscal 1996 increased 4.9 percent from fiscal 1995. The overall sales volume increase was primarily due to the opening of one new home-center superstore in late fiscal 1995 versus this store being open for all of fiscal 1996. The company had no substantive increase in the variety of products offered or sales territory other than the new store. The average annual sales per store for fiscal 1996 was $17.7 million compared to $16.6 million for fiscal 1995. Competition has become very intense over the past few years and is expected to continue. During fiscal 1996, Lowe’s opened stores in Russellville and Conway, and The Home Depot inc. opened stores in North Little Rock and west Little Rock. These stores have adversely affected the company’s sales and profit levels in these markets and may continue to do so in the future.

Gross profit as a percentage of net sales for fiscal 1996 decreased to 24.2 percent from 25.4 percent in fiscal 1995, due to increased competition in the contractor division and continued competitive pricing pressures in central and Northwest Arkansas. If any of the company’s major competitors seek to gain or retain market share by reducing prices or the new competitor locations mentioned offer promotional store opening pricing, the company may be required to lower prices, which would further reduce gross margins and profits.

Selling, general and administrative expenses as a percentage of net sales decreased to 24.9 percent in fiscal 1996 versus 25.2 percent in fiscal 1995. The company made a concentrated effort to reduce expenses as a percent of sales. The expense ratios as a percent of sales for newer stores were higher than older stores due to higher expenses such as salaries, advertising and depreciation.

Net interest expense as a percentage of net sales in fiscal 1996 increased to 2 percent from 1.8 percent in fiscal 1995, primarily as a result of higher interest rates on the variable-rate revolving credit facility and additional debt for the new Rogers superstore.

Effective income-tax rates were 34 percent and 37 percent for fiscal years 1996 and 1995, respectively. The effective rate for fiscal 1996 results from the income-tax benefit due to the net operating loss in fiscal 1996. As a result of the net operating loss carryback, the company has filed for a federal tax refund of approximately $1.3 million, which is expected to be received in the second quarter of fiscal 1997.