<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
             ______________________________________________________

                                   FORM 10-K
(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)
<PAGE>

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
<PAGE>

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:

<TABLE>
<CAPTION>
                                Opening                 Area in Square Feet     Retail/Contractor             Fabrication
       Store Location            Date      Acreage     Retail      Warehouse         Mix (%)          SKUs     Operations
       --------------            ----      -------   -----------  ------------       -------          ----     ----------
<S>                            <C>        <C>        <C>          <C>           <C>                 <C>       <C>
I.  Northwest Arkansas
     Springdale                    11/83         21       49,300       190,000               30/70    14,000  door, window
     Bentonville                   06/92          6       20,200        18,000               0/100     5,000  door, window
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                Opening                 Area in Square Feet     Retail/Contractor             Fabrication
       Store Location            Date      Acreage     Retail      Warehouse         Mix (%)          SKUs     Operations
       --------------            ----      -------   -----------  ------------       -------          ----     ----------
<S>                            <C>        <C>        <C>          <C>           <C>                 <C>       <C>
II.  Fort Smith
      Fort Smith                   12/77         10       31,100       110,000               0/100     8,000  door, window

III.  Little Rock
       North Little Rock           10/85         13       96,200       150,000               45/55    27,000  door, window
       Conway Contractor           05/93          4            0        30,000               0/100     4,000  door, window
       Maumelle                    06/93          3            0        20,000               0/100       900

IV.  Russellville
       Russellville                06/93         14       30,000        80,000               0/100    12,000  door, window
       Clarksville                 09/95          1            0        14,000               0/100     5,000            --
                                                         -------       -------
       Total area                                        226,800       612,000               21/79
</TABLE>

     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
<PAGE>

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:

<TABLE>
<CAPTION>

                                                                   Fiscal Year Ending January 31,
Products                                                   2001                 2000                 1999
-------------------------------------------                ----                 ----                 ----
<S>                                                     <C>                  <C>                  <C>
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%
</TABLE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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.

<TABLE>
<CAPTION>

Fiscal 1999                                                High                         Low
------------------------------------------------   ------------------------  -----------------------------
<S>                                                 <C>                         <C>
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
</TABLE>

                                       8
<PAGE>

<TABLE>
<S>                                               <C>                       <C>
Fiscal 2001
------------------------------------------------
First Quarter (through April 20, 2001)                                1.27                           1.09
</TABLE>



                                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.

PART III

Item 10.  Directors and Executive Officers of the Registrant.
          --------------------------------------------------

         Incorporated by reference from the sections captioned "Election of
Directors," "Executive Officers" and "Section 16 Requirements" contained in the
Company's Proxy Statement for Annual Meeting of Stockholders and Adjournments
(the "Proxy Statement").

                                       9
<PAGE>

Item 11.  Executive Compensation.
          ----------------------

         Incorporated by reference from the section captioned "Executive
Compensation" contained in the Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
          --------------------------------------------------------------

         Incorporated by reference from the section captioned "Principal
Stockholders" contained in the Proxy Statement.

Item 13.  Certain Relationships and Related Transactions.
          ----------------------------------------------

         Incorporated by reference from the sections captioned "Executive
Compensation--Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" contained in the Proxy Statement.

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.
             -----------------------------------------------

<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------------------  -----------------------------------------------------------------------
<S>                      <C>
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/
</TABLE>

                                       10
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------------------  -----------------------------------------------------------------------
<S>                      <C>
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.

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/
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------------------  -----------------------------------------------------------------------
<S>                      <C>
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

</TABLE>

/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.

                                       12
<PAGE>

                                   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.

         April 27, 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.



         April 27, 2001      By:    /s/ DWAIN A. NEWMAN
                                ---------------------------------
                             Dwain A. Newman
                             Chairman of the Board and  Chief Executive Officer

         April 27, 2001      By:  /s/ DANNY R. FUNDERBURG
                                ---------------------------------
                             Danny R. Funderburg
                             President, Chief Operating Officer and Director

         April 27, 2001      By:  /s/ ROGER A. HOLMAN
                                ---------------------------------
                             Roger A. Holman
                             Vice President, Purchasing - Marketing and Director

         April 27, 2001      By:   /s/ BRENT A. HANBY
                                ---------------------------------
                             Brent A. Hanby
                             Executive Vice President, Chief Financial Officer
                              and Director

         April 27, 2001      By:   /s/ RICHARD D. DENISON
                                ---------------------------------
                             Richard D. Denison
                             Director

         April 27, 2001      By:   /s/ DAVID W. TRUETZEL
                                ---------------------------------
                             David W. Truetzel
                             Director

                                       13
<PAGE>

                               INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.  Description
-----------  -----------
<S>          <C>
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
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.  Description
-----------  -----------
<S>          <C>
             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 First
             Tennessee National Bank as Trustee.

10.18        1996 Long-Term Performance Plan./4/

10.19        Loan and Security Agreement with NationsCredit Commercial
             Funding./8/

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
</TABLE>

                                       15
<PAGE>

MANAGMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION

The following discussion should be read in conjunction with the "Selected
Financial Data" and the related notes thereto and the Company's audited
financial statements and the related notes thereto appearing elsewhere in this
annual report.

RESULTS OF OPERATIONS

Net sales for the three fiscal years ended January 31, 2001, and the respective
total and comparable store percentage increases (decreases) were:
<TABLE>
<CAPTION>

                                                            Total Company          Comparable Store
Year Ended January 31,                 Net Sales        Increases (Decreases)   Increases (Decreases)
<S>                                  <C>                 <C>                     <C>
2001                                  $ 96,604,067             (12)%                   (12)%
2000                                   110,040,562               5%                     16%
1999                                   104,745,826             (31)%                   (13)%
</TABLE>
YEAR ENDED JANUARY 31, 2001 COMPARED TO YEAR ENDED JANUARY 31, 2000

NET SALES - The Company's net sales decreased 12.2% to $96.6 million for the
year ended January 31, 2001 (fiscal 2000) from $110.0 million for the year ended
January 31, 2000 (fiscal 1999).  Comparable store sales in fiscal 2000 decreased
12.2% from fiscal 1999.  The overall sales dollar decrease was primarily due to
lower sales volume during the fourth quarter of 2000 as a result of the snow and
icy weather, higher interest rates and severe lumber deflation during 2000.
Single-family building permits were down 12% and multi-family building permits
were down 35% in fiscal 2000 versus fiscal 1999. The Company had no substantive
increase in the variety of products offered or its sales territory.  The average
annual sales per store for fiscal 2000 was $12.1 million compared to $13.8
million for fiscal 1999.  Competition has become very intense over the past few
years and is expected to continue.

