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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NATIONAL HOME CENTERS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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Notes:
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NATIONAL HOME CENTERS, INC.
P.O. BOX 789
HIGHWAY 265 NORTH
SPRINGDALE, ARKANSAS 72765
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1997
To the Stockholders of National Home Centers, Inc.:
Notice is hereby given that the annual meeting of Stockholders of National
Home Centers, Inc., an Arkansas corporation (the "Company"), will be held at the
Northwest Arkansas Holiday Inn, Springdale, Arkansas, on June 5, 1997, at 10:00
a.m., local time, for the following purposes:
1. To elect seven directors to serve for the ensuing year; and
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
RECORD DATE
Only stockholders of record at the close of business on April 7, 1997, will
be entitled to vote at the Annual Meeting and any adjournment thereof.
The Company's Proxy Statement and Annual Report are submitted herewith.
By Order of the Board of Directors
/s/ Brent A. Hanby
Brent A. Hanby
Executive Vice President and
Chief Financial Officer
Springdale, Arkansas
May 2, 1997
YOUR VOTE IS IMPORTANT
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO DATE, SIGN AND
PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH
YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE
GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER OR VOTE YOUR
SHARES IN PERSON IN THE EVENT YOU SHOULD ATTEND THE MEETING.
<PAGE>
NATIONAL HOME CENTERS, INC.
P.O. BOX 789
HIGHWAY 265 NORTH
SPRINGDALE, ARKANSAS 72765
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1997 AND ADJOURNMENTS
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy, for use only at the annual meeting of Stockholders to be
held at the Northwest Arkansas Holiday Inn, Springdale, Arkansas, on June 5,
1997, at 10:00 A.M., local time, and any adjournment thereof, is solicited on
behalf of the Board of Directors of National Home Centers, Inc. (the "Company").
The meeting will be held for purposes set forth in the notice of such meeting on
the cover page hereof. Such solicitation is being made primarily by mail, but
may also be made in person or by telephone or telegraph by officers, directors
and regular employees of the Company. All expenses incurred in the solicitation
will be borne by the Company.
Any stockholder executing a proxy retains the right to revoke it at any time
prior to exercise at the Annual Meeting. A proxy may be revoked by giving
written notice to Brent A. Hanby, Chief Financial Officer of the Company. A
proxy may also be revoked by the execution of a later proxy or by voting the
shares in person at the Annual Meeting. If not revoked, all shares represented
by properly executed proxies will be voted. Where a stockholder has specified a
choice with respect to any matter to be acted upon at the meeting, such shares
will be voted in accordance with the stockholder's wishes.
The approximate date this Proxy Statement is first being mailed to
stockholders is May 2, 1997.
OUTSTANDING STOCK AND VOTING RIGHTS
At the Annual Meeting, each stockholder will be entitled to one vote for
each share of Common Stock, $.01 par value ("Common Stock"), owned of record at
the close of business on April 7, 1997. The outstanding stock of the Company as
of the record date totaled 7,142,251 shares of Common Stock. Votes may be cast
in person or by proxy. The stock transfer books of the Company will not be
closed.
The enclosed form of proxy provides a method for stockholders to withhold
authority to vote for any one or more of the director nominees while still
granting authority to the proxy to vote for the remaining nominees. The names
of all nominees are listed on the proxy card. If you wish to grant the proxy
authority to vote for all nominees, check the box marked "FOR." If you wish to
withhold authority to vote for all nominees, check the box marked "WITHHOLD."
If you wish your shares to be voted for some nominees and not for one or more of
the others, indicate the name(s) of the nominee(s) for whom you are withholding
the authority to vote by writing the name(s) of such nominee(s) in the space
provided on the form of proxy. If you checked the box marked "WITHHOLD" your
vote will be treated as an abstention and accordingly your shares will neither
be voted for nor against a director but will be counted for quorum purposes.
<PAGE>
Although shares represented by proxies containing abstentions or indicating
broker non-votes will be considered as present at the meeting for purposes of
determining the presence of a quorum, abstentions and broker non-votes will not
otherwise be counted on any matters submitted to a vote at the meeting.
ITEM 1
ELECTION OF DIRECTORS
NOMINEES
The Company's By-Laws provide that the number of directors constituting the
Board of Directors shall be not less than six nor more than nine, as determined
by the Board of Directors. The Board's size is currently set at seven members.
