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 September 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 October 27, 1995
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 -
September 30, 1995 (Unaudited) and Dec. 31, 1994 (Audited)........3
Unaudited Consolidated Statements of Income -
Three Months and Nine Months Ended September 30, 1995 and 1994....4
Unaudited Consolidated Statements of Retained Earnings -
Nine Months Ended September 30, 1995 and 1994.....................5
Unaudited Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994.....................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
SIGNATURE....................................................................12
<PAGE>
PART 1. FINANCIAL INFORMATION
NOLAND COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
Item 1. Financial Statements
September 30, December 31,
1995 1994
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 5,394,393 $ 1,428,702
Accounts receivable, net 52,549,792 52,457,892
Inventory, net 63,807,945 64,458,250
Deferred income taxes 2,000,981 2,000,981
Prepaid expenses 266,861 231,018
Total Current Assets 124,019,972 120,576,843
Property and Equipment, at cost:
Land 13,103,647 13,293,104
Buildings 68,767,938 66,040,313
Equipment and fixtures 51,120,964 49,001,851
Property excess to current needs 1,810,700 1,927,822
Total 134,803,249 130,263,090
Less accumulated depreciation 60,643,818 57,277,794
Property and Equipment, net 74,159,431 72,985,296
Assets Held for Resale 1,355,897 1,355,898
Prepaid Pension 12,052,730 12,240,230
Other Assets 1,437,166 1,464,603
$213,025,196 $208,622,870
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, short-term borrowings $ - $ 14,100,000
Current maturity of long-term debt 3,646,250 2,116,250
Accounts payable 37,868,781 23,743,496
Employee compensation 4,118,018 4,695,592
Accruals and other liabilities 5,875,891 8,633,887
Federal and state income taxes 236,932 1,712,473
Total Current Liabilities 51,745,872 55,001,698
Long-term Debt 40,770,313 36,913,750
Deferred Income Taxes 8,638,193 8,638,193
Accrued Postretirement Benefits 382,736 204,424
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 73,267,081 69,661,726
Total 112,075,961 108,470,606
Less treasury stock, 180,012, at cost 535,750 535,750
Less unearned compensation-restricted stock 52,129 70,051
Stockholders' Equity 111,488,082 107,864,805
$213,025,196 $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 Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Merchandise sales $120,701,547 $116,981,688 $355,997,768 $329,964,410
Cost of goods sold:
Purchases and freight-in 88,785,629 92,592,426 287,282,590 274,589,772
Inventory, beginning 72,707,108 64,122,742 64,458,250 55,474,886
Inventory, ending 63,807,944 61,646,444 63,807,944 61,646,444
Cost of goods sold 97,684,793 95,068,724 287,932,896 268,418,214
Gross profit on sales 23,016,754 21,912,964 68,064,872 61,546,196
Operating expenses 21,473,962 20,242,399 62,959,817 58,447,718
Operating profit (loss) 1,542,792 1,670,565 5,105,055 3,098,478
Other income:
Interest 25,518 18,141 64,221 69,767
Cash discounts, net 873,320 932,075 2,983,357 2,838,086
Service charges 337,463 333,080 994,171 925,464
Other gains (losses)
and recoveries - - - (44,234)
Miscellaneous 197,679 67,754 325,535 290,865
Total other income 1,433,980 1,351,050 4,367,284 4,079,948
Interest expense 843,900 666,164 2,505,109 1,884,436
Income before income taxes 2,132,872 2,355,451 6,967,230 5,293,990
Income taxes:
State 117,300 129,500 383,200 291,200
Federal 685,200 756,800 2,238,500 1,700,200
Total income taxes 802,500 886,300 2,621,700 1,991,400
Net income $ 1,330,372 $ 1,469,151 $ 4,345,530 $3,302,590
Earnings per share (based on
3,700,876 shares outstanding)$ .36 $ .39 $ 1.17 $ .89
Cash dividends per share $ .08 $ .06 $ .20 $ .18
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Retained Earnings
Nine Months Ended
September 30,
1995 1994
Retained earnings, January 1 $69,661,726 $64,323,410
Add net income 4,345,530 3,302,590
Deduct cash dividends paid
($.20 and $.18 per share, respectively) (740,175) (666,158)
Retained earnings, September 30 $73,267,081 $66,959,842
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Nine Months
Ended September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,345,530 $ 3,302,590
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,998,237 4,660,788
Amortization of prepaid pension cost 187,500 (300,000)
Amortization of unearned compensation-restricted stock 17,923 7,468