GROSS PROFIT - Gross profit as a percentage of net sales for fiscal 2000
increased to 25.0% from 22.5% in fiscal 1999, due to management's efforts to
increase margins in all categories of products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses as a percentage of net sales increased to 23.2% in
fiscal 2000 versus 20.2% in fiscal 1999.  Expenses as a percentage of sales were
higher due to lower sales dollars.  The increase in salaries and benefits
reflects the higher costs associated with the tight labor markets in which the
Company operates.  In addition, transportation expenses (included in other
selling, general and administrative expenses) were higher as a percentage of net
sales due to a large increase in fuel costs.

INTEREST EXPENSE - Net interest expense as a percentage of net sales in fiscal
2000 increased to 1.6% from 1.3% in fiscal 1999, primarily as a result of higher
interest rates for most of fiscal year 2000 compared to fiscal 1999.  See Note 2
of Notes to Financial Statements for additional information on debt and
interest.

INCOME TAXES - No income tax expense was recorded in fiscal 2000 or 1999, as the
tax effects of previously unrecognized NOL carryforwards utilized in fiscal 2000
and fiscal 1999 were included in the net decrease in the valuation allowance for
deferred tax assets for the year.  See Note 3 of Notes to Financial Statements
for additional information on income taxes.
<PAGE>

YEAR ENDED JANUARY 31, 2000 COMPARED TO YEAR ENDED JANUARY 31, 1999

NET SALES - The Company's net sales increased 5.1% to $110.0 million for the
year ended January 31, 2000 (fiscal 1999) from $104.7 million for the year ended
January 31, 1999 (fiscal 1998).  Comparable store sales in fiscal 1999 increased
16.2% from fiscal 1998.  The overall sales volume increase was primarily due to
attractive mortgage rates and strong housing demand.  The Company had no
substantive increase in the variety of products offered or its sales territory.
The average annual sales per store for fiscal 1999 was $13.8 million compared to
$15.8 million for fiscal 1998.  Competition has become very intense over the
past few years and is expected to continue.

GROSS PROFIT - Gross profit as a percentage of net sales for fiscal 1999
decreased to 22.5% from 22.6% in fiscal 1998, due to increased competition and
continuing competitive pricing pressures in central and northwest Arkansas.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses as a percentage of net sales decreased to 20.2% in
fiscal 1999 versus 23.3% in fiscal 1998.  This decrease as a percentage of net
sales is primarily due to the closing of the two large retail stores which
incurred higher operating expenses (including salaries) and as a result of
reduced rent expense and depreciation expense.

INTEREST EXPENSE - Net interest expense as a percentage of net sales in fiscal
1999 decreased to 1.3% from 2.1% in fiscal 1998, primarily as a result
retirement of indebtedness (which led to decreased interest expense) on the
Fayetteville and west Rogers retail stores.  See Note 2 of Notes to Financial
Statements for additional information on debt and interest.

INCOME TAXES -  No income tax expense was recorded in fiscal 1999, as the tax
effects of previously unrecognized NOL carryforwards utilized in 1999 were
included in the net decrease in the valuation allowance for deferred tax assets
for the year. No income tax benefit was recorded in fiscal 1998, as the tax
effects of NOL's generated in 1998 were included in the net increase in the
valuation allowance for deferred tax assets for the year. See Note 3 of Notes to
Financial Statements for additional information on income taxes.


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to changes in interest rates on a majority of its total
debt. See Note 2 to the financial statements for discussion of the Company's
total debt. Any increases in interest rates could also affect the ability of the
Company to collect accounts receivable from customers. The Company depends on
the market for favorable long-term mortgage rates to help generate sales and
create housing turnover. Should mortgage rates continue to increase
substantially, the Company could have difficulty generating sales. The Company's
exposure to commodity markets for lumber, plywood and other building materials
does fluctuate in pricing but is limited to what is held in inventory as the
Company does not trade commodity futures or options. Quotes to customers for
proposed products to be sold are short-term and increases or decreases in
commodity pricing are generally passed on to the customer. The Company has no
foreign sales and accepts payment only in US dollars; therefore it is not
subject to any currency exchange rate risk.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital at January 31, 2001 decreased to $12.9 million
from $14.7 million at January 31, 2000, primarily due to lower inventories and
lower accounts receivable as a result of the decreased sales during the fourth
quarter of fiscal 2000.

The Company's primary capital needs are to finance inventories and accounts
receivable.  During the year ended January 31, 2001, operating activities
provided net cash of $3.4 million.  Primary uses of cash from operating
activities included approximately $0.9 million from decreases in accounts
payable and accrued expenses. The primary sources of cash was an approximate
$1.5 million decrease in accounts receivable, $1.1 million decrease in
inventories, and $1.3 million from net income including depreciation.

Net cash used in investing activities for the year ended January 31, 2001 was
approximately $1.2 million, principally due to additions of property, plant and
equipment of $1.1 million.

Net cash used in financing activities during fiscal 2000 totaled approximately
$2.3 million, primarily from repayments under the revolving credit facility.

At January 31, 2001, the Company owed $12.5 million under its revolving credit
agreement. This agreement provides a revolving credit loan commitment not to
exceed the lesser of (i) $20 million, or (ii) a borrowing base of 85% and 65% of
eligible accounts receivable and eligible inventory, respectively, with
receivable and inventory availability each capped at $10 million. Based upon
eligible accounts receivable and eligible inventory as of January 31, 2001, the
Company had approximately $1.3 million of additional borrowing capacity under
the revolving credit agreement.  The current revolving credit agreement expires
July 14, 2002.  Borrowings under the revolving credit agreement are
collateralized by the Company's accounts receivable and inventory. The Company
was in compliance with all covenants at January 31, 2001.

