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, 1995 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 26, 1995,
3,700,876 shares.
[FN]
This report contains 11 pages.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 (Unaudited) and Dec. 31, 1994 (Audited).... 3
Unaudited Consolidated Statements of Income -
Three Months and Six Months Ended June 30, 1995 and 1994.. 4
Unaudited Consolidated Statements of Retained Earnings -
Six Months Ended June 30, 1995 and 1994.................. 5
Unaudited Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994.................. 6
Notes to Unaudited Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8-9
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6..................................... 10
SIGNATURE ............................................................... 11
<PAGE>
PART 1. FINANCIAL INFORMATION
NOLAND COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
Item 1. Financial Statements
June 30, December 31,
1995 1994
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 3,847,450 $ 1,428,702
Accounts receivable, net 55,646,879 52,457,892
Inventory, net 72,707,107 64,458,250
Deferred income taxes 2,000,981 2,000,981
Prepaid expenses 295,033 231,018
Total Current Assets 134,497,450 120,576,843
Property and Equipment, at cost:
Land 13,089,124 13,293,104
Buildings 68,266,000 66,040,313
Equipment and fixtures 50,734,881 49,001,851
Property excess to current needs 1,927,822 1,927,822
Total 134,017,827 130,263,090
Less accumulated depreciation 59,499,764 57,277,794
Property and Equipment, net 74,518,063 72,985,296
Assets Held for Resale 1,355,897 1,355,898
Prepaid Pension 12,240,230 12,240,230
Other Assets 1,505,210 1,464,603
$224,116,850 $208,622,870
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, short-term borrowings $ 17,600,000 $ 14,100,000
Current maturity of long-term debt 1,991,250 2,116,250
Accounts payable 40,270,698 23,743,496
Employee compensation 3,879,657 4,695,592
Accruals and other liabilities 5,275,889 8,633,887
Federal and state income taxes 659,887 1,712,473
Total Current Liabilities 69,677,381 55,001,698
Long-term Debt 35,058,125 36,913,750
Deferred Income Taxes 8,638,193 8,638,193
Accrued Postretirement Benefits 295,345 204,424
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 72,232,779 69,661,726
Total 111,041,659 108,470,606
Less treasury stock, 180,012, at cost 535,750 535,750
Less restricted stock 58,103 70,051
Stockholders' Equity 110,447,806 107,864,805
$224,116,850 $208,622,870
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Merchandise sales $123,559,896 $115,931,471 $235,296,221 $212,982,722
Cost of goods sold:
Purchases and freight-in 100,156,239 94,375,279 198,496,961 181,997,346
Inventory, beginning 72,559,444 64,104,926 64,458,250 55,474,886
Inventory, ending 72,707,108 64,122,742 72,707,108 64,122,742
Cost of goods sold 100,008,575 94,357,463 190,248,103 173,349,490
Gross profit on sales 23,551,321 21,574,008 45,048,118 39,633,232
Operating expenses 20,985,066 19,769,642 41,485,855 38,205,319
Operating profit 2,566,255 1,804,366 3,562,263 1,427,913
Other income:
Interest 18,700 19,623 38,703 51,626
Cash discounts, net 1,041,018 981,055 2,110,037 1,906,011
Service charges 335,524 294,345 656,708 592,384
Other gains (losses)
and recoveries - - - (44,234)
Miscellaneous 47,359 71,496 127,856 223,111
Total other income 1,442,601 1,366,519 2,933,304 2,728,898
Interest expense 911,033 641,430 1,661,209 1,218,272
Income before income taxes 3,097,823 2,529,455 4,834,358 2,938,539
Income taxes:
State 170,400 139,100 265,900 161,700
Federal 995,400 812,700 1,553,300 943,400
Total income taxes 1,165,800 951,800 1,819,200 1,105,100
Net income $ 1,932,023 $ 1,577,655 $ 3,015,158 $ 1,833,439
Earnings per share (based on
3,700,876 shares outstanding)$ .52 $ .43 $ .81 $ .50
Cash dividends per share $ .06 $ .06 $ .12 $ .12
[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,
1995 1994
Retained earnings, January 1 $69,661,726 $64,323,410
Add net income 3,015,158 1,833,439
Deduct cash dividends paid
($.12 per share) (444,105) (444,105)
Retained earnings, June 30 $72,232,779 $65,712,744
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Six Months
Ended June 30
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,015,158 $ 1,833,439
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,315,025 3,105,768
Amortization of prepaid pension cost - (200,000)
Provision for doubtful accounts 580,380 688,500
Amortization of unearned compensation-restricted stock 11,949 -
Loss on sale of property - 44,234
Change in operating assets and liabilities:
(Increase) in accounts receivable (3,769,367) (5,135,773)
(Increase) in inventory (8,248,857) (8,647,855)
(Increase) decrease in prepaid expenses (64,015) 334,685
Decrease (increase) in assets held for resale 1 (49,911)
(Increase) decrease in other assets (70,607) 831,998
Increase in accounts payable 16,527,202 20,878,102
(Decrease) in employee compensation (815,935) (525,064)
(Decrease) in accruals and other liabilities (3,357,998) (740,087)
(Decrease) in federal and state income taxes (1,052,586) (351,471)
Increase (decrease) in accrued post retirement benefits 90,921 (376,393)
Total adjustments 3,146,113 9,856,733
Net cash provided by operating activities 6,161,271 11,690,172
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,983,842) (3,497,957)
Proceeds from sale of assets 166,049 344,249
Net cash used by investing activities (4,817,793) (3,153,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (payments) net 3,500,000 (3,900,000)
Long-term debt repayments (1,980,625) (1,850,000)
Dividends paid (444,105) (444,105)
Net cash provided (used) by financing activities 1,075,270 (6,194,105)
CASH AND CASH EQUIVALENTS:
Increase during first six months 2,418,748 2,342,359
Beginning of year 1,428,702 2,191,153
End of first six months $3,847,450 $4,533,512
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first six months for:
Interest $1,619,812 $1,218,272
Income taxes $2,871,786 $1,456,571
[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, 1995 and 1994.
2. The Notes to Consolidated Financial Statements included in the
Company's December 31, 1994 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, 1995 and 1994 are net of
allowance for doubtful accounts of $968,427 and $968,427,
respectively. Second quarter bad debt charges, net of
recoveries, were $247,673 for 1995 and $247,814 for 1994.
Year-to-date bad debt charges, net of recoveries, were
$462,236 for 1995 and $495,806 for 1994.
5. The dollar amount of Noland Company's backlog of orders
believed to be firm was approximately $43,270,172 at June 30,
1995.
<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 from bank lines of
credit arrangements, when needed; and (3) additional long-term debt,
when needed.
For the first six months of 1995, the Company generated $6.2 million
in cash from operations, compared to $11.7 million for the same
period last year. The cash was used primarily to purchase property
and equipment, 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 $123.6 million were 6.6 percent greater than
the $115.9 million recorded in the second quarter of 1994. Much of
the increase in sales came from operations opened late last year.
Same-branch sales increased 2.1 percent. Two of our key markets --
housing construction and factory production -- slowed more than
expected in the second quarter, limiting demand for our products.
Second quarter sales did however benefit from stronger activity in
the nonresidential construction segment, which includes office
buildings, manufacturing plants and utility expansions. Direct
shipment sales, which typically involve large commercial
construction projects, were up 21 percent. Sales for the air
conditioning/refrigeration, electrical and plumbing and heating
departments increased 16 percent, 14 percent and three percent,
respectively. Industrial department sales were down slightly from
the year-earlier period. Sales for the first six months of 1995 were
$235.3 million compared to $213 million for the year-earlier period.
The gross margin of profit as a percent of sales increased five-
tenths of a percentage point for both the quarter and year-to-date.
The increase for the quarter and year-to-date is primarily due to
management refining its quarterly inventory adjustments.
Operating expenses for the quarter were $21 million compared to
$19.8 million for an increase of 6.1 percent from the year-earlier
period. For the first six months, operating expenses were $41.5
million versus $38.2 million a year-ago. Operating expenses as a
<PAGE>
Managements Discussion & Results of Operations (cont'd)
percent of sales declined for both the quarter and first six months
compared to the year-earlier periods.
Interest expense for the quarter and year-to-date increased 42.0
percent and 36.4 percent, respectively. The increases are due to
higher interest rates and larger investments in accounts receivable
and inventories.
Net income for the quarter was $1,932,023 or 52 cents per share
compared to $1,577,655 or 43 cents per share for the second quarter
of 1994. All of the increase of nine cents per share came from the
refinement in quarterly inventory adjustments. For year-to-date,
net income was $3,015,158 or 81 cents per share compared to
$1,833,439 or 50 cents per share for the year earlier period. The
inventory adjustment added 19 cents per share.
We were not ecstatic about our performance in the second quarter
because it fell short of our expectations, but we have reasons to
be optimistic about the remainder of the year. Housing construction
is showing signs of improving, and the recent drop in interest rates
should give it an additional boost. Unusually mild weather this
spring had an adverse impact on replacement air conditioning
equipment sales, which should translate into a surge in demand this
summer. Also, there are indications that factory production is
rising, which would create greater demand for our industrial
supplies.
<PAGE>
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. None
<PAGE>
SIGNATURE
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 26, 1995
Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance
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<SECURITIES> 0
<RECEIVABLES> 56,615,306
<ALLOWANCES> 968,427
<INVENTORY> 72,707,107
<CURRENT-ASSETS> 134,497,450
<PP&E> 134,017,827
<DEPRECIATION> 59,499,764
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<CURRENT-LIABILITIES> 69,677,381
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<COMMON> 38,808,880
<OTHER-SE> 71,638,926
<TOTAL-LIABILITY-AND-EQUITY> 224,116,850
<SALES> 123,559,896
<TOTAL-REVENUES> 123,559,896
<CGS> 100,008,575
<TOTAL-COSTS> 20,522,830
<OTHER-EXPENSES> 1,442,601
<LOSS-PROVISION> 462,236
<INTEREST-EXPENSE> 911,033
<INCOME-PRETAX> 3,097,823
<INCOME-TAX> 1,165,800
<INCOME-CONTINUING> 1,932,023
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