Provision for doubtful accounts 870,570 1,032,750
Loss on sale of property - 44,234
Change in operating assets and liabilities:
(Increase) in accounts receivable (962,470) (5,479,050)
Decrease (increase) in inventory 650,305 (6,171,558)
(Increase) decrease in prepaid expenses (35,843) 417,840
Decrease (increase) in assets held for resale 1 (49,911)
(Increase) decrease in other assets (17,563) 863,261
Increase in accounts payable 14,125,285 11,907,180
(Decrease) in employee compensation (577,574) (160,214)
(Decrease) in accruals and other liabilities (2,757,996) (614,873)
(Decrease) in federal and state income taxes (1,475,541) (788,095)
Increase (decrease) in accrued postretirement benefits 178,312 (324,905)
Total adjustments 15,201,146 5,044,915
Net cash provided by operating activities 19,546,676 8,347,505
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,479,569) (4,922,287)
Proceeds from sale of assets 352,196 375,405
Net cash used by investing activities (6,127,373) (4,546,882)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (payments) net (14,100,000) 1,750,000
Long-term debt repayments (4,613,437) (1,980,000)
Long-term borrowings 10,000,000 -
Dividends paid (740,175) (666,158)
Purchase of restricted stock - (102,500)
Net cash used by financing activities (9,453,612) (998,658)
CASH AND CASH EQUIVALENTS:
Increase during first nine months 3,965,691 2,801,965
Beginning of year 1,428,702 2,191,153
End of first nine months $5,394,393 $4,993,118
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first nine months for:
Interest $2,509,857 $1,859,016
Income taxes $3,640,861 $2,779,495
[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 nine
months ended September 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 September 30, 1995 and 1994 are
net of allowance for doubtful accounts of $968,427 and
$968,427, respectively. Third-quarter bad debt charges, net
of recoveries, were $223,754 for 1995 and $292,778 for 1994.
Year-to-date bad debt charges, net of recoveries, were
$685,990 for 1995 and $788,584 for 1994.
5. The dollar amount of Noland Company's backlog of orders
believed to be firm was approximately $38,810,456 at
September 30, 1995.
6. In August, the Company entered into an unsecured term
revolver loan with a bank. The committed amount of the
loan is $15,000,000. The Company may pay down and
reborrow to the committed amount without penalty. The
interest rate is variable with interest payable
monthly. The loan matures on August 21, 1998. The
loan is subject to a non-usage fee if the average usage
for a 90 day period is less than fifty percent. The
Company borrowed $7,500,000 at closing which was used
to pay down short-term debt.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Company generates necessary cash 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 nine months of 1995, the Company generated $19.5
million in cash from operations, compared to $8.3 million for the
same period last year. The cash was used primarily to purchase
property and equipment, reduce debt and pay dividends. The
Company arranged a $15 million long term revolver loan in August
1995. The initial draw of $7.5 million was used to pay off
short-term debt.
Management believes the Company's liquidity, capital resources
and working capital are sufficient to meet the needs of the
foreseeable future.
Results of Operations
Third-quarter sales of $120.7 million were 3.2 percent greater
than the $117 million for the year-earlier period. Results for
individual product departments varied. Air conditioning
/refrigeration department sales were up 27 percent over last year
due to a combination of new operations opened late last year and
high demand prompted by record-setting summer heat. Industrial
sales were flat, while the plumbing/heating and electrical
departments suffered sales declines of three percent and eight
percent, respectively. Sales for the first nine months of 1995
were $356 million compared to $330 million for the year-earlier
period.
The gross margin of profit increased from 18.7 percent in 1994 to
19.1 percent in 1995 for both the quarter and first nine months.
The increase is due to management refining its quarterly
inventory adjustment.
Operating expenses for the quarter were $21.5 million compared to
$20.2 million for an increase of 6.1 percent from the year-
earlier period. For the first nine months, operating expenses
were $63 million versus $58.4 million a year-ago for an increase
of 7.7 percent.
Interest expense for the quarter and year-to-date increased 26.7
percent and 32.9 percent, respectively. The increases are due to
higher interest rates and larger investments in accounts
receivable and inventories.
Net income for the quarter was $1.3 million or 36 cents per share
compared to $1.5 million or 39 cents per share for the third
quarter of 1994. Eight cents of the 36 cents per share came from
the refinement in quarterly inventory adjustments. For year-to-
date, net income was $4.3 million or $1.17 per share compared to
$3.3 million or 89 cents per share for the year earlier period.
The inventory adjustment added 27 cents per share.
The third quarter was a disappointment because it fell short of
our expectations. Demand for our products and services in the
housing and manufacturing sectors fell sharply in September
thwarting our efforts to achieve significant sales growth. As we
head into the final months of 1995 we are hopeful we can take
full advantage of the pockets of strength in our markets and
finish the year with renewed momentum.
<PAGE>
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6a. Exhibits
EXHIBIT INDEX
Exhibit Number Exhibit Page
3 Articles of Incorporation 13 - 34
and ByLaws (as amended and
restated)
27 Financial data schedule 35
As to any security holder requesting a copy of the Form 10-Q,
the Company will furnish any exhibit indicated in the above list
as filed with Form 10-Q upon payment to it of its expenses in
furnishing such exhibit.
Item 6b. 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
November 2, 1995 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance
<PAGE>
ARTICLES OF INCORPORATION
Of
NOLAND COMPANY
A Virginia Stock Corporation
As Amended and Restated
1. The name of the Corporation is NOLAND COMPANY.
2. The purposes of the Corporation are to engage in the
business of manufacturing, buying, selling and distributing, at
wholesale or otherwise, plumbing, heating, electrical,
industrial, refrigerating and air conditioning products and
equipment, machine tools and all other products of any kind
without limitation and to engage in all related businesses. In
addition, the Corporation shall have the power to carry on
business of any nature and purpose not prohibited by law or
required by Section 13.1-50 of the Virginia Code to be stated in
these Articles. The Corporation shall also have power to enter
into partnerships and joint ventures with other corporations,
domestic or foreign, or with any individual or individuals.
3. The Corporation shall have authority to issue 6,000,000
shares of common stock of the par value of $10 per share. The
shares outstanding shall be entitled to preemptive rights and
shall not be issued until the agreed subscription shall have been
fully paid so that all shares shall be fully paid and non-
assessable.
4. The number of Directors of the Corporation shall be
three or such greater number as may from time to time be
specified in the By-Laws.
5. Any amendment or restatement of these articles other
than an amendment or restatement that amends or affects the
shareholder vote required by the Virginia Stock Corporation Act
to approve a merger, statutory share exchange, sale of all or
substantially all of the Corporation's assets or the dissolution
of the Corporation shall be approved by a majority of the votes
entitled to be cast by each shareholder voting group that is
entitled to vote on the matter.
<PAGE>
[Effective 7/26/95]
NOLAND COMPANY
BY-LAWS
ARTICLE I
Stockholders
1.Annual and Special Meetings
The annual meeting of the stockholders of the
Corporation shall be held on the third Thursday of April
each year, or such later date in the month of April, May or
June as the Board of Directors may designate. Other
meetings of the stockholders shall be held whenever called
by the Chairman of the Board of Directors, the President, a
majority of the Directors or stockholders holding at least
1/10 of the then outstanding number of shares of Capital
Stock entitled to vote. All meetings shall be held at such
hour and at such place within or without the State of
Virginia as may be stated in the notice of the meeting.
2.Notice of Meetings
Notice stating the time and place of the
meeting and, in case of a special meeting, the purpose or
purposes for which it is called, shall be mailed to each
stockholder at his address as it appears on the Stock
Transfer books of the Corporation not less than 10 nor more
than 50 days before the date of the meeting (except that if
the meeting is to act on (a) an amendment to the Articles of
Incorporation, (b) a reduction in stated capital, (c) a plan
<PAGE>
of merger or consolidation, (d) the sale, lease, exchange,
mortgage or pledge of all or substantially all of the assets
of the Corporation when not to be made in the usual and
regular course of business, or (e) the dissolution of the
Corporation, then such notice shall be mailed not less than
25 nor more than 50 days before the date of the meeting and
in addition shall be accompanied by a copy of the proposed
amendment or plan of reduction, or merger or consolidation,
as appropriate). Any stockholder may waive in writing any
notice of a meeting, whether before or after the date of the
meeting.
3.Quorum
The holders of a majority of the outstanding
shares of Capital Stock entitled to vote shall constitute a
quorum at any meeting of the stockholders. If less than a
majority of the outstanding shares are present in person or
represented by proxy at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time
without further notice. At such reconvened meeting at which
a quorum shall be present or represented, any business may
be transacted which might have been transacted at the
meeting as originally notified. The shareholders present at
a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
<PAGE>
4.Vote Required
A vote of the majority of the shares present
either in person or by proxy shall determine all questions,
except that (1) a two-thirds vote of all shares outstanding
shall be required to approve any of the actions listed in
items (a), (b), (c), (d) or (e) of Section 2 above and (2) a
two-thirds vote, or more, of shares present shall be
required on certain questions of procedure for the meeting
when required by Section 6 of this Article I.
5.Closing of Transfer Books and Fixing of Record
Date
The transfer books for shares of Capital Stock
of the Corporation may be closed by order of the Board of
Directors for not exceeding 50 days for the purpose of
determining stockholders entitled to notice of, or to vote
at, any meeting of stockholders or any adjournment thereof
or entitled to receive payment of any dividend or in order
to make a determination of stockholders for any other proper
purpose. In lieu of closing the stock transfer books the
Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date
to be not more than 50 days preceding the date on which the
particular action requiring such determination is to be
taken.
<PAGE>
6.Meeting Procedure
The Chairman of the Board of Directors shall
preside over all meetings of the stockholders or, in his
absence, the President or, if he be present, the Senior Vice
President or a Vice President. If no such officer is
present, a chairman shall be elected by the meeting. The
Secretary of the Corporation shall act as secretary of the
meeting if he be present and, if he be not present, a
secretary shall be elected by the meeting. The Chairman of
the meeting may appoint one or more inspectors of election
to determine the qualification of voters, the validity of
proxies and the results of any vote. To the extent not
otherwise expressly provided elsewhere in these By-Laws or
by the laws of Virginia, the meeting shall be conducted by
the ordinary rules of parliamentary procedure as interpreted
by the presiding officer and in the event of any dispute as
to such parliamentary rules, the most recent edition of
Roberts Rules of Order as interpreted by the presiding
officer shall govern and no ruling of the Chair shall be
reversed on appeal to the floor except by the concurring
vote of the holders of more than two-thirds of the shares
present or represented.
7.Opt-Out of Control Share Acquisitions Act
Article 14.1 of the Virginia Stock Corporation
Act (Control Share Acquisitions) does not apply to any
acquisition of shares of the Corporation.
<PAGE>
ARTICLE II
Directors
1.Number
The Board of Directors shall consist of six
(6) Directors. This number may be changed at any time by
amendment of these By-Laws, but shall always be a number of
not less than three. Directors need not be stockholders.
2.Election, Term, Removal, Vacancy
The Board of Directors shall be chosen at the
annual meeting of the stockholders. Directors shall hold
office until the next annual meeting of the stockholders or
until their successors are elected. The stockholders at any
meeting called expressly for the purpose, by a vote of the
holders of a majority of all the shares of Capital Stock at
the time outstanding may remove any Director with or without
cause and fill the vacancy. Any vacancy arising among the
Directors may be filled by the remaining Directors unless
sooner filled by the stockholders in meeting, provided,
however, that the Directors may not fill more than two
vacancies resulting from an increase in the number of
Directors by amendment of the By-Laws.
<PAGE>
3.Meetings
Meetings of the Board of Directors shall be
held at times fixed by resolution of the Board or on the
call of the Chairman of the Board, the President or a
majority of the members of the Board.
4.Notice of Meetings
Notice of any meeting, whether regular or
special, shall be given by the Secretary to each member of
the Board not less than two days before the meeting by mail
or by delivering such notice to him or telephoning or
telegraphing it to him at least one day before the meeting.
Notice of any meeting shall state the time and place of the
meeting but need not state the objects thereof. Meetings
may be held without notice if all the Directors are present
or those not present waive notice in writing whether before
or after the meeting.
5.Quorum and Vote Requirement
A quorum at any meeting shall consist of a
majority of the number of Directors fixed by the By-Laws and
a majority of those present where there is a quorum shall
decide all questions coming before the meeting. The
Chairman shall always be entitled to vote.
<PAGE>
6.Action by Written Consent
The Board of Directors may take action without
a meeting provided that all of the Directors sign a written
consent pursuant to Section 13.1-685 of the Virginia Stock
Corporation Act.
ARTICLE III
Executive Committee
1.Appointment
The Board of Directors may, by the concurring
action of a majority of the number of the Directors fixed by
the By-Laws, designate by resolution 2 or more of the
Directors to constitute an Executive Committee.
2.Authority
The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all
of the authority of the Board of Directors except (i) to
approve or recommend to stockholders for approval, any of
the actions listed in items (a), (b), (c), (d) or (e) of
Section 2 of Article I or (ii) to amend the By-Laws.
<PAGE>
3.Quorum
A majority of the members of the Executive
Committee shall constitute a quorum.
4.Action Without a Meeting
The Executive Committee may take action
without a meeting upon the signature of all members to a
written consent signed before such action and setting forth
the action to be taken in this manner.
5.Minutes
The Executive Committee shall keep regular
minutes of its proceedings.
6.Other Rules
The Executive Committee may make other rules
for the conduct of its meetings, the notice required and the
maintenance of its records.
<PAGE>
ARTICLE IV
Audit Committee
1.Establishment
There shall be and hereby is established an
Audit Committee of the Board of Directors, which Committee
is intended to function primarily in an oversight capacity
with respect to the Company's auditing, accounting,
reporting and control functions and to assist the whole
Board in fulfilling its fiduciary responsibilities with
respect thereto and the adequacy thereof. The Board in its
judgment and from time-to-time, by subsequent actions, may
provide more detailed description of the Committee's charter
and modus operandi.
2.Appointment
The Board of Directors, by the concurring
action of a majority of the number of Directors fixed by the
By-Laws, shall designate by resolution two or more of the
Directors to constitute an Audit Committee, of which a
majority shall be independent directors and the Chairman
thereof.
3.Quorum
A majority of the members of the Audit
Committee shall constitute a quorum.
<PAGE>
4.Minutes
The Audit Committee shall keep regular minutes
of its proceedings.
5.Other Rules
The Audit Committee, as it deems appropriate,
may make such other rules for the conduct of its meetings,
the notice required and the maintenance of its records.
ARTICLE V
Compensation Committee
1.Appointment
The Board of Directors shall, by the
concurring action of a majority of the number of the
Directors fixed by the By-Laws, designate by resolution two
or more of the Directors to constitute the Compensation
Committee.
2.Authority
The Compensation Committee shall fix the
salaries and extra compensation of all executive officers.
It also shall administer the Corporation's Restricted Stock
Plan.
3.Quorum
A majority of the members of the Compensation
Committee shall constitute a quorum.
<PAGE>
4.Action Without a Meeting
The Compensation Committee may take action
without a meeting upon the signature of all members to a
written consent setting forth the action to be taken in this
manner.
5.Minutes
The Compensation Committee shall keep regular
minutes of its proceedings.
6.Other Rules
The Compensation Committee may make other
rules for the conduct of its meetings, the notice required
and the maintenance of its records.
ARTICLE VI
Officers
1.Officers and Election
The Board of Directors, promptly after its
election in each year, shall elect a Chairman of the Board
(who shall be one of the Directors), a President (who shall
be one of the Directors), a Treasurer and a Secretary, and
may elect an Senior Vice President and such number of Vice
Presidents (with or without special designation), Assistant
Vice Presidents, Assistant Treasurers and Assistant
Secretaries as the Board may choose, all to hold office
until the next annual meeting of the Board of Directors or
<PAGE>
until such times as their respective successors shall be
elected, unless removed by the Board of Directors. Any
officer may hold more than one office except that the same
person shall not be President and Secretary.
2.Removal
Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the
Corporation would be served thereby.
3.Vacancies
A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion
of the term.
4.Duties
The Chairman of the Board of Directors shall
be the principal executive officer of the Corporation. He
shall preside at all meetings of Directors and stockholders
and have general supervision of the affairs of the
Corporation. Subject to the Chairman of the Board of
Directors, the President shall be the principal executive
officer of the Corporation and in the absence or incapacity
of the Chairman of the Board or at the direction of the
Chairman of the Board, shall discharge his duties. In the
absence or incapacity of the Chairman of the Board of
<PAGE>
Directors and of the President or at their joint direction,
the Senior Vice President, if any, shall be the principal
executive officer of the Corporation and shall discharge the
duties of the President. Subject to the preceding, the
officers of the Corporation shall have such duties as
ordinarily pertain to their respective offices and in
addition the duties and responsibilities contemplated by the
Basic Plan of Management Organization as approved under date
of July 10, 1959, with such changes as may at the time be in
effect.
5. Compensation
The Chairman of the Board shall recommend to
the Compensation Committee the salaries and any extra
compensation of all executive officers except himself. The
Compensation Committee shall fix the salaries and any extra
compensation of all executive officers. No officer shall be
prevented from receiving compensation by reason of being a
Director.
<PAGE>
ARTICLE VII
Stock
1.Certificates
Each stockholder shall be entitled to a
certificate or certificates of stock in such form as may be
approved by the Board of Directors. Each certificate shall
be signed by the President or Vice President and by the
Secretary or an Assistant Secretary and sealed with the
Corporation's seal, which may be either facsimile, engraved
or printed. Certificates of stock issued in the name of
Noland Company, Incorporated, shall continue as valid
certificates of stock of the Corporation under its new name
Noland Company.
2.Transfers
All transfers of stock of the Corporation
shall be made upon its books by surrender of the certificate
for the shares transferred accompanied by an assignment in
writing by the holder and may be accomplished either by the
holder in person or by a duly authorized attorney in fact.
Before a new certificate is issued the surrendered
certificate shall be marked "cancelled" and the date of
cancellation marked thereon and initialed by the Secretary
or an Assistant Secretary.
<PAGE>
3. Replacement
In case of the loss, mutilation or destruction
of a certificate of stock, a duplicate certificate may be
issued upon such terms not in conflict with law as the Board
of Directors may prescribe.
4. Transfer Agents
The Board of Directors may appoint one or more
Transfer Agents and Registrars and may require stock
certificates to be countersigned by a Transfer Agent or
registered by a Registrar or may require stock certificates
to be both countersigned by a Transfer Agent and registered
by a Registrar. If certificates of Capital Stock of the
Corporation are signed by a Transfer Agent or by a Registrar
(other than the Corporation itself or one of its employees),
the signature thereon of the officers of the Corporation and
the seal of the Corporation thereon may be facsimiles,
engraved or printed. In case any officer or officers who
shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or
certificates, shall cease to be such officer or officers of
the Corporation, whether because of death, resignation or
otherwise before such certificate or certificates shall have
been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures
shall have been used thereon had not ceased to be such
<PAGE>
officer or officers of the Corporation.
ARTICLE VIII
Seal
The seal of the Corporation shall be a circular
die of which there may be any number of counterparts with
the word "SEAL" and the name of the Corporation engraved
thereon.
ARTICLE IX
Voting of Stock Held in Other Companies
Unless otherwise provided by a resolution of the
Board of Directors, the Chairman of the Board of Directors
or the President may sign a proxy voting any shares of stock
owned by the Corporation in other companies, or personally
attend the meeting and vote such shares or appoint attorneys
to vote such shares.
<PAGE>
ARTICLE X
Indemnification of Directors and Officers
Each Director and officer shall be indemnified
against liabilities, fines, penalties and claims imposed
upon or asserted against him (including amounts paid in
settlement) by reason of having been such a Director or
officer, whether or not then continuing so to be, and
against all expenses (including counsel fees) reasonably
incurred by him in connection therewith, except in relation
to matters as to which he shall have been finally adjudged
to be liable by reason of having been guilty of gross
negligence or willful misconduct in the performance of his
duty as such Director or officer. In the event of any
judgment against such Director or officer, except one
adjudging him to have been guilty of gross negligence or
willful misconduct in the performance of his duty, or in the
event of a settlement, the indemnification shall be made
only if the Corporation shall be advised that such Director
or officer was not guilty of gross negligence or willful
misconduct in the performance of his duty, and, in the event
of a settlement, that such settlement was, or if still to be
made is, in the best interest of the Corporation. As to
officers who are not past or present Directors, such opinion
shall be rendered by the Board of Directors. As to past or
present Directors such opinion shall be rendered by
independent counsel appointed by the Board of Directors. If
the determination is to be made by the Board of Directors,
<PAGE>
it may rely, as to all questions of law, on the advice of
independent counsel. Every reference herein to Director or
officer shall include every Director or officer or former
Director or officer of the Corporation and every person who
may have served at its request as a Director or officer of
another corporation in which the Corporation owns shares of
stock or of which it is a creditor or, in case of a non-
stock corporation, to which the Corporation contributes and,
in all of such cases, his executors and administrators. The
right of indemnification hereby provided shall not be
exclusive of any other rights to which any Director or
officer may be entitled.
ARTICLE XI
Emergency By-Laws
The Emergency By-Laws provided in this Article
shall be operative during any emergency resulting from an
attack on the United States or any nuclear or atomic
disaster notwithstanding any different provision in the
preceding Articles of the By-Laws
or in the Articles of Incorporation of the Company. To the
extent not inconsistent with these Emergency By-Laws, the
By-Laws provided in the preceding Articles shall remain in
effect during such emergency and upon the termination of
such emergency the Emergency By-Laws shall cease to be
operative unless and until another such emergency shall
occur.
<PAGE>
During any such emergency:
(a) Any meeting of the Board of Directors may
be called by any officer of the Company or by an Director.
Notice shall be given by such person or by any officer of
the Company. The notice shall specify the place of the
meeting, which shall be the general office of the Company at
the time if feasible and otherwise any other place specified
in the notice. The notice shall also specify the time of
the meeting. Notice may be given only to such of the
Directors as it may be feasible to reach and by such means
as may be feasible, including publication or radio. If
given by mail, messenger, telephone or telegram, the notice
shall be addressed to the Director at his residence or
business address or such other place as the person giving
the notice shall deem most suitable. If it appears that
there may be difficulty in getting a quorum, then notice
shall be similarly given, to the extent feasible, to the
other persons referred to in (b) below. Notice shall be
given at least two days before the meeting if feasible in
the judgment of the person giving the notice and otherwise
on any shorter time he may deem necessary.
(b) At any meeting of the Board of Directors,
a quorum shall consist of a majority of the number of
Directors fixed at the time by Article II of the By-Laws.
If the Directors present at any particular meeting shall be
fewer than the number required for such quorum, other
persons present, to the number necessary to make up such
quorum, shall be deemed Directors for such particular
<PAGE>
meeting as determined by the following provisions and in the
following order of priority:
(i)The Senior Vice President, if any;
(ii)The Vice Presidents (with or without
special designation) in the order of their
seniority of first election to such office,
or if two or more shall have been first
elected to such office on the same day, in
the order of their seniority in age; and
(iii) Any other persons that are
designated on a list that shall have been
approved by the Board of Directors before the
emergency, such persons to be taken in such
order of priority and subject to such
conditions as may be provided in the
resolution approving the list.
(c)The Board of Directors, during as well
as before any such emergency, may provide, and from time to
time modify, lines of succession in the event that during
such an emergency any or all officers or agents of the
Company shall for any reason be rendered incapable of
discharging their duties.
(d)The Board of Directors, during as well
as before any such emergency, may, effective in the
emergency, change the general office or designate several
alternative general offices or regional offices, or
authorize the officers to do so.
<PAGE>
No officer, Director or employee acting in
accordance with these Emergency By-Laws shall be liable
except for willful misconduct.
These Emergency By-Laws shall be subject to repeal
or change by further action of the Board of Directors or by
action of the stockholders, except that no such repeal or
change shall modify the provisions of the next preceding
paragraph with regard to action or inaction prior to the
time of such repeal or change. Any such amendment of these
Emergency By-Laws may make any further or different
provision that may be practical and necessary for the
circumstances of the emergency.
ARTICLE XII
Amendments
The By-Laws may be amended by the Directors or the
stockholders provided, in the case of the stockholders, that
the proposed amendment is stated in the notice of the
meeting.
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