The Company's current ratio was 2.4 to 1 at January 31, 2001 and January 31,
2000.  The Company's total liabilities to equity ratio was 2.2 to 1 at January
31, 2001 versus 2.5 to 1 at the end of fiscal 1999.  Return on average
investment for the three years ended January 31, 2001, 2000 and 1999 was 2.1%,
11.5% and (28.5)%, respectively.

FORWARD-LOOKING STATEMENTS

Many issues discussed in this annual report are forward-looking statements made
under Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These statements involve known
and unknown risks, uncertainties and other factors that may cause results,
levels of activity, growth, performance, earnings per share or achievements to
be materially different from any future results, levels of activity, growth,
performance, earning per share or achievements expressed or implied by such
forward-looking statements. Investors are cautioned that all forward-looking
statements involve risk and uncertainties. The Company does not undertake to
publicly update or revise its forward looking statements even if experience or
future changes make 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
extent of new and existing competition; the Company's ability to maintain
competitive pricing in its markets; the Company's ability to maintain adequate
levels of vendor support; the Company's ability to maintain adequate levels of
lender support; the ability of the Company 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; commodity prices;
weather; and other factors described from time to time in the Company's
Securities and Exchange Commission filings. Actual events or results may differ
materially from those described above and those further set forth by the Form
10-K.
<PAGE>

National Home Centers, Inc.   Selected Financial Data
(in thousands, except selected operating and per share data)

<TABLE>

                                                                              For Fiscal Year Ending January 31,
<S>                                                 <C>                <C>             <C>             <C>           <C>
Statement of Operations Data:                                 2001            2000            1999             1998          1997
     Net sales                                      $       96,604         110,041         104,746          150,756       177,001
     Cost of sales                                          72,494          85,320          81,121          117,072       134,104
     Gross profit                                           24,110          24,721          23,625           33,684        42,897
     Selling, general and administrative
         expenses                                           22,368          22,168          24,422           43,375        44,023
     Operating income (loss)                                 1,743           2,553            (797)          (9,691)       (1,126)
     Interest expense, net                                  (1,517)         (1,438)         (2,162)          (3,660)       (3,583)
     Earnings (loss) before income taxes                       226           1,115          (2,959)         (13,351)       (4,709)
     Income tax benefit                                          0               0               0             (341)       (1,601)
     Net earnings (loss)                            $          226           1,115          (2,959)         (13,010)       (3,108)
                                                  -------------------------------------------------------------------------------
     Earnings (loss) per share                      $         0.03            0.16           (0.41)           (1.82)        (0.44)
                                                  -------------------------------------------------------------------------------
     Weighted average number of common                                                                                      7,142
         shares outstanding                                  7,142           7,142           7,142            7,142
                                                  -------------------------------------------------------------------------------

Selected Financial Data:
     Total assets                                   $       33,506          35,896          32,193           61,790        84,838
     Long-term debt                                         13,525          15,030          12,427           23,323        29,320
     Net property, plant and equipment                       8,213           7,731           7,899           29,286        37,266
     Stockholders' equity                                   10,532          10,306           9,190           12,150        25,160

Selected Operating Data:
     Number of stores at end of period                           8               8               8               10            13
     Average total sales per square foot -
       Retail and Contractor (1)                    $          426             485             250              202           229
     Comparable store sales increase                        (12.2)%           16.2%         (12.5)%          (12.3)%          4.9%
       (decrease)
</TABLE>

(1)  Net sales divided by average retail square feet for the period.
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                              Financial Statements

                        January 31, 2001, 2000 and 1999

             Together with Report of Independent Public Accountants
<PAGE>

                    Report of Independent Public Accountants
                    ----------------------------------------




To the Board of Directors and Shareholders of
National Home Centers, Inc.:


We have audited the accompanying balance sheets of National Home Centers, Inc.
(an Arkansas corporation) as of January 31, 2001 and 2000, and the related
statements of operations and accumulated deficit and cash flows for each of the
three years in the period ended January 31, 2001.  These financial statements
are the responsibility of the Company's management.   Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Home Centers, Inc. as
of January 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended January 31, 2001, in
conformity with accounting principles generally accepted in the United States.



                                                     Arthur Andersen LLP



Fayetteville, Arkansas
March 23, 2001
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                                 Balance Sheets

                           January 31, 2001 and 2000
<TABLE>
<CAPTION>



                              Assets                                      2001         2000
                              ------                                      ----         ----
<S>                                                                 <C>            <C>
Current assets:
 Cash                                                                $    38,928       43,847
 Accounts receivable, less allowance for doubtful accounts of
  $139,000 in 2001 and $210,000 in 2000                                8,261,858    9,994,939
 Inventories                                                          13,544,665   14,675,988
 Prepaid expenses and other                                              536,668      541,606
                                                                     -----------   ----------
   Total current assets                                               22,382,119   25,256,380
                                                                     -----------   ----------

Property, plant and equipment:
 Land                                                                  1,433,846    1,433,846
 Buildings and improvements                                            6,360,083    6,025,280
 Machinery and equipment                                              10,951,614   10,883,336
                                                                     -----------   ----------
                                                                      18,745,543   18,342,462
 Less accumulated depreciation                                        10,532,852   10,611,433
                                                                     -----------   ----------
   Net property, plant and equipment                                   8,212,691    7,731,029
                                                                     -----------   ----------

Other assets, at cost less amortization of $640,200 in 2001 and
 $471,200 in 2000                                                      2,910,801    2,908,675
                                                                     -----------   ----------
      Total assets                                                   $33,505,611   35,896,084
                                                                     ===========   ==========

              Liabilities and Stockholders' Equity
              ------------------------------------
Current liabilities:
 Current installments of long-term debt                              $   759,660      988,832
 Accounts payable                                                      6,091,847    6,491,277
 Accrued expenses                                                      2,597,841    3,079,971
                                                                     -----------   ----------
   Total current liabilities                                           9,449,348   10,560,080
                                                                     -----------   ----------

