FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1994 Commission file no. 2-27393
NOLAND COMPANY
A Virginia Corporation IRS Identification #54-0320170
2700 Warwick Boulevard
Newport News, Virginia 23607
Telephone: (804) 928-9000
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 and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Outstanding capital common stock, $10.00 par value at July 15, 1994,
3,700,876 shares.
[FN]
This report contains 12 pages.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1994 (Unaudited) and Dec. 31, 1993 (Audited)..... 3
Unaudited Consolidated Statements of Income -
Three Months and Six Months Ended June 30, 1994 and 1993.. 4
Unaudited Consolidated Statements of Retained Earnings -
Six Months Ended June 30, 1994 and 1993.................. 5
Unaudited Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993.................. 6
Notes to Unaudited Consolidated Financial Statements........ 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9-10
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6................................. 11
SIGNATURES ............................................................ 12
<PAGE>
PART 1. FINANCIAL INFORMATION
NOLAND COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
Item 1. Financial Statements
June 30, December 31,
1994 1993
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 4,533,512 $ 2,191,153
Accounts receivable, net 51,276,868 46,829,595
Inventory, net 64,122,742 55,474,887
Deferred income taxes 1,763,065 1,763,065
Prepaid expenses 363,887 698,572
Total Current Assets 122,060,074 106,957,272
Property and Equipment, at cost:
Land 12,501,307 12,413,631
Buildings 62,693,775 62,006,032
Equipment and fixtures 47,210,830 46,097,163
Property excess to current needs 2,091,952 2,200,626
Total 124,497,864 122,717,452
Less accumulated depreciation 55,321,812 53,580,106
Property and Equipment, net 69,176,052 69,137,346
Assets Held for Resale 1,355,897 1,305,986
Prepaid Pension 11,905,599 11,705,599
Other Assets 1,406,350 2,273,348
$205,903,972 $191,379,551
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, short-term borrowings $ 3,100,000 $ 7,000,000
Current maturity of long-term debt 2,105,000 1,980,000
Accounts payable 41,854,494 20,976,392
Employee compensation 3,447,539 3,972,603
Accruals and other liabilities 5,443,577 6,183,664
Federal and state income taxes 904,622 1,256,093
Total Current Liabilities 56,855,232 41,368,752
Long-term Debt 36,530,000 38,505,000
Deferred Income Taxes 8,403,742 8,403,742
Accrued Postretirement Benefits 129,124 505,517
Stockholders' Equity:
Capital common stock, par value $10;
authorized, 6,000,000 shares; issued,
3,880,888 shares 38,808,880 38,808,880
Retained earnings 65,712,744 64,323,410
Total 104,521,624 103,132,290
Less treasury stock, 180,012, at cost 535,750 535,750
Stockholders' Equity 103,985,874 102,596,540
$205,903,972 $191,379,551
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Merchandise sales $ 115,931,471 $ 105,150,139 $ 212,982,722 $ 193,452,796
Cost of goods sold:
Purchases and freight-in 94,375,279 83,545,937 181,997,346 161,437,192
Inventory, beginning 64,104,926 56,656,549 55,474,886 50,865,543
Inventory, ending 64,122,742 54,573,322 64,122,742 54,573,322
Cost of goods sold 94,357,463 85,629,164 173,349,490 157,729,413
Gross profit on sales 21,574,008 19,520,975 39,633,232 35,723,383
Operating expenses 19,769,642 19,052,072 38,205,319 37,458,161
Operating profit (loss) 1,804,366 468,903 1,427,913 (1,734,778)
Other income:
Interest 19,623 23,590 51,626 57,661
Cash discounts, net 981,055 832,319 1,906,011 1,605,555
Service charges 294,345 296,199 592,384 620,068
Other gains (losses)
and recoveries - (419,460) (44,234) (419,460)
Miscellaneous 71,496 104,261 223,111 224,066
Total other income 1,366,519 836,909 2,728,898 2,087,890
Interest expense 641,430 625,215 1,218,272 1,237,423
Income(loss)before income taxes 2,529,455 680,597 2,938,539 (884,311)
Income taxes:
State 139,100 37,400 161,700 (48,700)
Federal 812,700 210,900 943,400 (291,900)
Total income taxes 951,800 248,300 1,105,100 (340,600)
Net income (loss) $ 1,577,655 $ 432,297 $ 1,833,439 $ (543,711)
Earnings (loss) per share
(based on 3,700,876 shares
outstanding) $ .43 $ .11 $ .50 $ (.15)
Cash dividends per share $ .06 $ .06 $ .12 $ .12
</TABLE>
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Retained Earnings
Six Months Ended
June 30,
1994 1993
Retained earnings, January 1 $64,323,410 $61,916,132
Add (deduct) net income (loss) 1,833,439 (543,711)
Deduct cash dividends paid
($.12 per share) (444,105) (444,104)
Retained earnings, June 30 $65,712,744 $60,928,317
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Six Months
Ended June 30
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,833,439 $ (543,711)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,105,768 3,120,438
Amortization of prepaid pension cost (200,000) (360,000)
Provision for doubtful accounts 688,500 1,139,250
Loss on sale of property 44,234 419,460
Change in operating assets and liabilities:
(Increase) in accounts receivable (5,135,773) (2,511,404)
(Increase) in inventory (8,647,855) (3,707,780)
Decrease in prepaid expenses 334,685 4,980
(Increase) decrease in assets held for resale (49,911) 52,175
Decrease in other assets 831,998 210,070
Increase in accounts payable 20,878,102 16,946,066
(Decrease) in employee compensation (525,064) (445,286)
(Decrease) in accruals and other liabilities (740,087) (2,195,743)
(Decrease) in federal and state income taxes (351,471) (1,217,964)
(Decrease) increase in accrued post retirement benefits (376,393) 274,000
Total adjustments 9,856,733 11,728,262
Net cash provided by operating activities 11,690,172 11,184,551
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,497,957) (2,890,372)
Proceeds from sale of assets 344,249 532,326
Net cash used by investing activities (3,153,708) (2,358,046)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (payments) net (3,900,000) (3,500,000)
Long-term debt repayments (1,850,000) (1,852,922)
Dividends paid (444,105) (444,104)
Net cash used by financing activities (6,194,105) (5,797,026)
CASH AND CASH EQUIVALENTS:
Increase during first six months 2,342,359 3,029,479
Beginning of year 2,191,153 2,538,167
End of first six months $ 4,533,512 $ 5,567,646
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first six months for:
Interest $ 1,218,272 $ 1,245,614
Income taxes $ 1,456,571 $ 877,364
</TABLE>
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
1. In the opinion of the Company, the accompanying unaudited
consolidated statements of income contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the results of operations for the six months
ended June 30, 1994 and 1993.
