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, 1996 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 25, 1996
3,700,876 shares.
This report contains 11 pages.
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NOLAND COMPANY AND SUBSIDIARY
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1996 (Unaudited) and Dec. 31, 1995 (Audited).......3
Unaudited Consolidated Statements of Income -
Three Months and Nine Months Ended September 30, 1996 and 1995...4
Unaudited Consolidated Statements of Retained Earnings -
Nine Months Ended September 30, 1996 and 1995....................5
Unaudited Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995....................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
September 30, December 31,
1996 1995
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 4,935,600 $ 12,577,642
Accounts receivable, net 54,888,366 50,504,021
Inventory, net 62,703,492 58,072,335
Deferred income taxes 1,901,915 1,901,915
Prepaid expenses 467,789 275,755
Total Current Assets 124,897,162 123,331,668
Property and Equipment, at cost:
Land 13,419,432 13,288,151
Buildings 74,072,193 70,621,815
Equipment and fixtures 54,000,357 51,518,836
Property excess to current needs 2,054,040 2,054,040
Total 143,546,022 137,482,842
Less accumulated depreciation 64,588,151 61,818,967
Property and Equipment, net 78,957,871 75,663,875
Assets Held for Resale 1,290,775 1,290,775
Prepaid Pension 12,165,129 11,991,504
Other Assets 1,105,186 1,242,063
$218,416,123 $213,519,885
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, short-term borrowings $ 4,000,000 $ -
Current maturity of long-term debt 3,301,108 3,721,108
Book overdrafts 12,021,708 11,967,714
Accounts payable 25,324,699 21,349,691
Other accruals and liabilities 10,548,603 14,236,217
Federal and state income taxes 651,317 167,787
Total Current Liabilities 55,847,435 51,442,517
Long-term Debt 38,337,858 41,611,267
Deferred Income Taxes 8,352,682 8,352,682
Accrued Postretirement Benefits 628,772 425,724
Stockholders' Equity:
Capital common stock, par value $10;
authorized, 6,000,000 shares; issued,
3,700,876 shares 37,008,760 37,008,760
Retained earnings 78,489,890 74,836,888
Total 115,498,650 111,845,648
Less unearned compensation-restricted stock 249,274 157,953
Stockholders' Equity 115,249,376 111,687,695
$218,416,123 $213,519,885
The accompanying notes are an integral part of the financial statements.
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NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Income
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Merchandise sales $123,472,658 $120,701,547 $354,286,921 $355,997,768
Cost of goods sold:
Purchases and freight-in 99,771,423 88,785,629 290,995,802 287,282,590
Inventory, beginning 62,879,086 72,707,108 58,072,334 64,458,250
Inventory, ending 62,703,491 63,807,944 62,703,491 63,807,944
Cost of goods sold 99,947,018 97,684,793 286,364,645 287,932,896
Gross profit on sales 23,525,640 23,016,754 67,922,276 68,064,872
Operating expenses 21,283,600 21,473,962 63,192,164 62,959,817
Operating profit 2,242,040 1,542,792 4,730,112 5,105,055
Other income:
Cash discounts, net 1,005,084 873,320 3,248,247 2,983,357
Service charges 388,060 362,981 1,153,644 1,058,392
Other gains (losses)
and recoveries (547) - 3,952 -
Miscellaneous 75,640 197,679 217,101 325,535
Total other income 1,468,237 1,433,980 4,622,944 4,367,284
Interest expense 680,660 843,900 2,072,044 2,505,109
Income before income taxes 3,029,617 2,132,872 7,281,012 6,967,230
Income taxes:
State 166,700 117,300 400,400 383,200
Federal 973,400 685,200 2,339,400 2,238,500
Total income taxes 1,140,100 802,500 2,739,800 2,621,700
Net income $1,889,517 $ 1,330,372 $ 4,541,212 $4,345,530
Earnings per share (based on
3,700,876 shares outstanding) $ .51 $ .36 $ 1.23 $ 1.17
Cash dividends per share $ .08 $ .08 $ .24 $ .20
The accompanying notes are an integral part of the financial statements.
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NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Retained Earnings
Nine Months Ended
September 30,
1996 1995
Retained earnings, January 1 $74,836,888 $70,926,096
Add net income 4,541,212 4,345,530
Deduct cash dividends paid
($.24 and $.20 per share, respectively) (888,210) (740,175)
Retained earnings, September 30 $78,489,890 $74,531,451
The accompanying notes are an integral part of the financial statements.