Long-term debt, excluding current installments                        13,524,627   15,030,208
                                                                     -----------   ----------
Commitments and contingencies

Stockholders' equity:
 Preferred stock, $1.00 par value.  5,000,000 shares authorized;
  no shares issued                                                             -            -
 Common stock, $.01 par value.  25,000,000 shares authorized;
  issued 7,465,958 shares                                                 74,660       74,660
 Additional paid-in capital                                           20,831,739   20,831,739
 Accumulated deficit                                                  (9,111,319)  (9,337,159)
                                                                     -----------   ----------
                                                                      11,795,080   11,569,240
 Treasury stock, 323,707 common shares at cost                        (1,263,444)  (1,263,444)
                                                                     -----------   ----------
   Total stockholders' equity                                         10,531,636   10,305,796
                                                                     -----------   ----------
    Total liabilities and stockholders' equity                       $33,505,611   35,896,084
                                                                     ===========   ==========

</TABLE>
      The accompanying notes are an integral part of these balance sheets.
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                            Statements of Operations
                            and Accumulated Deficit

                  Years ended January 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>



                                                      2001          2000          1999
                                                      ----          ----          ----
<S>                                              <C>            <C>           <C>
Net sales                                         $96,604,067   110,040,562   104,745,826
Cost of sales                                      72,493,736    85,319,586    81,121,118
                                                  -----------   -----------   -----------
         Gross profit                              24,110,331    24,720,976    23,624,708
                                                  -----------   -----------   -----------

Operating expenses:
  Salaries and benefits                            15,179,358    14,619,424    15,506,681
  Rent                                              1,239,988     1,143,206     1,704,078
  Depreciation and amortization                     1,295,696     1,235,639     1,759,353
  Other                                             4,652,480     5,169,877     5,451,981
                                                  -----------   -----------   -----------
                                                   22,367,522    22,168,146    24,422,093
                                                  -----------   -----------   -----------
         Operating income (loss)                    1,742,809     2,552,830      (797,385)

Interest expense                                    1,516,969     1,437,449     2,162,058
                                                  -----------   -----------   -----------
     Earnings (loss) before income taxes              225,840     1,115,381    (2,959,443)

Income taxes                                                -             -             -
                                                  -----------   -----------   -----------
         Net earnings (loss)                          225,840     1,115,381    (2,959,443)

Accumulated deficit:
  Beginning of year                                (9,337,159)  (10,452,540)   (7,493,097)
                                                  -----------   -----------   -----------
  End of year                                     $(9,111,319)   (9,337,159)  (10,452,540)
                                                  ===========   ===========   ===========

Earnings (loss) per share (basic and diluted)     $      0.03          0.16         (0.41)
                                                  ===========   ===========   ===========

Average common shares outstanding
  (basic and diluted)                               7,142,251     7,142,251     7,142,251
                                                  ===========   ===========   ===========

</TABLE>
        The accompanying notes are an integral part of these statements.
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                            Statements of Cash Flows

                  Years ended January 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>



                                                                                   2001         2000          1999
                                                                                   ----         ----          ----
<S>                                                                          <C>           <C>          <C>
Cash flows from operating activities:
     Net earnings (loss)                                                     $   225,840    1,115,381    (2,959,443)
     Adjustments to reconcile net earnings (loss) to net cash
         provided by (used in) operating activities:
            Provision for losses on accounts receivable                          278,880      223,037       389,828
            Depreciation                                                       1,114,849    1,052,166     1,586,899
            Amortization of other assets                                         180,847      183,473       172,454
            Loss (gain) on sale of property, plant and equipment                 (66,903)      91,391      (311,547)
            Decrease (increase) in cash surrender value of life insurance              -       95,105      (107,960)
            Changes in assets and liabilities:
                Accounts receivable                                            1,454,201   (2,769,992)    2,133,031
                Income tax refunds receivable                                          -            -       517,118
                Inventories                                                    1,131,323   (1,261,852)    5,759,332
                Prepaid expenses and other                                         4,938      (16,088)       68,383
                Accounts payable                                                (399,430)   1,478,250    (8,187,038)
                Accrued expenses                                                (482,130)  (1,222,955)      299,283
                                                                             -----------   ----------   -----------
                Net cash provided by (used in) operating activities            3,442,415   (1,032,084)     (639,660)
                                                                             -----------   ----------   -----------

Cash flows from investing activities:
     Additions to property, plant and equipment                               (1,142,841)    (937,720)     (144,420)
     Proceeds from sale of property, plant and equipment                         135,531       14,750    20,255,824
     Increase in other assets                                                   (182,973)    (339,207)     (774,770)
                                                                             -----------   ----------   -----------
            Net cash provided by (used in) investing activities               (1,190,283)  (1,262,177)   19,336,634
                                                                             -----------   ----------   -----------

Cash flows from financing activities:
     Proceeds from long-term debt                                              2,705,259    5,423,743    14,267,636
     Repayments of long-term debt                                             (4,962,310)  (3,143,619)  (33,018,169)
                                                                             -----------   ----------   -----------
            Net cash provided by (used in) financing activities               (2,257,051)   2,280,124   (18,750,533)
                                                                             -----------   ----------   -----------
Net decrease in cash                                                              (4,919)     (14,137)      (53,559)
Cash at beginning of year                                                         43,847       57,984       111,543
                                                                             -----------   ----------   -----------
Cash at end of year                                                          $    38,928       43,847        57,984
                                                                             ===========   ==========   ===========

Supplemental disclosures:
     Interest paid                                                           $ 1,533,065    1,417,724     2,301,535
     Income taxes refunded                                                             -            -       517,118
     Noncash investing and financing activities-acquisition
         of fixed assets for notes payable                                       522,298       52,611             -

</TABLE>



        The accompanying notes are an integral part of these statements.

<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements

                        January 31, 2001, 2000 and 1999



(1)  Summary of Significant Accounting Policies
     ------------------------------------------

 (a)  Description of Business
      -----------------------

      National Home Centers, Inc. ("Company") is a full-line retailer of home
        improvement products and building materials, with eight locations in
        Arkansas. The Company serves retail consumers and professional
        contractors primarily in Arkansas, Oklahoma and Missouri.