The Company's directors each serve for a term of one year and until their
successors shall be elected and qualified. The following slate of seven
nominees has been chosen by the Board of Directors, and the Board recommends
that each be elected.
Name Age Experience
---- --- ----------
Dwain A. Newman 63 Chairman of the Board and Chief Executive Officer of
the Company since the organization of its predecessor
in 1968. President of the Company through February
1995. Prior to 1968, Mr. Newman was a contractor
salesman and general manager of Gateway Plywood and
Door Company of Springdale, Arkansas (division of
International Forest Products, Phoenix, Arizona);
regional manager of operations for International Forest
Products until 1972. Board of Directors of Home Center
Institute since 1994 (Chairman, 1994).
Danny R. Funderburg 51 President and Chief Operating Officer of the Company
since February 1995; Executive Vice President from
March 1993 through February 1995; General Manager of
the Company's North Little Rock store from 1989-1993
and Vice President from 1978 through March 1993.
Before joining the Company, Mr. Funderburg was a
factory representative with Boise Cascade. Director
since 1983. Board of Directors of Builder Marts of
America since 1996.
Larry C. Chumley 55 President, Contractor Division since February 1995;
Vice President, Contractor Division from October 1993
through February 1995. Previously served as manager of
the Company's Fort Smith store from 1988 through 1993.
Director since February 1995.
Roger A. Holman 50 President, Home Center Division since February 1995;
Vice President, Purchasing from 1984 through February
1995. Employed by the Company as a salesman from 1973
through 1984.
2
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Prior to his affiliation with the Company, Mr. Holman
was employed by Arkansas Western Gas Company and by
Service Supply. Director since 1984.
Brent A. Hanby 33 Executive Vice President since February 1995 and Chief
Financial Officer since 1990. Previously served as the
Company's Assistant Financial Officer from 1987 through
1990. Director since 1993.
David W. Truetzel 40 Chief Financial Officer and Secretary of First USA
Paymentech, Inc. since December, 1995. Previously
served as Vice President of A.G. Edwards & Sons, Inc.
from 1990 through 1995. Director since 1993.
R. Dick Denison 67 President and owner since 1984 of First San Francisco
Corporation, a Chicago based financial advisory firm.
Previously served as Senior Vice President and Director
of Edward Hines Lumber Co. and also as Vice President
and Treasurer of Quaker Oats Co. for eleven years.
Director since 1996.
Each of the foregoing nominees is currently serving as a director of the
Company and was elected at the Company's June 6, 1996 Annual Meeting. Each
nominee has been employed as described above for at least the past five years.
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.
Unless otherwise designated, the enclosed proxy will be voted for the
election of the foregoing nominees as directors. The Board of Directors does
not contemplate that any of the nominees will be unable to stand for election,
but should any nominee unexpectedly become unavailable for election, the persons
named as proxies shall have the authority to vote for the election of any other
person.
MEETINGS AND COMMITTEES
The Board of Directors held four meetings in fiscal 1996. All current
directors attended at least 75% of the meetings of the Board of Directors, and
of the Committee of the Board of which they were members during that period,
except Mr. Truetzel who attended 50% of the Board meetings.
The Board maintains a standing Audit Committee; Brent A. Hanby, R. Dick
Denison and David W. Truetzel are its members. The Audit Committee is charged
with reviewing the scope of the Company's audit and the engagement of its
independent auditors and such auditors' reports. The Audit Committee also meets
with the Company's financial staff to review accounting procedures and reports,
and performs such additional duties as may be specifically assigned from time to
time by the Board. The Audit Committee held one meeting during fiscal 1996.
The Company has a Compensation Committee which recommends to the Board of
Directors all salaries and bonuses for officers of the Company and reviews all
significant changes in compensation arrangements. The Company also expects the
Compensation Committee to administer the Company's employee benefit
3
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plans. Members of the Compensation Committee are Dwain A. Newman, R. Dick
Denison and David W. Truetzel. The Compensation Committee held one meeting
during fiscal 1996. See "Executive Compensation."
The Company does not have a standing nominating committee. The Board
nominates persons to stand for election as directors. The Board will consider
suggestions for names of possible future nominees made in writing by
stockholders and sent to the Secretary of the Company so that they are received
on or before March 1 in any year.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 7, 1997, 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 percent of its
outstanding Common Stock.
COMMON STOCK/(1)/
---------------------------------
NUMBER OF PERCENT OF CLASS
SHARES OWNED OWNED
DIRECTORS AND OFFICERS BENEFICIALLY BENEFICIALLY
- - ---------------------- ------------ ----------------
Dwain A. Newman 4,491,885/(2)/ 62.9%
Danny R. Funderburg 107,067 1.5%
Larry C. Chumley 36,179 *
Roger A. Holman 27,930 *
Brent A. Hanby 17,788 *
David W. Truetzel 500 *
R. Dick Denison 5,000 *
All directors and officers as
a group (12 Persons) 4,693,749 65.7%
Dimensional Fund Advisors, Inc. 359,200/(3)/ 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
- - -------------------------
* Less than 1 percent
/(1)/ Based on 7,142,251 shares of Common Stock outstanding as of April 7, 1997.
/(2)/ Dwain A. Newman holds 4,466,264 shares of Common Stock in his own name.
Mr. Newman's wife holds 12,121 shares of Common Stock in her own name and
Mr. and Mrs. Newman own 3,500 shares jointly. 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 4,491,885 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)/ By a Schedule 13G dated February 5, 1997, Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, has reported that it
beneficially owned 359,200 shares of National Home Centers Inc. stock as
of December 31, 1996. All of Dimensional's beneficially-owned shares are
held in portfolios of DFA Investment Dimensions Group, Inc., a registered
open-end investment company; series of the DFA Investment Trust Company, a
Delaware business trust; or the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit plans.
Dimensional serves as investment manager for all of the above. Dimensional
disclaims beneficial ownership of all such shares.
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EXECUTIVE OFFICERS
Dwain A. Newman, Danny R. Funderburg, Larry C. Chumley, Roger A. Holman,
Brent A. Hanby, Rick Campbell, John Collins, David Jackson, C. Belle Reed and
Robert H. Storment serve as executive officers of the Company. The first five
named individuals also serve as directors and are described above under the
caption "Election of Directors."
Rick Campbell, age 39, was promoted to Vice President, Purchasing-Marketing
in February 1995. Mr. Campbell has been employed with the Company since
September 1983 and previously served as Marketing and Merchandise Manager.
John Collins, age 38, 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.
David Jackson, age 50, was promoted to Vice President, Management
Information Systems in February 1995. Mr. Jackson previously served as Computer
Operations Manager and has been employed with the Company since April 1984.
C. Belle Reed, age 41, has served as the Corporate Controller for the past
nine 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 38, 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.
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.
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, R. Dick 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 are made
typically 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 1997 reflect performance in fiscal 1996. 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 1996.
5
<PAGE>
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 1996 COMPENSATION
The Company's executive compensation program for fiscal 1996 consisted of
(i) base salary, adjusted from the prior year, (ii) pro rata distribution under
the 401(k) Retirement Plan, and (iii) employee match related to the Employee
Stock Purchase Plan. 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 1996. Pro
rata distributions of the Company's contribution were made according to a
formula based on the individual's tenure with the Company and base salary.
During fiscal 1997, no executive officer will receive a cash bonus due to the
net loss for fiscal 1996.
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
1996 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 1996. During
fiscal 1997, Mr. Newman will not receive a bonus for fiscal 1996.
6
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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 1996 adequately reflect the Company's
compensation goals and policies.
Dwain A. Newman
R. Dick Denison
David W. Truetzel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, members of the Compensation Committee were Dwain A.
Newman, R. Dick Denison and David W. Truetzel. Dwain A. Newman is a member of
the Board of Directors and is an executive officer of the Company. Messrs.
Denison and Truetzel are members of the Board of Directors, but are not employed
by the Company.
Dwain A. Newman has assigned the leases on the Springdale, Fort Smith, 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 purchase
transaction resulted in a gain to the Company of $161,882, which was credited to
additional paid-in capital (net of related income taxes of $61,985). 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 1996, the Company paid Mr. Newman rent in the aggregate amount of
$432,000 on the Springdale property, $240,000 on the Fort Smith property, and
$624,000 on the North Little Rock property.