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NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Nine Months
Ended September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,541,212 $4,345,530
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,082,836 4,998,237
Amortization of prepaid pension cost (173,625) 187,500
Amortization of unearned compensation-restricted stock 33,678 17,923
Provision for doubtful accounts 996,314 870,570
Gain on sale of property (3,952) -
Change in operating assets and liabilities:
(Increase) in accounts receivable (5,380,659) (962,470)
(Increase) decrease in inventory (4,631,157) 650,305
(Increase) in prepaid expenses (192,034) (35,843)
Decrease in assets held for resale - 1
Decrease (increase) in other assets 91,877 (17,563)
Increase in book overdrafts 53,994 4,889,294
Increase in accounts payable 3,975,008 773,723
(Decrease) in other accruals and liabilities (3,687,614) (3,335,570)
Increase (Decrease) in federal and state income taxes 483,530 (1,475,541)
Increase in accrued postretirement benefits 203,049 178,312
Total adjustments (3,148,755) 6,738,878
Net cash provided by operating activities 1,392,457 11,084,408
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,045,401) (6,479,569)
Proceeds from sale of assets 717,520 352,196
Net cash used by investing activities (8,327,881) (6,127,373)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (payments) net 4,000,000 (14,100,000)
Long-term debt repayments (3,693,408) (4,613,437)
Long-term borrowings - 10,000,000
Dividends paid (888,210) (740,175)
Purchase of restricted stock (125,000) -
Net cash used by financing activities (706,618) (9,453,612)
CASH AND CASH EQUIVALENTS:
Decrease during first nine months (7,642,042) (4,496,577)
Beginning of year 12,577,642 9,890,970
End of first nine months $4,935,600 $5,394,393
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first nine months for:
Interest $2,351,211 $2,509,857
Income taxes $2,256,270 $3,640,861
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, 1996 and 1995.
2. The Notes to Consolidated Financial Statements included in
the Company's December 31, 1995 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. The Company uses estimated gross profit rates to
determine cost of goods sold during interim periods.
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, 1996 and 1995 are
net of allowance for doubtful accounts of $1,008,132 and
$968,427, respectively. Third-quarter bad debt charges, net
of recoveries, were $257,488 for 1996 and $223,754 for 1995.
Year-to-date bad debt charges, net of recoveries, were
$824,335 for 1996 and $685,990 for 1995.
5. The dollar amount of Noland Company's backlog of orders
believed to be firm was approximately $39,932,054 at
September 30, 1996.
<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 1996, the Company generated $1.4
million in cash from operations, compared to $11.1 million for
the same period last year. Cash was used primarily to purchase
property and equipment and pay dividends. Working capital at
September 30, 1996 was $69.0 million and the current ratio was
2.24.
The Company successfully completed the acquisition of the
principal assets of a two-branch supplier in Florida in late
September, increasing the number of branches to 101. The
purchase of assets was financed with existing debt arrangements.
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 $123.5 million were 2.3 percent greater
than the $120.7 million for the year-earlier period. Sales for
the first nine months of 1996 were $354.3 million compared to
$356 million for the year-earlier period.
The gross margin of profit of 19.1 percent remained at the levels
of a year ago. This, combined with the higher sales, generated a
modest increase in gross profit. For the first nine months the
gross margin of profit was 19.2 percent compared to 19.1 percent
a year ago.
Operating expenses for the quarter were $21.3 million compared to
$21.5 million for a decrease of one percent from the year-earlier
period. For the first nine months, operating expenses were $63.2
million versus $63 million a year-ago.
Interest expense for the quarter and year-to-date decreased 19.3
<PAGE>
percent and 17.3 percent, respectively. The decreases are due to
lower interest rates and reduced borrowings.
Net income for the quarter was $1.9 million or 51 cents per share
compared to $1.3 million or 36 cents per share for the third
quarter of 1995. For year-to-date, net income was $4.5 million
or $1.23 per share compared to $4.3 million or $1.17 per share
for the year earlier period.
Steps are being taken on a number of fronts to energize our sales
efforts. The impact will be gradual and won't begin to be felt
until sometime in 1997. At the same time we are continuing to
focus on improving gross margins and internal operations.
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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
November 1, 1996 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,935,600
<SECURITIES> 0
<RECEIVABLES> 55,896,498
<ALLOWANCES> 1,008,132
<INVENTORY> 62,703,492
<CURRENT-ASSETS> 124,897,162
<PP&E> 143,546,022
<DEPRECIATION> 64,588,151
<TOTAL-ASSETS> 218,416,123
<CURRENT-LIABILITIES> 55,847,435
<BONDS> 0
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0
<COMMON> 37,008,760
<OTHER-SE> 78,240,616
<TOTAL-LIABILITY-AND-EQUITY> 218,416,123
<SALES> 123,472,658
<TOTAL-REVENUES> 123,472,658
<CGS> 99,947,018
<TOTAL-COSTS> 21,026,112
<OTHER-EXPENSES> (1,468,237)
<LOSS-PROVISION> 257,488
<INTEREST-EXPENSE> 680,660
<INCOME-PRETAX> 3,029,617
<INCOME-TAX> 1,140,100
<INCOME-CONTINUING> 1,889,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,889,517
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