 (b)  Inventories
      -----------

      Inventories, which are comprised primarily of merchandise purchased for
        resale, are stated at the lower of average cost or market.

 (c)  Property, Plant and Equipment
      -----------------------------

      Property, plant and equipment are stated at cost. Equipment under capital
        leases is stated at the lower of the present value of minimum lease
        payments at the beginning of the lease term or fair value at the
        inception of the lease. Depreciation is calculated on the straight-line
        method over the estimated useful lives of the assets as follows:
        buildings, 40 years; improvements, 10 years; and machinery and
        equipment, 3 to 10 years. Equipment under capital leases is amortized
        using the straight-line method over the shorter of the lease term or
        estimated useful lives of the assets. Leasehold improvements are
        amortized using the straight-line method over the shorter of the lease
        term, including renewal options, or the estimated useful lives of the
        assets.

 (d)  Long-Lived Assets
      -----------------

      The Company accounts for long-lived assets under Statement of Financial
        Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
                                             --------------------------------
        Long-Lived Assets and for Long-Lived Assets Expected to be Disposed of,
        ----------------------------------------------------------------------
        which requires impairment losses to be recorded on long-lived assets
        used in operations when indications of impairment are present and the
        undiscounted cash flows estimated to be generated by those assets are
        less than the assets' carrying amount. Management has evaluated the
        Company's long-lived assets for purposes of SFAS No. 121 and has
        recognized related impairment losses of $100,000 in fiscal year 1999
        (none in 2001 or 2000).

 (e)  Other Assets
      ------------

      Other assets include a covenant not to compete, deferred loan costs, cash
        surrender values of life insurance policies and premiums advanced on
        life insurance policies (note 8). Amortization of the covenant not to
        compete and deferred loan costs is provided on the straight-line method,
        which in the case of deferred loan costs is not significantly different
        from the interest method, over the terms of the agreements.



                                                                     (Continued)


                                       2
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



(f)   Income Taxes
      ----------

      Deferred tax assets and liabilities are recognized for the future tax
        consequences attributable to differences between the financial statement
        carrying amounts of existing assets and liabilities and their respective
        tax bases. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in
        which those temporary differences are expected to be recovered or
        settled. The effect on deferred tax assets and liabilities of a change
        in tax rates is recognized in income in the period that includes the
        enactment date.

(g)  Revenue Recognition Policy
     --------------------------

     The Company recognizes revenue at the time goods are shipped.

(h)  Earnings (Loss) Per Share
     -------------------------

     The Company presents earnings (loss) per share amounts in accordance with
        SFAS No. 128, Earnings Per Share.  Basic earnings (loss) per share were
                      ------------------
        computed by dividing the earnings (loss) by the weighted average number
        of common shares outstanding during the period (7,142,251 for the years
        ended January 31, 2001, 2000 and 1999). In computing diluted earnings
        per share, only potentially common shares that were dilutive (those that
        reduce earnings per share or increase loss per share) are included. The
        Company had options for 205,000, 215,000, and 230,000 shares of common
        stock at January 31, 2001, 2000 and 1999, respectively, all with
        weighted average exercise prices of $1.75, that were not included in the
        calculation of diluted shares because they would have had an anti-
        dilutive effect. Due to the Company's net loss for the year ended
        January 31, 1999, any incremental shares would have an anti-dilutive
        effect and were, therefore, not considered.

(i)  Credit Risk
     ------------

     Financial instruments which potentially subject the Company to
        concentrations of credit risk consist primarily of trade receivables.
        Substantially all of the Company's receivables are from a large number
        of building contractors located in Arkansas. Accordingly, the Company's
        credit risk is affected by general economic conditions in Arkansas and
        in the construction industry.

(j) Fair Value of Financial Instruments
    ------------------------------------

    The carrying value of accounts receivable, accounts payable and accrued
      expenses approximated fair value as of January 31, 2001 and 2000, because
      of the relatively short-term maturity of these instruments.  The fair
      value of long-term debt, including current installments, is calculated by
      discounting future principal and interest payments at the interest rate
      currently available to the Company for debt with similar terms and
      remaining maturities.  The fair value of long-term debt does not
      significantly differ from its carrying value.


                                                                     (Continued)
                                       3
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



 (k)  Use of Estimates
      -----------------

      The preparation of financial statements in conformity with accounting
        principles generally accepted in the United States requires management
        to make estimates and assumptions that affect the reported assets and
        liabilities and disclosure of contingent assets and liabilities at the
        date of the financial statements and the reported amounts of revenues
        and expenses during the reporting period. Actual results could differ
        from these estimates.

(2) Long-Term Debt
<TABLE>
<CAPTION>

Long-term debt consists of the following:

                                                                                                                  2001       2000
                                                                                                                  ----       ----
<S>                                                                                                       <C>             <C>
      Notes payable under revolving credit agreements                                                        $12,453,104  14,289,335
    Notes payable-principal and interest payable monthly:
     10.00% note, secured by real property, balance due May 2002                                                 744,038   1,284,078
     9.07%-10.00% notes, secured by equipment, due at various dates through July 2004                            808,323     267,244
       Other notes payable, weighted average interest rate of 8.96%, due at various dates through
        November 2005                                                                                            278,822     178,383
                                                                                                             -----------  ----------
                                                                                                              14,284,287  16,019,040
      Less current installments                                                                                  759,660     988,832
                                                                                                             -----------  ----------
       Long-term debt, excluding current installments                                                        $13,524,627  15,030,208
                                                                                                             ===========  ==========
</TABLE>

The Company's revolving credit agreement with a financial institution provides a
revolving credit loan commitment not to exceed the lesser of (a) $20 million or
(b) a borrowing base of 85% and 65% of eligible accounts receivable and eligible
inventory, respectively, with sublimits on advances of $10 million each.
Borrowings under the agreement are based on prime (9.00% at January 31, 2001)
plus 0.375%.  The Company also pays a commitment fee of 0.25% based on the
average unused amount of the line.  Borrowings under the revolving credit
agreement are collateralized by the Company's accounts receivable and inventory.
Based upon eligible accounts receivable and eligible inventory as of January 31,
2001, the Company had approximately $1.3 million of additional available
borrowing capacity under the revolving credit agreement as of that date.  The
current revolving credit agreement expires on July 14, 2002.