Mr. Newman also owns and leases to the Company the stores located in
Bentonville and Rogers and the Cabinet Craft manufacturing facility in
Springdale. The Company paid Mr. Newman a total of $296,400 in rent on these
properties during fiscal 1996.
The real estate transactions with Mr. Newman have simultaneously provided
the Company working capital and satisfactory long-term access to the related
facilities. For example, in the fiscal 1992 sale/leaseback transaction, the
Company received approximately $2.9 million of cash for its working capital
needs while securing long-term leases on three facilities (10 years with four
five-year renewal options) at rates comparable to those available from
unaffiliated third parties. 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 the transactions between Mr. Newman and
the Company were approved by the Board of Directors.
[The remainder of this page intentionally left blank.]
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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
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus/(1)/ Compensation Compensation/(3)/
- - ------------------ ------ -------- ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Dwain A. Newman 1996 $ 80,000 -0- -0- $15,087/(2)/
Chairman, Chief Executive 1995 80,000 -0- -0- 12,773/(2)/
Officer 1994 80,000 $20,000 -0- 19,918/(2)/
Danny R. Funderburg 1996 101,440 -0- -0- 745
President and Chief Operating 1995 99,533 40,000 -0- 648
Officer 1994 85,583 60,000 -0- 797
Larry C. Chumley 1996 80,000 -0- -0- 584
President, Contractor Division 1995 79,167 50,000 -0- 578
1994 75,833 68,000 -0- 763
</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: $6,531 (fiscal 1996); $5,281 (fiscal 1995); and $13,108 (fiscal
1994). Also includes Mr. Newman's share (related PS-58 cost) of premiums
paid on split-dollar life insurance policies in the following amounts:
$7,962 (fiscal 1996); $7,094 (fiscal 1995); and $6,412 (fiscal 1994).
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 two policies are 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, $594 (fiscal 1996), $398 (fiscal 1995); and $398 (fiscal 1994);
Danny R. Funderburg, $745 (fiscal 1996); $648 (fiscal 1995), and $797
(fiscal 1994); and Larry C. Chumley, $584 (fiscal 1996); $578 (fiscal
1995), and $763 (fiscal 1994).
COMPENSATION OF DIRECTORS
The Company pays each of its outside directors $10,000 per year, regardless
of the number of meetings attended. During fiscal 1996, 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.
8
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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 since May 20, 1993, the date of the Company's
initial public offering of its common stock.
[CORPORATE PERFORMANCE GRAPH APPEARS HERE]
TOTAL RETURN ANALYSIS
National Home Centers, Inc. $ 100.00 $ 107.32 $ 37.80 $ 21.95 $ 14.63
Peer Group $ 100.00 $ 93.88 $ 117.97 $111.77 $ 121.07
S&P 500 $ 100.00 $ 108.79 $ 109.37 $151.60 $ 191.51
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 at
May 20, 1993.
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.; Eagle Hardware & Garden, Inc.; Hechinger Company; The
Home Depot, Inc.; Lowes Companies, Inc.; Payless Cashways; Waban, Inc.; and
Wolohan Lumber Co. Inclusion of these companies in the peer group index was
approved by the Board of Directors.
9
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COMPENSATION PLANS
Life Insurance. The Company maintains a split-dollar life insurance policy
on Dwain A. Newman, in which the beneficiaries have been selected by Mr. Newman.
Upon Mr. Newman's death, the Company will be reimbursed by the policy
beneficiary in an amount equal to the lesser of premiums paid by the Company or
the cash surrender value. See "Summary Compensation Table."
The Company has entered into a split-dollar life insurance agreement with a
trust which owns two $10 million joint life insurance policies on the lives of
the Company's chairman and majority shareholder, Dwain A. Newman, and his wife,
Glenda R. Newman. The policies become payable upon the death of the last to
die. Under the terms of the agreement, the Company will pay the premiums
required under the insurance policies. The Company is entitled to reimbursement
of the amounts advanced, without interest, upon the termination of the policies,
and will have a security interest in the cash values and death benefits payable
under the policies as repayment of such advances. In the event the policies are
terminated before the cash surrender values exceed the premium advances made by
the Company, the Company has entered into a Guaranty Agreement with Mr. Newman.
