Examine Atlanta's recent history and the story, at first, sounds common: Business is down markedly, just like in most regions. But for lumber dealers, Atlanta is notably different for two reasons: No other metro area saw two of its biggest companies all but disappear, and few others match the region's long-term growth potential.

Ultimately, it seems even in a big market, you need to pay extra close attention to the details. According to ProSales' sister publication Builder magazine, the market of Atlanta/Sandy Springs/Marietta, Ga., remained the second busiest in the country in 2007, despite a 34.5% drop in permits issued to 44,686.

"Our market has been impacted in the same manner as every market across the country," says Eugene James, director of the Atlanta region for Metrostudy, a national housing market research firm. "Demand is temporarily down, so there is no need to continue building houses–our starts are down. The good news is that while sales have been low for year-over-year, the sales pace is higher than our starts pace. That allows us to eat into our excess inventory."

The downturn staggered two giant dealers: PlyMart and Wheeler's.

In 2006, PlyMart was the area's highest-ranking independent dealer on the ProSales 100. Its overall sales of nearly $300 million in 2005 put it 24th on the list. Wheeler's did not rank far behind at No. 28, with total sales in 2005 of $230 million.

There wasn't much writing on the wall at the start of 2007, either. PlyMart jumped to 20th on the ProSales 100 with sales of $347.9 million and expanded from 32 to 34 locations. Wheeler's also demonstrated significant growth, as sales grew 17.4% to $270 million, and the company expanded from 21 to 23 locations.

Then came the fall. Earlier this year, Wheeler's filed for Chapter 11 bankruptcy law protection from creditors. It eventually sold most of its operations, bought back its name and some assets, and went back into business at just six locations. PlyMart is gone altogether, having sold most of its inventory and locations this year.

Bill Hofius, who was senior vice president of PlyMart, says his company could not keep up with the growing number of builders that went out of business once tough times hit. Compounding PlyMart's troubles was that Atlanta has an unusually fractured market; according to Builder, in America's top 75 markets, the 10 biggest builders usually account for 38.82% of all starts. But in Atlanta, the top 10's share is just 17.7%.That's the eighth-lowest market share in the country.

"Hands down, receivables were the biggest issue that became insurmountable," Hofius says. "It sucked the cash right out the company."

PlyMart had been primarily dealing with independent, regional builders with its customer list at 3,500 accounts at its peak. But out of that, as many as a 1,000 had tough times paying bills. By June 2007, PlyMart had as much as $15 million in bad debts that appeared unlikely to ever be paid.

James says national tract builders in Atlanta "had their eyes a lot more wide open" than their smaller counterparts. The way Metrostudy examines the market, it says the top 10 builders make up about 25% of the overall market share.

"That means as much as 75% of the builders did not react as fast as the larger builders in terms of pulling back their housing starts," James says.

"A sale isn't a sale until you're paid for it," Hofius says. "We didn't get paid for a bunch."

The Atlanta market also is home to Marietta, Ga.-based Robert Bowden Inc., which has chugged along at a slower pace but is still alive and well. Its sales grew from $128.8 million in 2005, putting it 55th on the ProSales 100, and $149.1 million in 2006, moving it to 43rd. But in 2007, its sales fell to $97.7 million, and the company retreated to 53rd place. Still, it was a far cry from being gone altogether.

Amid this shrinking has come significant growth in market share for ProBuild. It already had a significant presence in the area, but its size grew markedly earlier this year. First, it purchased the lumber arm of HD Supply, which encompassed 39 yards and 11 production facilities in Atlanta and in Florida. Then, ProBuild acquired Jasper Lumber, which included a lumberyard and a truss and millwork manufacturing facility in Kennesaw, Ga., and distribution business in Cumming, Ga.

"Atlanta is just another poster child for what has happened in other markets," says Paul Hylbert, CEO of ProBuild, the largest U.S. pro dealer. "But it's still one of the largest markets for new-home construction, and it's significant for commercial, repair, and remodeling. We want to be in Atlanta."

Exactly where to be in Atlanta is the next question. "We started out as a combination of ProBuild and HD Supply with 27 locations, but we had a lot of smaller locations and locations not in the right place," Hylbert says. So the company resized to meet the market's demand. It now has 10 locations in the area, along with millwork, window, and component manufacturing facilities plus a new truss plant set to open by year's end.

Meanwhile, Stock Building Supply, the No. 2 dealer on the 2008 ProSales 100 with total sales of $4.7 billion, still has 15 locations in the market, including truss manufacturing, a stair plant, and a showroom. Stock declined to respond to questions from ProSales about its plans, but it seems likely that Stock's officers also believe there's still money to be made here.

Additionally, ProBuild's capital structure–the company is a subsidiary of Fidelity Capital–has let it weather storms when others have crashed on the banks. "I think that's one of the reasons we are a survivor," Hylbert says. But he also notes that ProBuild has a disciplined credit policy.

This marks Hylbert's fifth time through a downturn. "Credit and disciplines around credit are among our strengths, and will continue to be," he says. "We are not going get caught in extended terms."

"This too shall pass," James says. "I don't expect the lumber industry and the housing industry to go back to doing what they were used to two or three years ago. This is a correction."

–Andy Carlo