National Home Centers Hits the End of the Line

National Home Centers Inc. made a 38-year run as a family-controlled enterprise. The Springdale venture operated as a private company for 29 of those years, sandwiched around a nine-year stint in the public arena.

Among private companies in Arkansas, National ranked as high as No. 31 in 2006, with revenue of $273.1 million for the fiscal year that ended Jan. 31, 2006.

Who knew that high-water mark in revenue would mark the beginning of the end for a company that had survived so much competitive and market adversity since its launch in 1972? National Home Centers makes its final appearance, at No. 60, on Arkansas Business’ annual list of the largest Arkansas-based, Arkansas-owned private companies.

“We have had times when we had to tighten things, but nothing like this,” said Dwain Newman, founder and chief executive officer of National Home Centers. “We were doing a third of the business we were doing four years ago.”

Total revenue plummeted to $115.2 million for fiscal 2009 as many of the company’s largest customers, big homebuilders in Northwest Arkansas, went bust.

“It was a great run,” said Brent Hanby, former chief financial officer and Newman’s stepson. “We obviously went through the ups and downs of the housing market over the years. We peaked out in 2005, and then the bottom just dropped out.

“We had numerous customers who went bankrupt. They didn’t pay us, and there’s no protection for suppliers like us.”

All too often, National Home Centers became an unsecured creditor washed out through foreclosures and bankruptcies when homebuilders didn’t pay for materials used to construct houses.

Since 2006, bad debts from contractors began overwhelming the company. Last year, Newman realized it was time for drastic measures.

He took National Home Centers, battered by $12 million in bad-debt write-offs during the past several years, into Chapter 11 reorganization.

“We just couldn’t find anyone to loan us money at reasonable terms,” Newman said. “The fellows who bought this got a helluva deal.”

Unable to rework his company’s own debt and financing, the 76-year-old executive realized his family’s days of ownership were numbered. A court-approved $15 million sale of assets to Stock Building Supply Holdings LLC of Raleigh, N.C., took care of the secured creditors and preserved some jobs.

 

‘It’s a Funeral’

Newman still shakes his head at the way things went down after overcoming tough times that saw the waning of home improvement competitors such as Payless Cashways of Kansas City, Mo., Wickes of Vernon Hills, Ill., and Home Quarters Warehouse of Landover, Md., and the ascendance of Home Depot of Atlanta and Lowe’s of Mooresville, N.C.

“It’s a funeral, I tell you,” Newman said. “The outcome was just awful, to start something and it end like this. I figured I would die, and some National Home Center entity would be around, and it wouldn’t have vanished.”

The National Home Centers name eventually will be replaced by Stock Building Supply. Only the Springdale, Fort Smith, Sherwood and Conway stores will remain. Gone are Bentonville, Little Rock, Clarksville and Russellville in an Arkansas chain that numbered as many as 13 locations over the years.

“It was tough for Dwain to do this, but under the circumstances, it was the best thing to do to save the business and jobs,” said Hanby, now a manager of the Springdale store.

Gene Pfeifer, president of Mechanics Lumber Co., competed with National Home Centers in the Pulaski County market before selling the assets to Newman in 2003.

“They were very principled people to sell to,” Pfeifer said. “They did everything exactly as they were supposed to and went beyond that to be very kind to me and the employees in the sale.”

National didn’t buy Pfeifer’s Heber Springs property, which it leased with an option to buy until last year when the company opted to cancel the agreement.

“They returned the property to me in A-plus condition,” Pfeifer said. “I have nothing but compliments for them.

“They were fierce competitors, but once they inked the deal, they turned into very good friends. It doesn’t always end that way.”

 

National Home Centers Highlights

 

Jan. 2, 1972

Dwain Newman goes full-time with his National Window Co. of Springdale, which evolves into National Lumber Co. He bought a West Fork roof truss plant in 1975 and developed a Fort Smith location in 1977. The company focused on sales to professional builders and contractors until late 1983 when Newman made a move to diversify by opening the company’s first retail store in Springdale. The pursuit of the home improvement market gave rise to National Home Centers.

 

Oct. 13, 1985

National Home Centers entered the central Arkansas market with its Sherwood store and 240,000 SF of showroom, warehouse and protected lumber storage.

 

April 10, 1987

John Lee Good Jr., 27, was arrested for attempting to extort $100,000 from Dwain Newman. Good bluffed that he had kidnapped Newman’s teenaged stepson, Blake, who actually was safe at a friend’s house. After discovering the shakedown was a ruse, Newman contacted authorities who took Good into custody when he recovered a garbage bag with $5,000 at a prearranged drop in a trash dumpster behind Gene’s Donut Shop in Springdale. Good, who was sentenced to five years in prison, demanded the “loan” from Newman to finance a marijuana crop. Good claimed he would repay the money after his crop was harvested and sold.

 

 1988

National Home Centers expanded into Little Rock by taking over two leased Handy Dan locations and bought Eden Jones Lumber Co. of Rogers. The sales mix was split 55-45 between professional builders and do-it-yourself customers.

 

June 3, 1992

National Home Centers purchased Triangle Building & Supply of Bentonville.

 

Sept. 17, 1992

Merger talks between National Home Centers and Builders Warehouse Association Inc. of Conway were announced. The move would have allowed National to go public, but Newman decided against the deal. Good call. By 1995, Builders Warehouse had amassed three years of losses totaling $4.4 million, and its stock price ultimately degenerated into penny stock oblivion.

 

May 20, 1993

National Home Centers joined the ranks of public companies with a $19.8 million IPO. Shares opened trading on Nasdaq at $10, ending the day up a quarter. Newman retained ownership of the remaining 63.5 percent of the shares valued at $34.4 million. The company planned to use the IPO funds to add six Arkansas locations during the next two years. Preceding the public move, revenue for fiscal 1992 totaled $88 million.

 

June 17, 1993

National announced the $1.6 million purchase of Cash Lumber Co. of Conway, which also operated a location in Russellville. The deal was a market consolidation move for National, which already had a Conway store and a Russellville store under construction.

 

1998

The company endured a $13 million loss for the fiscal year ending Jan. 31, with $11 million of that associated with the closing of four locations in Conway, Rogers, Little Rock and Fayetteville. The 150,000-SF home center in Fayetteville, unprofitable since opening in 1994, was sold for $6.5 million to Home Depot Inc. of Atlanta. The Rogers home center and inventory were sold for a reported $14.9 million to Lowe’s Cos. Inc. of Mooresville, N.C. Shed debt and hunker down was the order of the day as undeveloped properties in Fort Smith, Fayetteville and Branson, Mo., were put on the market and sold. The company announced it was retreating from the consumer market with the goal of reducing its retail sales to 20 to 25 percent.

 

Feb. 12, 2002

National officially returned to private ownership after nearly nine years as a public company. The transition followed Newman making a tender offer of $1.40 per share to purchase the 2.6 million shares he didn’t already own.

 

Oct. 30, 2003

The company announced an agreement to buy the assets of Mechanics Lumber Co., which operated One Source Home & Building Centers in Little Rock, Arkmo Lumber & Supply Co. of North Little Rock and Cleburne County Building Center in Heber Springs. At the time, National employed 600 at eight Arkansas locations.

 

2007

Sales at National Home Centers fell by 20 percent compared with 2006 as the slowdown in homebuilding began taking its fiscal toll. It also marked the beginning of the company amassing $12 million in bad debts from contractors, write-offs that couldn’t be overcome.

 

Dec. 8, 2009

National Home Centers filed for Chapter 11 bankruptcy reorganization, listing both its assets and liabilities between $10 million and $50 million and the number of its creditors between 200 and 1,000.

 

April 6, 2010

The court-approved sale of National Home Centers Inc. of Springdale to Stock Building Supply Holdings LLC of Raleigh, N.C., was completed. The $15 million transaction emerged from National’s Chapter 11 bankruptcy reorganization and satisfied the company’s secured creditors. The court approved the closing of stores in Little Rock, Bentonville and Clarksville. The purchase marked the end of the race for National Home Centers as an Arkansas-based private company. Jobs were offered to 265 of National’s 400-member staff.