2. The Notes to Consolidated Financial Statements included in the
Company's December 31, 1993 Annual Report on Form 10-K are an
integral part of the interim unaudited financial statements
and remain substantially unchanged. The Company takes a
physical inventory annually on December 31 of each year.
Interim period cost of goods sold is determined by costing
sales as follows: stock items at current acquisition costs;
direct shipments from manufacturers to customers at identified
cost. Elements of cost that are finally determinable only at
year-end have been considered by management.
3. Due to the seasonal nature of the construction industry
supplied by the registrant, interim results of operations of
each period are not necessarily indicative of earnings for the
year.
4. Accounts Receivable as of June 30, 1994 and 1993 are net of
allowance for doubtful accounts of $968,427 and $2,206,442,
respectively. Second quarter bad debt charges, net of
recoveries, were $247,814 for 1994 and $484,744 for 1993.
Year-to-date bad debt charges, net of recoveries, were
$495,806 for 1994 and $979,549 for 1993.
5. The dollar amount of Noland Company's backlog of orders
believed to be firm was approximately $41,109,394 at June 30,
1994.
6. At the April 20, 1994 Annual Meeting of Stockholders, the
stockholders approved a restricted stock plan for certain
senior executives of the company.
<PAGE>
Notes to Unaudited Consolidated Financial Statements (cont'd)
The plan covers in the aggregate 50,000 shares of common stock
and provides for annual grants to certain senior executives of
up to an aggregate of 10,000 shares of restricted stock each
year. Participants may not dispose or otherwise transfer
stock granted for three years from date of grant.
Restrictions lapse at the rate of 20% of the stock per year,
beginning in the third year. Upon issuance of stock, unearned
compensation equal to the cost to acquire the stock will be
charged to stockholders' equity and subsequently amortized
over a seven year period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company generally generates its cash needs through: (1) cash
flow from operations; (2) short-term borrowings; (3) bank lines of
credit arrangements, when needed; and (4) additional long-term debt.
For the first six months of 1994, the Company generated $11.7
million in cash from operations, compared to $11.2 million for the
same period last year. The cash was used to purchase property and
equipment, pay off short-term debt, and reduce long-term debt and
pay dividends. Management believes the Company has adequate financial
resources to meet the needs of foreseeable future.
Results of Operations
Second-quarter sales of $115.9 million were 10.3 percent greater
than the $105.2 million recorded in the second quarter of 1993. The
construction industry and the manufacturing sector were operating
at healthy levels, creating strong demand for our products and
services. Sales for all four product departments increased, led by
the industrial department's 15 percent gain in sales of maintenance,
repair and operating supplies. In addition, the air
conditioning/refrigeration department established a new all-time
monthly sales record in June, indicating this should be a very good
summer for the sale of air conditioning replacement equipment.
The overall gross margin of profit on sales remained at recently
improved levels and operating expenses rose by only 3.8 percent.
Operating profit for the second quarter of 1994 totaled $1,804,000
compared to $469,000 for the year-earlier period.
Interest expense rose 2.6 percent in the second quarter, due to
higher short-term interest rates and increased inventories and
accounts receivable.
Adversely affecting profits in the second quarter of 1993 was a
$419,000 loss on the sale of the Company's former North Little Rock,
Ark., branch property, which reduced net income by $253,760, or
seven cents per share.
For the first six months, Noland's sales totaled $212,983,000, for
<PAGE>
Managements Discussion & Results of Operations (cont'd)
a 10.1 percent increase over the year-earlier period. Net income
for the first half of 1994 totaled $1,833,000, or 50 cents per
share, versus a first-half 1993 net loss of $544,000, or 15 cents
per share.
Prospects are good for continued strength in the Company's key
markets in the coming months. Although there are growing concerns
about inflation and the prospect of further hikes in interest rates.
Employment is growing and consumer confidence is high, both of which
bode well for demand for housing and consumer goods.
<PAGE>
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. None
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
NOLAND COMPANY
July 22, 1994 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance
