FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file no. 2-27393
NOLAND COMPANY
A Virginia Corporation IRS Identification #54-0320170
80 29th Street
Newport News, Virginia 23607
Telephone: (757) 928-9000
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock $10 Par Value
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 (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 12, 1998, was approximately $37,795,000.
3,700,876 shares of the Registrant's Common Stock were outstanding at the close
of business on March 12, 1998.
DOCUMENTS (or portions thereof) INCORPORATED BY REFERENCE
Part of
Document Form 10-K
Portions of Annual Report to Stockholders for the Parts II and IV
year ended December 31, 1997
Portions of Noland Company Proxy Statement for Parts III and IV
April 30, 1998 Annual Meeting of Stockholders
This report contains 33 pages. The exhibit index is shown on page 11 of this
10-K.
1
<PAGE>
PART I
Item 1 Business
(1) (a) A Virginia corporation founded in 1915, Noland Company is
a distributor of Plumbing/Heating, Air Conditioning,
Industrial and Electrical supplies, with branch facilities
in fourteen states.
While most of its sales are wholesale, the Company plays
a modest retail role through product showrooms and other
marketing efforts of certain items. It handles products
of over 2,000 vendors and sells to thousands of customers,
largely in the industrial and construction sectors of the
Southern United States. There have been no significant
changes in the Company's methods of operation during the
last five years. However, the growing demand for
computer-based, fully automated procurement systems for
MRO (maintenance, repair and operating) products is
attracting new business and widening the scope and
possibilities for potential sales growth in this market.
In 1997 the Company entered into two foreign corporate
joint ventures with former air conditioning equipment
customers in Venezuela and Panama. Noland Company owns a
fifty percent interest in each joint venture.
(b) The Company operates in only one industry segment, the
distribution of mechanical equipment and supplies.
Markets for these products include contractors, industrial
plants, utilities and others.
(c) During the last five years, the Company has continued to
serve essentially the same markets described in Item 1 (1)
(b). Current plans call for the continuation of this
policy. The Company does not manufacture any products.
(i) Total sales of each class of similar products for the last five
years are as follows:
1997 1996 1995 1994 1993
(In thousands)
Plumbing/Heating $250,327 $241,235 $245,407 $241,273 $220,879
Air Conditioning 112,013 115,963 110,920 90,574 84,600
Industrial 55,077 62,451 64,741 62,279 54,099
Electrical 47,548 46,056 48,444 46,076 43,363
$464,965 $465,705 $469,512 $440,202 $402,941
Not all branches have all four departments. If a product department does
not exist in a particular branch, any sales of that department's products
are attributed to the department that makes the sale.
(ii) The Company continues to market new products introduced by
its suppliers/manufacturers. None will require the
investment of a material amount of the assets of the
Company.
(iii) The Company does not use or market raw materials.
(iv) The Company holds several sales franchises and has produced
a variety of copyrighted materials and systems used in the
normal conduct of its business. It is virtually impossible
to dollar-quantify their significance. None are reflected
as assets in the Company's Balance Sheet. The Company
has no patents.
(v) The business in general is seasonal to the extent of the construction
industry it supplies.
<PAGE>
(vi) It is the practice of the Company to carry a full line of inventory
items for rapid delivery to customers. At times, advance buying is
necessary to ensure the availability of products for sale. The
Company also extends credit, and this and the necessity for an
adequate supply of merchandise ordinarily absorbs most of the
Company's working capital.
(vii) The dollar amount of the Company's backlog of orders believed to be
firm was approximately $35,572,435 at December 31, 1997 and
$37,437,444 at December 31, 1996.
(viii) The portion of the Company's business with the Government and
subject to renegotiation is not considered material.
(ix) The wholesale distribution of all products in which the Company is
engaged is highly competitive. Competition results primarily from
price, service and the availability of goods. Industry statistics
indicate that Noland Company is one of the larger companies in its
field.
(x) Company-sponsored research and development activities expenditures
in 1997, 1996 and 1995 were immaterial.
(xi) The Company believes it is in compliance with Federal, State and
local provisions which have been enacted or adopted regulating the
discharge of materials into the environment. The effects of
compliance are not material with respect to capital expenditures,
earnings and competitive position of the Company. No material
capital expenditures are anticipated for environmental control
facilities during the remainder of the current year and the
succeeding year.
(xii) As of December 31, 1997, the Company employed 1,606 persons.
(d) From its founding in 1915, the Company has operated principally in
the Southern United States. In 1995 and 1996 the Company opened
several locations in Pennsylvania.
Item 2 Properties
The main properties of the Company consist of 107 facilities, including
warehouses, offices, showrooms, paved outside storage areas and covered pipe
storage sheds. These are located in the following states: Alabama, Arkansas,
Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia.
Seventeen are held under leases and the remaining ninety are owned by the
Company. The executive office of the Company is located at 80 29th Street,
Newport News, Virginia 23607.
In the opinion of management, the aforementioned facilities are suitable for
the purposes for which they are used, are adequate for the needs of the
business and are in continuous use in the day-to-day course of operations.
The Company's policy is to maintain, repair and renovate its properties on a
continuing basis, replacing older structures with new buildings and yard
facilities as the need for such replacement arises. In addition, reference is
made to Note 2 (d), page 16 of the Annual Report to Stockholders filed as an
exhibit hereto, with respect to property excess to current needs.
Item 3 Legal Proceeding
None of material consequence.
Item 4 Submission of Matters to a Vote of Security Holders
None
<PAGE>
Additional Item
Executive Officers of the Registrant
Positions and Offices Business Experience
Name Age Held with Registrant During the Past Five Years
Lloyd U. Noland, III 54 Chairman of the Board, Chief Executive Officer of
President and Director. the Registrant.
Officer since 1981
A. P. Henderson, Jr. 54 Vice President-Finance. Chief Financial Officer of
Officer since 1983 the Registrant.
Charles A. Harvey 58 Vice President-Corporate Responsible for the
Data. Officer since 1980 Registrant's Corporate Data
Division.
John E. Gullett 56 Vice President-Corporate Responsible for the
Communications. Registrant's Corporate
Officer since 1982 Communications Department.
James E. Sykes, Jr. 54 Treasurer/Secretary. Responsible for Registrant's
Officer since 1982 treasury functions and
secretarial duties.
All executive officers were elected for a term of one year beginning May 1,
1997 and/or until their successors are elected and qualified. None of the
executive officers are related by blood, marriage or adoption. Service has
been continuous since the date elected to their present positions. There are
no arrangements or understandings between any officer and any other person
pursuant to which he was elected an officer.
PART II
Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters
The information set forth on the inside back cover of the Annual Report
to Stockholders contains information concerning the market price of
Noland Company's common stock for the past two years, the number of
holders thereof and the dividend record with respect thereto for the past
two years. This information is incorporated herein by reference.
Item 6 Selected Financial Data
The information set forth under the caption "Ten-Year Review of Selected
Financial Data" relating to sales, net income, total assets, long-term
debt, net income per share and dividends per share for the years 1993
through 1997 is incorporated herein by reference from pages 20 and 21 of
the enclosed Noland Company Annual Report to Stockholders for the year
ended December 31, 1997.
Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information set forth under the above caption is incorporated herein
by reference from pages 10 and 11 of the enclosed Noland Company Annual
Report to Stockholders for the year ended December 31, 1997.
Item 8 Financial Statements and Supplementary Data
The following consolidated financial statements of Noland Company,
included in the Annual Report to Stockholders for the year ended
December 31, 1997, are incorporated herein by reference:
<PAGE>
Annual
Report to
Stockholders
(page)
Report of Independent Accountants 12
Consolidated Statement of Income and Retained Earnings--
Years ended December 31, 1997, 1996 and 1995 13
Consolidated Balance Sheet--December 31, 1997, 1996 and 1995 14
Consolidated Statement of Cash Flows --
Years ended December 31, 1997, 1996 and 1995 15
Notes to Consolidated Financial Statements 16-19
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10 Directors and Executive Officers of the Registrant
Data relating to Directors is incorporated herein by reference from
pages 2 and 3 of the 1998 Noland Company Proxy Statement for the
April 30, 1998 Annual Meeting of Stockholders.
Data relating to Executive Officers is included in Part I of this
report.
Item 11 Executive Compensation
The information set forth under the caption "Compensation of Executive
Officers" on page 4 of the 1998 Noland Company Proxy Statement for the
April 30, 1998, Annual Meeting of Stockholders is incorporated herein
by reference.
Item 12 Security Ownership of Certain Beneficial Owners and Management
The information set forth under the captions "Voting Securities and
Principal Holders Thereof" and "Nominees for Director" on pages 1, 2
and 3 of the 1998 Noland Company Proxy Statement for the April 30, 1998,
Annual Meeting of Stockholders is incorporated herein by reference.
Item 13 Certain Relationships and Related Transactions
(a) The Company has a ten-year agreement to lease an existing office
building for its corporate headquarters. The building is owned by
Basic Construction Company. Basic Construction owns 893,967 shares
of Noland Company stock. The majority of Basic Construction Company
stock is owned by The L.U. Noland 1982 Trust whose trustees are
Mr. Lloyd U. Noland, Jr.'s wife, Jane K. Noland, and his three
children: Lloyd U. Noland III, Susan C. Noland and Anne N. Edwards.
Under the terms of the lease, the Company will pay an annual rental
fee of approximately $260,000 per year. The Company will bear the
direct costs of utilities and real estate taxes. The terms of the
lease were based on an evaluation by an independent real estate
firm.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
<PAGE>
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Consolidated Financial Statements
included in PART II, Item 8 of this report:
Report of Independent Accountants
Consolidated Statement of Income and Retained
Earnings--Years Ended December 31, 1997, 1996
and 1995
Consolidated Balance Sheet--December 31,
1997, 1996 and 1995
Consolidated Statement of Cash Flows
--Years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
With the exception of the aforementioned information incorporated by
reference and the information in the 1997 Annual Report to Stockholders on the
inside back cover and pages 10, 11, 20 and 21 incorporated in response to
Items 5, 6 and 7 in this Form 10-K Annual Report, the 1997 Annual Report to
Stockholders is not to be deemed "filed" as part of this report. The
individual financial statements of the registrant have not been filed because
consolidated financial statements are filed. The registrant is an operating
company and the subsidiary is wholly owned.
2. Financial Statement Schedules
Included in PART IV of this report:
For the three years ended December 31, 1997
Form 10-K Page(s)
Schedule II Valuation and Qualifying
Accounts 8
Other financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information
is given in the consolidated financial statements or notes thereto.
Report of Independent Accountants
on Consolidated Financial Statement schedules 10
3. The exhibits are listed in the Index of Exhibits required by
Item 601 of Regulation S-K at item (c) below.
(b) Reports on Form 8-K
A Form 8-K was filed on December 24, 1997 to report amendments
to the Bylaws.
(c) The Index of Exhibits and any required Exhibits are included
beginning at page 11 of this report.
(d) Not applicable.
<PAGE>
Item 14(a)(2)
Financial Statement Schedules
<PAGE>
<TABLE>
<CAPTION>
FORM 10-K
SCHEDULE II
Noland Company and Subsidiary
Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E
Additions
Balance Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions(2) of Year
<S> <C> <C> <C> <C> <C>
Valuation accounts
deducted from assets
to which they apply--
doubtful accounts
receivable
December 31, 1997 $1,008,132 $ 745,062(1) $ - $ 745,062 $1,008,132
December 31, 1996 $1,008,132 $ 855,577(1) $ - $ 855,577 $1,008,132
December 31, 1995 $ 968,427 $ 739,929(1) $ - $ 700,224 $1,008,132
</TABLE>
[FN]
(1) Net of recoveries on bad debts of $855,090 for 1997, $657,609 for 1996
and $896,772 for 1995.
(2) Represents charges for which reserve was previously provided.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15 (d) 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
March 21, 1998 By Lloyd U. Noland, III
Chairman of the Board
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman of the Board,
Lloyd U. Noland, III President and Director March 21, 1998
Lloyd U. Noland, III
Vice President-Finance,
Chief Financial Officer
Arthur P. Henderson, Jr. and Director March 21, 1998
Arthur P. Henderson, Jr.
James E. Sykes, Jr. Treasurer/Secretary March 21, 1998
James E. Sykes, Jr.
Allen C. Goolsby, III Director March 21, 1998
Allen C. Goolsby, III
<PAGE>
COOPERS & LYBRAND L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Our report on the consolidated financial statements of Noland Company and
Subsidiary has been incorporated by reference in this Form 10-K from page 12
of the 1997 Annual Report to Stockholders of Noland Company. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in Item 14 (a) 2 on page 8 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Virginia Beach, Virginia
February 23, 1998
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Page
(2) Plan of acquisition, reorganization,
liquidation or succession Not Applicable
(3) Articles of Incorporation and Bylaws Previously Filed
(4) Instruments defining the rights of
Security holders, including indentures Not Applicable
(9) Voting trust agreement Not Applicable
(10) Material contracts Not Applicable
(11) Statement regarding computation of per
share earnings--clearly determinable Not Applicable
(12) Statement regarding computation of
ratios Not Applicable
(13) Portions of Annual Report to
Stockholders 14 - 32
(16) Letter regarding change in a certifying
accountant Not Applicable
(18) Letter regarding change in accounting
principles Not Applicable
(21) Subsidiary of the registrant Previously Filed
(22) Published report regarding matters
submitted to vote of security holders Not Applicable
(23) Consents of experts and counsel Not Applicable
(24) Power of attorney Not Applicable
(27) Financial data schedule 33
(28) Information from reports furnished to
state insurance regulatory authorities Not Applicable
As to any security holder requesting a copy of the Form 10-K, the Company
will furnish any exhibit indicated in the above list as filed with the Form
10-K upon payment to it of its expenses in furnishing such exhibit.
<PAGE>
This page intentionally left blank.
<PAGE>
EXHIBIT 13
INDEX
Page
Management's Discussion 14-15
Report of Independent Accountants 16
Quarterly Financial Data 17
Consolidated Statement of Income 18
Consolidated Balance Sheet 19
Consolidated Statement of Cash Flows 20
Notes to Consolidated Financial Statements 21-28
Ten Year Review 29-30
Inside Back Cover 31-32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion focuses on the consolidated results of operations,
financial condition and cash flows of Noland Company. This section should be
read in conjunction with the consolidated financial statements and notes.
Results of Operations
Sales for 1997 of $465.0 million were slightly below the $465.7 million for
1996 for a decline of less than half of one percent. The decline in sales
stemmed from weaker sales in many of the Company's older operations. The
plumbing and electrical departments turned in higher sales compared to a year
ago. The air conditioning and industrial departments posted declines in sales
in 1997. Sales for 1996 were one percent less than 1995's sales of $469.5
million.
Gross profit margins improved to 20.2 percent in 1997, up from 19.5 percent
for 1996 and 19.0 percent for 1995. The higher gross profit margin helped
boost gross profit to $93.8 million for an increase of 3.3 percent over 1996.
1997's gross profit margin benefitted from the year-end LIFO adjustment which
decreased cost of goods sold by $1,040,000 through a combination of low
inflation and liquidation of certain inventory layers carried at lower costs
as compared with the cost of 1997 purchases. The 1996 LIFO inventory
adjustment decreased cost of goods sold by $207,000, while the 1995 adjustment
increased cost of goods sold by $2.1 million.
Operating expenses increased 3.9 percent over 1996, due primarily to the
additional costs of operating nine new branches opened in late-1996 and
changes in sales compensation plans. In 1996, operating expenses were 1.2
percent greater than 1995. Operating expenses, as a percent of sales, were
18.9 percent in 1997, 18.1 percent in 1996 and 17.8 percent 1995. 1997 and
1996 operating expenses were reduced $651,000 and $232,000, respectively for
pension income compared to a $249,000 increase in operating expense in 1995.
Interest expense increased 8.9 percent to $3.1 million in 1997 from $2.8
million. The increase is due to higher average borrowings related to the
cost of operating the newer branches and to higher average inventories. 1996
interest expense was 12.7 percent less than 1995.
1997 operations generated net income of $5.5 million compared to $5.9 million
for 1996 and $4.9 million for 1995.
Liquidity and Capital Resources
The Company maintains its short and long-term liquidity through: (1) cash
flow from operations; (2) short-term financings; (3) bank line of credit
arrangements, when needed; and (4) additional long-term debt, when needed.
In 1997, the primary source of liquidity was cash flow from operating
activities. Net cash provided by operating activities was $17.4 million in
1997 compared to $7.9 million in 1996 and $17.4 million in 1995. Significant
uses of cash include capital expenditures of $9.3 million and the retirement
of short and long term debt totaling $5.8 million.
<PAGE>
The Company's financial position remains strong with working capital of $75.8
million and a current ratio of 2.6 to 1. Management believes the Company's
liquidity, working capital and capital resources are sufficient to meet the
working capital and capital expenditure needs of the foreseeable future.
Outlook
The Company has launched several new initiatives in recent months to help
boost sales, including a new sales compensation plan, a new sales growth
strategy, and a new inventory management strategy. Further, management
anticipates significant sales growth from its newer branches and from several
integrated supply contracts initiated in 1996.
In addition, the Company is making steady progress in improving the
operational side of the business. Implementation of the basic platform for
its branch computer system was completed in late 1997, allowing the branches
to accelerate the use of technology to gain efficiencies and improve customer
service. The Company has also initiated a centralized credit administration
strategy.
Included in this discussion and in the Letter to the Shareholders are
forward-looking statements that reflect management's current outlook for the
future. Such forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated in the statements. Such
risks and uncertainties include, but are not limited to, general business
conditions, climatic conditions, competitive pricing pressures, product
availability, and successful implementation of the Company's new sales and
inventory management initiatives.
Impact of Inflation
Reported results, for the most part, reflect the impact of inflation because
of the Company's use of the LIFO (last-in, first-out) inventory method.
During inflationary periods, this method removes artificial profits induced by
inflation and presents operating results in truer, more absolute terms.
For purposes of financial reporting, the depreciation charge to earnings for
the use of capital assets is reflected on the straight-line basis which does
not necessarily keep pace with rising replacement costs of those assets.
Year 2000
The Company has completed an inventory and assessment of all operating systems
and active application programs. A strategic action plan with a timetable has
been developed to address all Year 2000 compliance issues. Year 2000
remediation will be accomplished with in-house resources and is expected to be
completed by August of 1999. The Year 2000 issue and the cost of remediation
is not material to the Company's business, operations, or financial condition.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
a professional services firm
COOPERS
& LYBRAND
To the Board of Directors and Stockholders of Noland Company:
We have audited the accompanying consolidated balance sheets of Noland Company
and Subsidiary as of December 31, 1997, 1996 and 1995, and the related
consolidated statements of income and retained earnings and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Noland Company and
Subsidiary as of December 31, 1997, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
Virginia Beach, Virginia Coopers & Lybrand L.L.P.