Borrowings under the real estate loan agreement at January 31, 2001, are secured
by a first real estate mortgage on real estate located in Conway, Arkansas.
Substantially all of the Company's furniture, fixtures, machinery and equipment,
as well as certain real estate, are pledged as collateral under the Company's
long-term debt agreements.

  The aggregate annual maturities of long-term debt for the five years
    subsequent to January 31, 2001, are as follows: 2002, $759,660; 2003,
    $13,165,276; 2004, $287,504; 2005, $55,190; and 2006, $16,657.  Annual
    maturities for fiscal year 2003 include borrowings under the Company's
    revolving credit agreement described above.

                                                                     (Continued)

                                       4
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



(3) Income Taxes
    ------------

    The Company has no current or deferred income tax expense or benefit for
      fiscal years 2001, 2000 or 1999, as a result of net operating losses
      (NOLs) for income tax purposes, and subsequent utilization of NOLs to
      offset taxable income. There is no deferred tax expense or benefit as a
      result of adjustments to the valuation allowance for deferred tax assets,
      which offset the net changes in deferred tax assets and liabilities.

    Income taxes differ from the amounts computed by applying the U.S. Federal
      income tax rate of 34% to pretax earnings (losses) from operations as a
      result of the following:
<TABLE>
<CAPTION>

                                                       2001        2000         1999
                                                       ----        ----         ----
<S>                                                 <C>         <C>         <C>
     Computed "expected" income taxes (benefit)     $ 76,786      379,230    (1,006,210)
     State income taxes, net of Federal
       income tax effect                             126,716       52,947      (124,064)
     Increase (decrease) in valuation allowance     (222,923)    (462,363)    1,135,001
     Other, net                                       19,421       30,186        (4,727)
                                                    --------      -------    ----------
                                                    $   -            -             -
                                                    ========      =======    ==========
</TABLE>
  The tax effects of temporary differences that give rise to significant
    portions of deferred tax assets and liabilities at January 31, 2001 and
    2000, are presented below:
<TABLE>
<CAPTION>

                                                                                    2001         2000
                                                                                    ----         ----
<S>                                                                            <C>           <C>
      Deferred tax assets:
        Accounts receivable, due to allowance for doubtful accounts            $    53,168       80,409
        Inventories, due to costs not currently deductible for tax purposes        125,797      124,587
        Accrued expenses not currently deductible                                  337,341      327,843
        Valuation allowance for property, plant and equipment                      668,022      702,029
        Net operating loss and other carryforwards                               4,157,593    4,344,657
        Other                                                                       99,133       78,262
                                                                               -----------   ----------
          Total gross deferred tax assets                                        5,441,054    5,657,787
        Valuation allowance for deferred tax assets                             (5,419,388)  (5,642,311)
                                                                               -----------   ----------
            Deferred tax assets                                                     21,666       15,476

      Deferred tax liabilities:
        Property, plant and equipment, due to differences in depreciation           21,666       15,476
                                                                               -----------   ----------
            Net deferred taxes                                                 $      -            -
                                                                               ===========   ==========

</TABLE>
                                                                     (Continued)


                                       5
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



  At January 31, 2001, the Company had Federal and state NOL and other tax
    carryforwards which expire as follows:
<TABLE>
<CAPTION>

     Year ending January 31,
<S>                                                       <C>
         2002                                                                 $    310,075
         2003                                                                      449,858
         2004                                                                      326,709
         2005 through 2012                                                          66,190
         2013                                                                    4,308,889
         2019                                                                    5,140,493
         Indefinite expiration (alternative minimum tax credit)                    208,501
                                                                               -----------
            Total                                                             $ 10,810,715
                                                                               ===========
</TABLE>

    Ultimate realization of deferred tax assets, which include these tax
      carryforwards and deductible temporary differences, is dependent upon many
      factors, including the Company's ability to generate adequate future
      taxable income in specific taxing jurisdictions within the carryforward
      periods. Management has considered these factors in reaching its
      conclusion as to the valuation allowance for financial reporting purposes.
      As a result of the uncertainty regarding future realization, the Company
      maintains a valuation allowance in order to fully reserve net deferred tax
      assets. During the year ended January 31, 2001, as a result of the
      utilization of NOL carryforwards, the valuation allowance has been
      decreased by $222,923.

(4) Leases
    ------

    The Company's principal stockholder, together with his wife
      ("stockholders"), own certain real property which is leased to the Company
      under various operating lease agreements, the terms of which approximate
      rental agreements with unrelated third parties. The following table
      summarizes these related party leases:
<TABLE>
<CAPTION>
                                                                                       Rent expense for
                                                                                    year ended January 31,
              Property                             Lease           Monthly        --------------------------
              location                           expiration        rental          2001       2000       1999
              --------                           ----------        ------          ----       ----       ----
<S>                                           <C>              <C>              <C>         <C>        <C>
        Springdale                             August, 2002     $   36,000       264,000     264,000    390,000
        Fort Smith                             August, 2002         20,000       144,000     144,000    216,000
        North Little Rock                      August, 2002         52,000       504,000     504,000    594,000
        Bentonville                            May, 2002             9,500        84,000      84,000    106,500
        Cabinet facility-
         Springdale                            Terminated             -             -           -        20,000
                                                                   -------     ---------   ---------  ---------
                                                                 $ 117,500       996,000     996,000  1,326,500
                                                                   =======
        Rent expense to non-related parties                                      243,988     147,206    377,578
                                                                               ---------   ---------  ---------
             Total rent expense                                                1,239,988   1,143,206  1,704,078
                                                                               =========   =========  =========

</TABLE>

                                                                     (Continued)



                                       6
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



The leases for the Springdale and North Little Rock properties are assigned as
collateral under a loan agreement between the stockholders and the Arkansas
Teacher Retirement System ("ATRS").  Proceeds from this loan were used by the
stockholders to finance the purchase of the Springdale and Fort Smith properties
from the Company, to retire their 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 the Springdale and North Little Rock properties and an assignment of a $1
million life insurance policy on the principal stockholder.