Under this agreement Mr. Newman has agreed to reimburse the Company for any
deficiency in the cash surrender value of the policies. Inasmuch as the
premiums advanced by the Company are fully reimbursable, there is no affect on
the Company's net earnings as a result of these payments. As of January 31,
1997, the Company has advanced approximately $912,498 in premium payments under
the policies which is included in other assets in the consolidated balance
sheet.
Employee Stock Purchase Plan. The Company's 1993 Amended and Restated
Employee Stock Purchase Plan (the "Purchase Plan") provides a means for full-
time employees who have been employed by the Company for 12 consecutive months
(except persons owning 10 percent or more of the Company's Common Stock) to
purchase shares of Common Stock through regular payroll deductions. The
Purchase Plan was adopted by the Board of Directors and approved by the
Company's stockholders on March 23, 1993. The Company registered the Purchase
Plan under the Securities Act of 1933, effective February 23, 1994. The
Purchase Plan is administered by Boatmen's Trust Company of St. Louis.
Approximately 527 employees of the Company were eligible to participate in the
Plan as of January 31, 1997, of which 152 employees participated.
Each eligible employee who chooses to participate in the Purchase Plan may
elect payroll deductions of at least one percent but not more than five percent
of the participant's gross pay, up to a maximum of $2,400 per year. The Company
annually contributes an amount equal to 10 percent of each participant's
contributions to the Purchase Plan and pays all administrative costs and
brokerage commissions (the "Company Contribution"). At December 31, 1996, the
Company made a contribution of $8,020 to the Plan. The Company may, through
action of its Board, elect to forego making part or all of any Company
Contribution if the Company incurs a net loss for the most recent Purchase Plan
year, exclusive of extraordinary items. The Company has no obligation to make
up any Company Contribution that had been foregone.
A participant may terminate or revise his or her payroll deduction at any
time, provided that once a participant terminates payroll deductions he or she
may not recommence deductions for a period of six months. A participant may
withdraw any or all of the full shares of stock held in his or her account at
any time. Any participant who is subject to the reporting requirements of
Section 16 of the Securities
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Exchange Act of 1934 and who requests delivery of a certificate must either (i)
cease participation in the Purchase Plan for a period of at least six months, or
(ii) hold the stock represented by the certificate for a period of six months
prior to disposition of that stock. A participant may also withdraw from
participation in the Purchase Plan at any time, but may not renew participation
sooner than six months after he or she has withdrawn from the Purchase Plan
unless the participant re-enrolls during the open enrollment period.
Participants who are subject to the reporting requirements of Section 16 of the
Securities Exchange Act of 1934 may not re-enroll during the open enrollment
period.
The Company, acting through its Board of Directors, may amend or terminate
the Purchase Plan at any time, provided that no such amendment or termination
may result in the forfeiture of any funds deducted from the salary of or paid by
any participant or contributed by the Company on behalf of any participant, or
of any shares or fractional interest in shares purchased for the participant, or
of any dividends or other distribution with respect to such shares, effective
before the effective date of amendment or termination of the Purchase Plan.
401(K) Retirement Plan. In order to attract and retain employees, the
Company maintains a 401(k) Retirement Plan which allows contributions to be made
by employees. Assets from the Profit Sharing Plan were merged with the 401(k)
Retirement Plan as of May 1, 1995. The 401(k) Retirement Plan covers
substantially all of the Company's eligible employees. Any company match will
be discretionary and determined each year by the Board of Directors.
Contributions by the Company to the 401(k) Retirement Plan for the plan
year ended December 31, 1996 amounted to $52,935. The Board of Directors
determined this amount by a subjective assessment of Company performance and
overall employee benefit contribution levels. The Company does not guarantee
any future matching contributions. Employee contributions range from one to
fifteen percent of gross pay and the individual maximum contribution limit for
fiscal 1996 was $9,500.
CERTAIN TRANSACTIONS
Dwain A. Newman was a party to certain transactions with the Company during
fiscal 1996. See "Executive Compensation--Compensation Committee Interlocks and
Insider Participation."
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.
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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 percent
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 1996, or written representations from certain reporting
persons, the Company believes that each such person has timely complied with all
filing requirements.
AUDITORS TO BE PRESENT
The Company employs Arthur Andersen LLP ("Andersen") as its principal
independent public accountants. A representative of Andersen is expected to
attend the Annual Meeting and will have the opportunity to make a statement.
The representative will also be available to respond to appropriate questions.