February 23, 1998
<PAGE>
<TABLE>
Selected Quarterly Financial Data (unaudited)
(In thousands, except per share amounts)
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter Year
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
Sales $110,930 $106,240 $117,719 $124,574 $122,014 $123,473 $114,302 $111,418 $464,965 $465,705
Gross Profit $ 22,283 $ 20,630 $ 22,792 $ 23,767 $ 23,837 $ 23,526 $ 24,841 $ 22,866 $ 93,753 $ 90,789
Net Income $ 638 $ 527 $ 655 $ 2,125 $ 981 $ 1,890 $ 3,269(A)$ 1,321(A) $ 5,543 $ 5,863
Basic Earnings $ .17 $ .14 $ .18 $ .58 $ .26 $ .51 $ .89(A)$ .35(A) $ 1.50 $ 1.58
Per Share
(A) The Company uses estimated gross profit rates to determine cost of goods sold duringinterim periods. Year-end
inventory adjustments to reflect actual inventory levels are made in the fourth quarter. These previously
undeterminable adjustments had the effect of increasing net income for the fourth quarter of 1997 and 1996 by
approximately$1,278,000 ($.35 per share) and $566,000 ($.15 per share), respectively. Other year-end adjustments
related to estimated accruals increased fourth quarter 1997 net income $977,000 ($.27 per share).
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Noland Company and Subsidiary
<CAPTION>
For the years ended December 31, 1997, 1996, and 1995
(In thousands, except per share amounts) 1997 1996 1995
<S> <C> <C> <C>
Sales $464,965 $465,705 $469,512
Cost of Goods Sold:
Purchases and freight in 369,900 384,626 374,039
Inventory, January 1 67,782 58,072 64,458
Inventory, December 31 (66,470) (67,782) (58,072)
Cost of Goods Sold 371,212 374,916 380,425
Gross Profit on Sales 93,753 90,789 89,087
Operating Expenses 87,659 84,383 83,389
Operating Profit 6,094 6,406 5,698
Other Income:
Cash discounts, net 4,096 4,196 3,849
Service charges 1,195 1,512 1,469
Miscellaneous 577 371 460
Total Other Income 5,868 6,079 5,778
Interest Expense 3,078 2,828 3,239
Income Before Income Taxes 8,884 9,657 8,237
Income Taxes 3,341 3,794 3,290
Net Income $ 5,543 $ 5,863 $4,947
Retained Earnings, January 1 79,516 74,837 70,926
Cash Dividends Paid ($.32 per share in 1997 and 1996
and $.28 per share in 1995) (1,184) (1,184) (1,036)
Retained Earnings, December 31 $83,875 $ 79,516 $74,837
Basic Earnings Per Share $ 1.50 $ 1.58 $ 1.34
</TABLE>
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Noland Company and Subsidiary
December 31, 1997, 1996, and 1995
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 5,674 $ 3,508 $ 12,578
Accounts receivable(net of allowance for doubtful accounts) 49,984 52,867 50,504
Inventory (net of reduction to LIFO) 66,470 67,782 58,072
Deferred income taxes 1,706 2,183 1,902
Prepaid expenses 185 389 276
Total Current Assets 124,019 126,729 123,332
Property and Equipment, at cost:
Land 13,384 13,026 13,288
Buildings 76,945 74,531 70,622
Equipment and fixtures 55,714 54,654 51,519
Property in excess of current needs 1,873 2,054 2,054
Total 147,916 144,265 137,483
Less accumulated depreciation 68,491 65,368 61,819
Total Property and Equipment, net 79,425 78,897 75,664
Assets Held for Resale 1,241 1,291 1,291
Prepaid Pension 12,874 12,223 11,991
Other Assets 889 745 1,242
$ 218,448 $219,885 $213,520
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, short-term borrowings $ 5,750 $ 6,000 $ -
Current maturity of long-term debt 2,896 3,228 3,721
Book overdrafts 5,348 6,338 11,968
Accounts payable 21,030 19,199 21,350
Other accruals and liabilities 12,277 14,097 14,236
Federal and state income taxes 873 488 168
Total Current Liabilities 48,174 49,350 51,443
Long-term Debt 39,784 45,039 41,611
Deferred Income Taxes 8,807 8,544 8,352
Accrued Postretirement Benefits 916 660 426
Stockholders' Equity:
Capital common stock, par value, $10;
authorized, 6,000,000 shares; issued, 3,700,876 shares 37,009 37,009 37,009
Retained earnings 83,875 79,516 74,837
Total 120,884 116,525 111,846
Less unearned compensation, restricted stock 117 233 158
Stockholders' Equity 120,767 116,292 111,688
$ 218,448 $219,885 $213,520
</TABLE>
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Noland Company and Subsidiary
For the years ended December 31, 1997, 1996, and 1995
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 5,543 $ 5,863 $ 4,947
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,305 6,686 6,939
Deferred income taxes 740 (89) (187)
Provision for doubtful accounts 1,710 1,513 1,637
Gain on sale of property (53) (4) -
Change in operating assets and liabilities:
Decrease in accounts receivable 1,173 1,320 317
Decrease (increase) in inventory 1,312 (6,051) 6,386
Decrease (increase) in prepaid expenses 204 (113) (45)
Decrease in assets held for resale 50 - 65
(Increase) decrease in other assets (230) 532 163
Increase (decrease) in accounts payable 1,831 (2,151) (2,393)
(Decrease) increase in other accruals and liabilities (1,820) (139) 906
Increase (decrease) in federal and state income taxes 385 320 (1,545)
Increase in postretirement benefits 256 234 222
Total adjustments 11,863 2,058 12,465
Net cash provided by operating activities 17,406 7,921 17,412
Cash Flows From Investing Activities:
Capital expenditures (9,339) (10,890) (9,735)
Proceeds from sale of assets 2,017 858 461
Purchase of note receivable - (13,091) -
Collections on note receivable - 4,136 -
Net cash used by investing activities (7,322) (18,987) (9,274)
Cash Flows From Financing Activities:
(Decrease) increase in book overdrafts (990) (5,630) 3,506
Short-term borrowings 169,300 112,500 156,175
Short-term payments (169,550) (106,500) (170,275)
Long-term borrowings 12,660 7,500 10,954
Long-term repayments (18,247) (4,565) (4,652)
Dividends paid (1,184) (1,184) (1,036)
Sale (purchase) of restricted stock 93 (125) (123)
Net cash (used) provided by financing activities (7,918) 1,996 (5,451)
Cash and Cash Equivalents:
Increase (decrease) during year 2,166 (9,070) 2,687
Beginning of year 3,508 12,578 9,891
End of year $ 5,674 $ 3,508 $12,578
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 3,104 $ 3,059 $ 2,997
Income taxes $ 2,222 $ 3,973 $ 5,022
</TABLE>
[FN]
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Noland Company and Subsidiary
1. Principal Business of the Company
Noland Company is a wholesale distributor of mechanical equipment and
supplies. These products are categorized under plumbing/heating, air
conditioning, industrial and electrical.
Markets for these products include contractors, industrial plants,
utilities and others.
2. Summary of Significant Accounting Policies
a. Principles of Consolidation
The consolidated financial statements include the accounts of Noland
Company and its wholly owned subsidiary. All material intercompany
transactions have been eliminated.
The Company entered into two joint venture agreements with former air
conditioning customers in Venezuela and Panama. Noland Company owns fifty
percent interest in each joint venture and accounts for both entities
under the equity method of accounting. The aggregate investment in and
results of operations from both joint ventures are not material.
b. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
c. Inventory
Inventory is stated at the lower of cost or market. The cost of inventory
has been principally determined by the last-in, first-out (LIFO) method
since 1974.
d. Property and Equipment
Property and equipment are valued at cost less accumulated depreciation.
Depreciation is computed by the straight-line method based on estimated
useful lives of 20 to 40 years for buildings and 3 to 10 years for
equipment and fixtures.
Expenditures for maintenance and repairs are charged to earnings as
incurred. Upon disposition, the cost and related accumulated depreciation
are removed and the resulting gain or loss is reflected in income for the
period.
Property in excess of current needs consists primarily of land held for
possible future expansion.
e. Retirement Plan
The Company has a noncontributory retirement plan that covers all
employees with one year or more of service. Benefits are based on years
of service and compensation during active employment. The Company's
policy is to fund annually the minimum funding requirements under the
Employee Retirement Income Security Act of 1974.
<PAGE>
f. Postretirement Benefit Plans
The Company offers postretirement health and life benefits to substantially
all employees who retire with the required years of service. Health care
benefits consist of a reimbursement towards the purchase of the retirees'
health plan of choice. The amount of reimbursement is based on years of
service. Life insurance in the amount of $3,000 is provided to all
retirees. Additional coverage may be purchased by the retiree in an amount
up to a total of fifty percent of final earnings. The Company pays a share
of the cost of such additional coverage. The cost of these benefits is
funded on a pay-as-you-go-basis.
g. Income Taxes
A deferred tax asset or liability is recognized for the deferred tax
consequences of all temporary differences.
h. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Due to
the short maturity period of cash and cash equivalents, the carrying amount
approximates the fair value.
The Company has no requirements for compensating balances. The Company
maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
i. Extra Compensation
All employees with at least one year of service participate in one or more
of the Company's extra compensation plans which are based on earnings
before income taxes and certain adjustments. The cost of these plans was
$1,604,000 in 1997, $1,897,000 in 1996 and $1,969,000 in 1995.
j. Unearned Compensation - Restricted Stock Plan
The Company provides a restricted stock plan for senior executives of the
Company. Under the Plan, 50,000 shares in the aggregate, limited to 10,000
shares per year, may be granted as restricted stock. Participants may not
dispose or otherwise transfer stock granted for three years from date of
grant. Restrictions lapse at the rate of 20 percent of the stock per year
beginning at the end of the third year. Upon issuance of stock under the
plan, unearned compensation equivalent to the market value at the date of
grant is charged to stockholders' equity and subsequently amortized over
seven years. There were no awards in 1997. The number of shares granted
in 1996 and 1995 was 6,000 in each year. The fair value of the awards in
1996 and 1995 was $125,000 and $123,000. These amounts were reflected as
unearned compensation - restricted stock. The amount amortized to
compensation expense in 1997, 1996 and 1995 was $67,000, $50,000 and
$35,000, respectively. In addition, 2,000 shares granted in 1996 and 1995,
respectively were cancelled in 1997 resulting in additional expense of
$48,000.
k. Professional Standards
Statements of Financial Accounting Standards No. 128 "Earnings Per Share"
is effective for periods ending after December 15, 1997. SFAS No. 128 was
adopted for the fourth quarter of 1997 with no material effect on the
financial condition or result of operations of the Company. Statements of
<PAGE>
Financial Accounting Standards No. 130 "Reporting Comprehensive Income"
and No. 131 "Disclosures About Segments of an Enterprise and Related
Information" are effective for periods beginning after December 15, 1997.
Earlier application is permitted. Adoption of SFAS No. 130 and 131 are
not expected to have a material effect on the financial condition or
results of operations of the Company.
3. Accounts Receivable
Accounts receivable are net of an allowance for doubtful accounts of
$1,008,000 for 1997, 1996 and 1995. Bad debt charges, net of recoveries,
were $855,000 for 1997, $856,000 for 1996 and $739,000 for 1995.
4. Inventory
Comparative year-end inventories are as follows:
(In thousands) 1997 1996 1995
Inventory, at approximate
replacement cost $98,965 $101,318 $91,814
Reduction to LIFO 32,495 33,536 33,742
LIFO inventory $66,470 $67,782 $58,072
Liquidation of certain inventory layers carried at the lower costs which
prevailed in prior years as compared with the costs of 1997 purchases had
the effect of increasing 1997 net income $393,000 ($.11 per share).
5. Notes Payable
a. Short-term Borrowings:
Amounts payable to banks at December 31, 1997 and 1996 were $5,750,000 and
$6,000,000, respectively. There were no short-term borrowings at
December 31, 1995. The average interest rate, which is based on existing
Federal Funds rates, at December 31, 1997 and 1996 was 7.1 percent. The
carrying amount of these short-term borrowings approximates fair value
because of the short maturity of the borrowings.
The Company had unused lines of credit totaling $17.0 million at
December 31, 1997.
b. Long-term Debt:
(In thousands) 1997 1996 1995
Promissory note, 9.60% interest payable
quarterly, $1,850,000 due annually June
1998 through 2000 with balance due June
2001. (1) $ 7,500 $ 9,350 $11,200
Promissory note, 6.6% interest
plus $83,333 principal payable
monthly 1998 through 2002. (1) 5,000 - -
Promissory note, variable interest
payable weekly (6.57% at December
31, 1997), fully revolving basis
through June 1, 1999. (1) 10,000 10,000 10,000
<PAGE>
Promissory note, variable interest
payable monthly (6.49% at December
31, 1997), principal due August
1999. (2) 7,500 15,000 7,500
Industrial revenue financings, variable
interest payable quarterly (4.25% at
December 31, 1997) with varying
maturities from 1998 to 2004. (1)(3) 12,050 13,415 15,200
Other 630 502 1,432
42,680 48,267 45,332
Less current maturities 2,896 3,228 3,721
$39,784 $45,039 $41,611
(1) Subject to agreements that require the Company to maintain not less than
$55,000,000 in working capital and not less than a 1.75-to-1 year-end
current ratio. Cash dividends cannot exceed 50 percent of earnings,
excluding net gains on disposition of capital assets, reckoned
accumulatively from January 1, 1986. Earnings retained since that date
not restricted under this provision amount to $12,632,000.
(2) The Company has an unsecured term revolver loan with a committed amount
of $15,000,000. The Company may pay down and reborrow within the committed
amount without penalty except for a non-usage fee if the average usage for
a 90 day period is less than 50 percent.
(3) Industrial Development Revenue Refunding Bonds are callable at the option
of the bondholders upon giving seven days notice to the Trustee. The
carrying value of these bonds is a reasonable estimate of fair value as
interest rates are based on prevailing market rates. To ensure payment of
the long-term refunding bonds the Company has caused to be delivered to
the Trustee an irrevocable, direct pay letter of credit in favor of the
Trustee in the amount of $12,486,000. The contract amount of the letter of
credit is a reasonable estimate of its fair value as the rate is fixed over
the life of the commitment. No material loss is anticipated due to
nonperformance by the counterparties to those agreements.
The fair value of the remaining $30.6 million of long-term debt is
estimated based on the borrowing rates currently available to the Company
for loans with similar terms and average maturities. The fair value of
this long-term debt is $30.9 million for 1997.
Annual maturities of long-term debt for the five years subsequent to
December 31, 1997, are as follows: 1998, $2,896,000; 1999, $12,372,000;
2000, $4,398,000; 2001, $4,427,000; 2002, $1,013,000.
6. Postretirement Health Care and Life Insurance Benefits
The components of the provision for net periodic postretirement benefit
costs are:
(In thousands) 1997 1996 1995
Service cost - benefits earned
during the period $ 47 $ 58 $ 45
<PAGE>
Interest cost on accumulated postretirement
benefit obligation 318 300 316
Net amortization and deferral 203 210 203
Net postretirement benefit cost $ 568 $ 568 $ 564
The following table sets forth the plan's combined postretirement benefit
liability as of
December 31, 1997, 1996, and 1995:
(In thousands) 1997 1996 1995
Accumulated postretirement benefit obligation:
Retirees $(3,182) $(2,690) $(2,938)
Fully eligible active
employees (618) (650) (644)
Other active plan
participants (854) (924) (880)
(4,654) (4,264) (4,462)
Unrecognized transition
obligation 3,051 3,254 3,457
Unrecognized net loss 687 350 579
Postretirement liability recognized in the
balance sheet $ (916) $ (660) $ (426)
The discount rate used to calculate the APBO was 7.0 percent for 1997, 7.5
percent for 1996 and 7.0 percent for 1995. There are no plan assets.
7. Retirement Plan
The components of the provision for net periodic pension cost are:
(In thousands) 1997 1996 1995
Service cost - benefits earned
during the period $ 976 $ 998 $ 726
Interest cost on projected
benefit obligation 2,647 2,402 2,278
Actual return on assets (13,979) (7,955) (11,936)
Net amortization and deferral 9,705 4,323 9,181
Net pension cost $ (651) $ (232) $ 249
Assumptions used in the accounting were:
1997 1996 1995
Discount rate 7.0% 7.5% 7.0%
Rate of increase in future
compensation levels 4.0% 4.0% 4.0%
Long-term rate of return 8.25% 8.25% 8.0%
The following table sets forth the plan's funded status and the
related amounts recognized in the Company's balance sheet at
December 31, 1997, 1996, and 1995.
<PAGE>
(In thousands) 1997 1996 1995
Actuarial present value of
projected benefit obligation,
based on employment service
to date and current salary levels:
Vested benefits $(35,953) $(31,041) $(30,966)
Nonvested benefits (371) (250) (259)
Accumulated benefit obligation (36,324) (31,291) (31,225)
Additional amounts related
to projected salary increases (3,444) (3,175) (2,431)
Projected benefit obligation (39,768) (34,466) (33,656)
Plan assets at fair value;
primarily U.S. Government and
corporate bonds and equity
securities 66,364 55,120 49,531
Plan assets in excess of
projected benefit obligation 26,596 20,654 15,875
Unrecognized net gain
from past experience different
from that assumed (13,722) (8,431) (3,884)
Prepaid pension $12,874 $12,223 $11,991
8. Income Taxes
The components of income tax expense are as follows:
(In thousands) 1997 1996 1995
Federal:
Current $ 2,612 $ 3,289 $ 2,936
Deferred 285 (76) (159)
State:
Current 369 594 541
Deferred 75 (13) (28)
Total $ 3,341 $ 3,794 $ 3,290
The components of the net deferred tax liability are:
(In thousands) 1997 1996 1995
Current deferred (assets)
Accounts receivable $ - $ (379) $ (379)
Inventory (1,100) (1,196) (960)
Accrued vacation (606) (608) (563)
Total net current deferred (asset) (1,706) (2,183) (1,902)
Noncurrent deferred (assets) liabilities
Property and equipment 4,639 4,694 4,687
Pension asset 4,845 4,600 4,512
Postretirement
benefit liability (345) (252) (160)
<PAGE>
Other (332) (498) (687)
Total net noncurrent deferred
liability 8,807 8,544 8,352
Net deferred liability $ 7,101 $ 6,361 $ 6,450
The reasons for the difference between total tax expense and the amount
computed by applying the statutory federal income tax rate to income before
income taxes are as follows:
(In thousands) 1997 1996 1995
Statutory rate applied to
pretax income $3,021 $3,283 $2,801
State income taxes, net
of federal tax benefit 244 391 357
Other 76 120 132
Total tax expense $3,341 $3,794 $3,290
9. Lease Commitments
The Company leases some of the warehouse and office facilities used in
its business. These leases have varying expiration dates and often include
renewal and purchase options. Certain leases require the Company to pay
escalations in cost over base amounts for taxes, insurance, or other
operating expenses incurred by lessor. The corporate office is leased from
a related party for an annual rent of $260,000.