  The stockholders granted the Company certain reductions in monthly rental
    payments totaling $414,000 in fiscal 2001 and 2000 and $103,500 in fiscal
    1999, which have been reflected in the schedule above.  Monthly rentals per
    the table above reflect amounts per the lease agreements as of January 31,
    2001.  As of that date, the monthly concession granted the Company amounted
    to $34,500.  The stockholders reserve the right to increase monthly payments
    to the amounts per the lease agreements, but have waived any claims with
    respect to past rent reductions.

  During fiscal year 1997, the Company ceased operations at the cabinet
    facility.  Beginning in fiscal year 1998, the Company subleased the cabinet
    facility to a third party for $19,000 per month.  The Company received
    $38,000 for the year ended January 31, 1999, under the sublease agreement.
    During fiscal year 1999, the stockholders and the Company agreed to
    terminate the lease agreement for the cabinet facility, and the stockholders
    agreed to release the Company from all obligations with respect to this
    lease.  In conjunction with the termination of the lease, the Company sold
    the related leasehold improvements to the stockholders for $525,000
    (resulting in a pre-tax loss of $18,500).

  The Company also leases properties from unrelated parties under noncancellable
    operating lease agreements, which expire at various dates through 2008, with
    options to extend the lease terms for additional periods of up to ten years.
    The lease agreements with the stockholders contain options to extend the
    lease terms for additional periods of up to twenty years.  Future minimum
    lease payments required under operating leases that have initial or
    remaining noncancellable lease terms in excess of one year as of January 31,
    2001, are as follows:
<TABLE>
<CAPTION>

                                            Related
                                             party       Other      Total
                                             -----       -----      ------
<S>                                       <C>          <C>        <C>
          Year ending January 31,
                2002                       $1,410,000    276,000  1,686,000
                2003                          794,000    246,000  1,040,000
                2004                             -       240,500    240,500
                2005                             -       246,000    246,000
                2006                             -       228,000    228,000
                Later years                      -       612,500    612,500
                                           ----------  ---------  ---------
          Total minimum lease payments     $2,204,000  1,849,000  4,053,000
                                           ==========  =========  =========

</TABLE>

                                                                     (Continued)



                                       7
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



(5) Capital Stock
    -------------

The Company's Articles of Incorporation authorize the Board of Directors to
issue shares of preferred stock in series, to determine the number of shares in
each series and to fix the designation, preferences, rights, voting powers,
restrictions, dividends, qualifications and terms and conditions thereof.  As of
January 31, 2001, the Company has issued no shares of its preferred stock.

  The Company has an employee stock purchase plan, a long-term performance plan
    and an incentive compensation plan.  Under the employee stock purchase plan,
    employees are eligible, through payroll deductions up to a maximum of $2,400
    annually, to purchase shares of the Company's common stock at the current
    market price of the stock.  The Company contributes an amount equal to ten
    percent (in cash or stock) of the amounts contributed by employees.

  Under the long-term performance plan, certain directors and key employees are
    eligible for awards granted under the plan in the form of, or combination
    thereof, stock options, stock appreciation rights, or restricted shares of
    the Company's common stock.  The Company has authorized 300,000 shares to be
    awarded under the plan, of which 95,000 shares are available for granting at
    January 31, 2001.  The amount, terms and conditions of any award under the
    plan are subject to certain limitations set forth therein.  The following
    summarizes stock option activity for years ended January 31, 1999, 2000 and
    2001:

                                                        Exercise
                                            Shares       price
                                            ------       -----

        Outstanding at January 31, 1998       -         $  -
          Granted                          280,000        1.75
          Canceled                         (50,000)       1.75
                                           -------       -----
        Outstanding at January 31, 1999    230,000        1.75
          Canceled                         (15,000)       1.75
                                           -------       -----
        Outstanding at January 31, 2000    215,000        1.75
          Canceled                         (10,000)       1.75
                                           -------       -----
        Outstanding at January 31, 2001    205,000       $1.75
                                           =======       =====
        Exercisable at January 31, 2001    123,000       $1.75
                                           =======       =====

  Options granted during fiscal year 1999 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 2.3 years.  There were no
    options granted during fiscal years 2000 or 2001.  As permissible under SFAS
    No. 123, Accounting for Stock-Based Compensation, the Company accounts for
             ---------------------------------------
    stock options granted under the provisions of Accounting Principles Board
    Opinion No. 25, Accounting for Stock Issued to Employees, which recognizes
                    ----------------------------------------
    compensation cost based upon the intrinsic value of the equity award.
    Accordingly, no compensation expense was recognized in the statements of
    operations during fiscal years 2001, 2000 or 1999.  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 years 2001, 2000 and 1999 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.


                                                                     (Continued)

                                       8
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



  Under the incentive compensation plan, certain salaried employees of the
    Company are eligible to receive a bonus each fiscal year based on the
    Company's performance in that year. Bonuses may be paid, at the Company's
    option, either in cash or stock units.   Bonuses awarded in the form of
    stock units will be converted into cash or common stock upon termination of
    the participant's employment.  As of January 31, 2001, no awards had been
    made under the incentive compensation plan.