On October 28, 1996, the Company changed its principal independent
accounting firm from KPMG Peat Marwick LLP ("KPMG") to Andersen. KPMG's report
on the financial statements for the past two years did not contain an adverse
opinion or a disclaimer of opinion, nor was the report qualified or modified as
to uncertainty, audit scope, or accounting principles. The decision to change
accountants was recommended and approved by the audit committee of the board of
directors. During the Company's two most recent fiscal years and the subsequent
interim period preceding this change, there have not been any disagreements with
KPMG on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure.
On October 28, 1996, the Company engaged Andersen as the new independent
accountant to audit the Company's financial statements. During the Company's
two most recent fiscal years, and the subsequent interim period prior to
engaging Andersen, the Company has not consulted Andersen regarding (i) either:
the application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements, and no written report was provided to the
Company and no oral advice was provided that Andersen concluded was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation
S-K) or a reportable event (as described in paragraph 304(a)(1)(v) of Regulation
S-K). Andersen has reviewed the disclosure contained herein and agrees with the
same.
VOTING PROCEDURES
Nominees for the Board of Directors of the Company will be elected by a
plurality of the votes of shares of all classes of Common Stock present in
person or represented by proxy at the Annual Meeting. Stockholder votes cast by
proxy or in person at the Annual Meeting will be tabulated by the
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Company's transfer agent, Boatmen's Trust Company, St. Louis, Missouri, and the
results will be announced by the transfer agent at the Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to be held on June 4, 1998 must be received by the Company on or
before December 31, 1997 in order to be eligible for inclusion in the Company's
Proxy Statement and form of proxy. To be so included, a proposal must also
comply with all applicable provisions of Regulation 14A under the Securities
Exchange Act of 1934.
ADDITIONAL INFORMATION AVAILABLE
UPON WRITTEN REQUEST OF ANY STOCKHOLDER, THE COMPANY WILL FURNISH A COPY OF
THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO. THE WRITTEN REQUEST SHOULD BE SENT TO MR. BRENT A. HANBY,
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, AT THE COMPANY'S EXECUTIVE
OFFICE. THE WRITTEN REQUEST MUST STATE THAT AS OF APRIL 7, 1997, THE PERSON
MAKING THE REQUEST WAS A BENEFICIAL OWNER OF COMMON STOCK OF THE COMPANY.
OTHER MATTERS
So far as now known, there is no business other than that described above
to be presented to the stockholders for action at the Annual Meeting. Should
other business come before the meeting, votes may be cast pursuant to proxies in
respect to any such business in the best judgment of the persons acting under
the proxies.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Brent A. Hanby
Brent A. Hanby
Executive Vice President and
Chief Financial Officer
May 2, 1997
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APPENDIX A
NATIONAL HOME CENTERS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, JUNE 5, 1997
The undersigned hereby constitute(s) and appoint(s) Dwain A. Newman and
Brent A. Hanby as Proxies, each with the power to appoint his substitute, and
hereby authorizes the Proxies, or either of them, to represent and vote as
designated on this proxy card all of the shares of common stock of National Home
Centers, Inc. held of record by the undersigned on April 7, 1997, at the Annual
Meeting of Stockholders to be held on June 5, 1997, and any adjournment thereof.
This card also constitutes voting instructions for all shares held by the
undersigned as a participant in National Home Centers, Inc. Employee Stock
Purchase Plan and held of record by Boatmen's Trust Company as plan
administrator.
ELECTION OF DIRECTORS
NOMINEES: Dwain A. Newman, Danny R. Funderburg, Larry C. Chumley, Roger A.
Holman, Brent A. Hanby, R. Dick Denison, David W. Truetzel
PLEASE SEE REVERSE SIDE
Please Mark your votes as in this example [X].
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Election of Directors.
1. ELECTION OF DIRECTORS
FOR WITHHOLD
[_] [_]
For, except vote withheld from the following nominee(s):
-------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such
business as may properly come before the meeting.
Change of Address, show at left.
Please sign exactly as name appears hereon. Joint tenants should each
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If the signer is a corporation, please sign in
full corporate name by duly authorized officer. If a partnership, please sign
in partnership name by authorized person.
- - ---------------------------------- ----------------------------------
Signature Date
- - ---------------------------------- ----------------------------------
Signature Date
(If jointly held)