Rental expense under operating leases for 1997, 1996, and 1995 was
$1,694,000, $1,036,000 and $992,000, respectively.
Minimum payments due for years after 1997 under noncancelable operating
leases are $1,524,000 in 1998, $1,451,000 in 1999, $1,134,000 in 2000,
$803,000 in 2001 and $3,734,000 thereafter.
10. Concentration of Credit Risk
The Company sells its products to all major areas of construction and
manufacturing markets throughout the Southern United States. When the
Company grants credit, it is primarily to customers whose ability to pay
is dependent upon the construction and manufacturing industry economics
prevailing in the Southern United States; however, concentrations of credit
risk with respect to trade accounts receivable are limited due to the large
number of customers comprising the Company's customer base. The Company
performs ongoing credit evaluations of its customers and in certain
situations requires collateral. The Company maintains allowances for
potential credit losses, and such losses have been within management's
expectations.
11. Asset Acquisition
In late 1996 the Company purchased a secured note from Foothill Capital
Corporation, issued by Raub Supply Co., for $9.9 million. Additional
operating advances of $3.2 million were made through the note to Raub.
Collections on the note totaled $4.1 million. Effective December 6, 1996
the Company agreed to accept certain operating assets of Raub, with a fair
value of $7.6 million, as partial payment on the note. Results, using the
<PAGE>
purchase method, for additional locations have been included in 1997
audited results. The outstanding note balance of $1.4 million at
December 31, 1996 was paid in 1997.
The following table reflects the unaudited pro forma combined results of
operations, assuming the acquisition had occurred at the beginning of
each year presented:
(In thousands) 1996 1995
Net sales $ 488,182 $ 505,749
Net income 6,117 5,512
Net income per share $ 1.65 $ 1.49
The pro forma information does not purport to be indicative of the
results which actually would have occurred had the acquisition been in
effect during the periods presented or of results which may occur in
the future.
12. Contingencies
The Company is a defendant in various lawsuits arising in the normal
course of business. In the opinion of management, the outcome of these
lawsuits will not have a material adverse effect on the Company's
financial position or results of operations.
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR REVIEW OF SELECTED FINANCIAL DATA (Unaudited)
Noland Company and Subsidiary
(Dollar amounts in thousands, except per share data) 1997 1996 1995 1994
Income Statement Data
<S> <C> <C> <C> <C>
Sales $464,965 $465,705 $469,512 $440,202
Gross Profit 93,753 90,789 89,087 86,166
Operating Expenses 87,659 84,383 83,389 78,259
Operating Profit (Loss) 6,094 6,406 5,698 7,907
Interest Expense 3,078 2,828 3,239 2,626
Interest Expense as Percent of Total Assets 1.4 1.3 1.5 1.2
Income (Loss) Before Income Taxes 8,884 9,657 8,237 10,568
Pretax Profit as Percent of Sales 1.9 2.1 1.8 2.4
Income Taxes Payable (Receivable) 3,341 3,794 3,290 4,341
Effective Tax Rate 37.6 39.3 39.9 41.1
Net Income (Loss) 5,543 5,863 4,947 6,227
Income Paid to Stockholders (Cash Dividends) 1,184 1,184 1,036 888
Income Reinvested 4,359 4,679 3,911 5,339
Property and Equipment Expenditures 9,339 10,890 9,735 10,858
Depreciation and Amortization 6,890 6,868 6,655 6,232
Balance Sheet Data
Stockholders' Equity 120,767 116,292 111,688 107,865
Working Capital 75,845 77,379 71,889 65,575
Current Ratio 2.6 2.6 2.4 2.0
Total Assets 218,448 219,885 213,520 217,085
Long-term Debt 39,784 45,039 41,611 36,914
Borrowed Funds 48,430 54,267 45,332 53,130
Borrowed Funds as Percent of Total Assets 22.2 24.7 21.2 24.5
Total Liabilities as Percent of Total Assets 44.7 47.1 47.7 50.3
Per Share Data *
Basic Earnings (Loss) 1.50 1.58 1.34 1.68
Cash Dividends Paid to Stockholders .32 .32 .28 .24
Stockholders' Equity (Book Value) 32.63 31.42 30.18 29.15
Return on Average Stockholders' Equity 4.7 5.1 4.5 5.9
Stock Price Range:
Average High 24.59 21.81 21.31 20.94
Average Low 21.72 18.89 18.38 17.56
Number of Employees at December 31 1,606 1,692 1,655 1,741
Number of Branches at December 31 107 107 99 99
Supplemental Information
The Company elected the LIFO method of inventory valuation in 1974.
The above information (i.e., gross profit, income and taxes) is stated on that basis.
Had the Company used the FIFO method, the results would have been:
Gross Profit 92,713 90,582 91,187 86,404
Income (Loss) Before Income Taxes 7,844 9,450 10,337 10,806
Income Taxes Payable (Receivable) 2,949 3,714 4,124 4,441
Net Income (Loss) 4,895 5,736 6,213 6,365
Net Income (Loss) Per Share 1.32 1.55 1.68 1.72
Stockholders' Equity (Book Value) Per Share 37.32 36.32 34.39 33.69
Return on Average Stockholders' Equity 3.6 4.4 4.9 5.2
</TABLE>
[FN]
* Based on 3,700,876 shares outstanding.