(6) Nonrecurring Charges
    --------------------

During fiscal year 1999, the Company completed the restructuring plans which had
been announced in the previous year by closing several stores, selling real
estate and equipment associated with the closed stores, and selling certain
other real estate.  These sales resulted in total cash proceeds of approximately
$10.8 million and losses of approximately $2.3 million, which have been charged
against the related valuation allowances.  In addition, in July 1998, the
Company sold the real estate and equipment of the Rogers, Arkansas, home center
store to Lowe's Home Centers, Inc. for cash totaling approximately $10.5
million.  This transaction resulted in gains of approximately $1.3 million,
which are included in income for the year ended January 31, 1999.  In
conjunction with the Company's restructuring, certain charges and other
transactions have been charged against the valuation allowances and store
closing accruals rather than to current period income or expense.  The following
is a reconciliation of activity with respect to these accounts, with certain
previously reported amounts reclassified in order to conform with current
presentation:
<TABLE>
<CAPTION>
                                                        Valuation        Accrued
                                                        allowances       expenses        Totals
                                                        ----------       --------        ------
<S>                                                  <C>              <C>              <C>
    Balances, January 31, 1998                        $ 5,459,000         641,000       6,100,000
    Activity, fiscal year 1999:
      Additions-writedown of land to
       estimated realizable value                         100,000            -            100,000
      Inventory losses                                   (780,567)           -           (780,567)
      Losses on sales of fixed assets                  (2,230,637)           -         (2,230,637)
      Depreciation                                       (298,791)           -           (298,791)
      Cash payments-severance benefits and rent              -           (366,232)       (366,232)
      Other noncash credits (charges)                    (112,547)         49,920         (62,627)
                                                       ----------        --------      ----------
         Net activity                                  (3,322,542)       (316,312)     (3,638,854)
                                                       ----------        --------      ----------

    Balances, January 31, 1999                          2,136,458         324,688       2,461,146
    Activity, fiscal year 2000:
      Cash payments-rent                                     -           (166,912)       (166,912)
      Other noncash charges                                  -            (78,604)        (78,604)
                                                       ----------        --------      ----------
         Net activity                                        -           (245,516)       (245,516)
                                                       ----------        --------      ----------

    Balances, January 31, 2000                          2,136,458          79,172       2,215,630
    Activity, fiscal year 2001:
      Cash payments-rent                                     -            (66,000)        (66,000)
      Other noncash charges                               (22,561)        (13,172)        (35,733)
                                                       ----------        --------      ----------
         Net activity                                     (22,561)        (79,172)       (101,733)
                                                       ----------        --------      ----------
    Balances, January 31, 2001                        $ 2,113,897            -          2,113,897
                                                       ==========        ========      ==========
</TABLE>

                                                                     (Continued)

                                       9
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



  The valuation allowances represent differences between the carrying amounts
    and estimated fair market values of the related assets, all of which are
    considered to be held for sale but are still being used in the Company's
    business.  Assets held for sale include real property with carrying amounts
    of $5,263,897 and $5,286,458 at January 31, 2001 and 2000, respectively, and
    estimated fair market values of $3,150,000 at January 31, 2001 and 2000.

(7) Accrued Expenses

Accrued expenses consist of the following:
                                             2001           2000
                                             ----           ----
     Salaries, wages and other
      employee benefits                   $873,989        995,786
     Deferred revenues                     662,610        106,504
     Taxes other than income taxes         536,590        741,588
     Customer incentives                   148,914        152,577
     Interest                              114,446        129,452
     Other                                 261,292        954,064
                                        ----------     ----------
                                        $2,597,841      3,079,971
                                        ==========     ==========

(8) Commitments and Contingencies
    ------------------------------


The Company advances premiums under a split-dollar life insurance agreement with
a trust which owns a $20 million insurance policy on the life of the Company's
principal stockholder's wife.  The Company has a security interest in the
policy's cash surrender value and death benefits and, upon termination of the
policy, is entitled to reimbursement of the amounts advanced, without interest.
The Company has a guarantee from the stockholder securing any deficiency in cash
surrender value if the policy is terminated before cash surrender value exceeds
actual premiums advanced.  The Company has advanced premiums of $2,195,250 and
$2,012,277 as of January 31, 2001 and 2000, respectively (included in other
assets in the accompanying balance sheets).

The Company sponsors the National Home Centers, Inc. 401(k) Retirement Plan, in
which employees are eligible to participate after they complete four months of
service and reach age 21.  Company contributions to the plan each year are made
at a discretionary amount determined by the Company's Board of Directors.  The
Company's contributions to the plan were $38,777, $37,570 and $36,920 for the
years ended January 31, 2001, 2000 and 1999, respectively.

The Company is involved in certain claims and pending litigation arising from
the normal conduct of business.  Based on the present knowledge of the facts,
management believes the resolution of claims and pending litigation will not
have a material adverse effect on the Company's financial position or the
results of its operations.


                                                                     (Continued)



                                       10
<PAGE>

                          NATIONAL HOME CENTERS, INC.

                         Notes to Financial Statements



(9) Valuation and Qualifying Accounts
    ----------------------------------

    The following provides an analysis of the Company's allowance for doubtful
      trade accounts receivable for the years ended January 31, 2001, 2000 and
      1999:
<TABLE>
<CAPTION>

                                    Balance at  Additions   Write-offs,   Balance at
                                    beginning    charged       net of       end of
                                    of period   to expense   recoveries     period
                                    ----------  ----------  ------------  ----------
<S>                                <C>         <C>         <C>           <C>

    Year ended January 31, 2001      $210,000     278,880      349,880      139,000
                                     ========     =======      =======      =======
    Year ended January 31, 2000       730,000     223,037      743,037      210,000
                                     ========     =======      =======      =======
    Year ended January 31, 1999       281,000     389,828      (59,172)     730,000
                                     ========     =======      =======      =======
</TABLE>
(10) New Accounting Standard
     -----------------------

  In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,

    Accounting for Derivative Instruments and Hedging Activities, as amended by
    ------------------------------------------------------------
    SFAS No. 138, Accounting for Certain Derivative Instruments and Hedging
                  ---------------------------------------------------------
    Activities-an Amendment of FASB Statement No. 133.  SFAS No. 133 establishes
    -------------------------------------------------
    accounting and reporting standards requiring that every derivative
    instrument (including certain derivative instruments embedded in other
    contracts) be recorded in the balance sheet as either an asset or liability
    measured at its fair value.  SFAS No. 133 requires that changes in the
    derivative's fair value be recognized currently in earnings unless specific
    hedge accounting criteria are met.  Special accounting for qualifying hedges
    allows a derivative's gains and losses to offset related results on the
    hedged item in the income statement.  Companies must formally document,
    designate, and assess the effectiveness of transactions that receive hedge
    accounting.  SFAS No. 133 is effective for fiscal years beginning after June
    15, 2000.  As of January 31, 2001, the Company had no outstanding derivative
    instruments or embedded derivatives that were subject to the provisions of
    SFAS No. 133.