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR REVIEW OF SELECTED FINANCIAL DATA (Unaudited)
Noland Company and Subsidiary
(Dollar amounts in thousands, except per share data) 1993 1992 1991 1990 1989 1988
Income Statement Data
<C> <C> <C> <C> <C> <C>
Sales $402,941 $412,086 $384,535 $428,473 $454,629 $461,255
Gross Profit 77,306 77,265 71,000 79,982 83,328 83,491
Operating Expenses 74,692 73,227 74,355 75,641 75,413 75,098
Operating Profit (Loss) 2,614 4,038 (3,355) 4,341 7,915 8,393
Interest Expense 2,422 3,058 3,724 4,742 5,973 5,673
Interest Expense as Percent of Total Assets 1.2 1.7 2.0 2.5 3.1 2.8
Income (Loss) Before Income Taxes 5,291 6,610 (1,203) 6,377 8,468 8,882
Pretax Profit as Percent of Sales 1.3 1.6 NA 1.5 1.9 1.9
Income Taxes Payable (Receivable) 1,996 2,518 (478) 2,651 3,441 3,553
Effective Tax Rate 37.7 38.1 (39.7) 41.6 40.6 40.0
Net Income (Loss) 3,295 4,092 (725) 3,726 5,027 5,329
Income Paid to Stockholders (Cash Dividends) 888 888 1,702 1,665 1,629 1,554
Income Reinvested 2,407 3,204 NA 2,061 3,398 3,775
Property and Equipment Expenditures 7,611 6,191 7,075 10,798 9,812 12,918
Depreciation and Amortization 6,178 6,365 6,543 6,433 6,306 6,028
Balance Sheet Data
Stockholders' Equity 102,596 100,189 96,985 99,412 97,351 93,953
Working Capital 65,203 65,509 64,433 70,701 76,486 78,713
Current Ratio 2.3 2.8 2.6 2.8 2.8 2.5
Total Assets 201,029 185,372 189,072 192,887 195,069 200,716
Long-term Debt 38,505 40,511 42,898 44,299 48,721 47,631
Borrowed Funds 47,485 46,097 54,299 56,131 60,030 68,240
Borrowed Funds as Percent of Total Assets 23.6 24.9 28.7 29.1 30.8 33.9
Total Liabilities as Percent of Total Assets 48.9 46.0 48.7 48.5 50.1 53.2
Per Share Data *
Net Income (Loss) .89 1.11 (.20) 1.01 1.36 1.44
Cash Dividends Paid to Stockholders .24 .24 .46 .45 .44 .42
Stockholders' Equity (Book Value) 27.72 27.07 26.21 26.86 26.30 25.39
Return on Average Stockholders' Equity 3.2 4.2 NA 3.8 5.3 5.8
Stock Price Range:
Average High 18.13 16.13 14.88 19.19 24.19 20.63
Average Low 15.06 13.91 12.25 15.00 22.09 18.75
Number of Employees at December 31 1,683 1,720 1,704 1,797 1,924 2,019
Number of Branches at December 31 93 93 92 92 94 101
Supplemental Information
The Company elected the LIFO method of inventory valuation in 1974.
The above information (i.e., gross profit, income and taxes) is stated on that basis.
Had the Company used the FIFO method, the results would have been:
Gross Profit 77,318 76,541 70,888 80,429 84,486 88,585
Income (Loss) Before Income Taxes 5,303 5,886 (1,315) 6,824 9,626 13,976
Income Taxes Payable (Receivable) 2,000 2,226 (495) 2,770 3,815 5,499
Net Income (Loss) 3,303 3,660 (820) 4,054 5,811 8,477
Net Income (Loss) Per Share .89 .99 (.22) 1.10 1.57 2.29
Stockholders' Equity (Book Value) Per Share 32.21 31.19 30.81 31.17 30.84 29.71
Return on Average Stockholders' Equity 2.8 3.2 NA 3.5 5.2 8.0
</TABLE>
[FN]
(1) Net income for 1987 includes $362,000 ($.10 per share) due to the
cumulative effect on prior years of a change in accounting for
deferred income taxes.
<PAGE>
Inside Back Cover Info
Shareholder and Investor Information
Corporate Information
Corporate Headquarters:
Noland Company
80 29th Street
Newport News, Virginia 23607
(757) 928-9000
Wholly Owned Subsidiary:
Noland Properties, Inc.
Suite 400, Central Fidelity National Bank
2700 Washington Avenue
Newport News, Virginia 23607
(757) 247-8200
Investor Inquiries or Request for Form 10-K:
Richard L. Welborn
Assistant Vice President-Finance and Tax Administrator
80 29th Street
Newport News, Virginia 23607
(757) 928-9000
Auditors:
Coopers & Lybrand, L.L.P.
One Columbus Center, Suite 400
Virginia Beach, Virginia 23462
Legal Counsel:
Hunton & Williams
P.O. Box 1535
Richmond, Virginia 23212
Noland on the Internet:
For the latest financial news, career opportunities and other
Company information, visit us on the Internet at: www.noland.com
Stock Information
The Company's common stock is traded over the counter as
part of NASDAQ's National Market System (symbol: NOLD). On
March 12, 1998, the approximate number of holders of record of
the Company's common stock was 2,500.
<PAGE>
Market Prices:
The following table sets forth the reported high and low
prices for the common stock on the NASDAQ system:
High Low
1997
Qtr. 4 $24.63 $22.13
Qtr. 3 $24.75 $22.75
Qtr. 2 $25.25 $20.50
Qtr. 1 $23.75 $21.50
1996
Qtr. 4 $23.75 $20.50
Qtr. 3 $22.25 $19.50
Qtr. 2 $21.25 $18.00
Qtr. 1 $20.00 $17.50
P/E Ratio:*
High Low
1997 16 15
1996 15 13
*Based on final, full-year earnings
Dividend Policy:
Noland has paid regular cash dividends for 65 consecutive
years; and, while there can be no assurance as to future
dividends because they are dependent on earnings, capital
requirements and financial condition, the Company intends to
continue that policy. Dividend payments are subject to the
restrictions described in the Notes to the Consolidated Financial
Statements.
Dividends Paid:
The Company paid quarterly dividends of $.08 per share in
each quarter of 1997 and 1996.
Registrar:
Noland Company
Transfer Agent:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
(212) 509-4000
Annual Meeting:
April 30, 1998, 10:00 a.m.
Noland's Corporate Headquarters
Newport News, Virginia
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