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, 1999 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 8, 2000, was approximately $27,600,758.
3,700,876 shares of the Registrant's Common Stock were outstanding at the close
of business on March 8, 2000.
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, 1999
Portions of Noland Company Proxy Statement for Parts III and IV
April 20, 2000 Annual Meeting of Stockholders
This report contains 45 pages. The exhibit index is shown on page 12 of this
10-K.
1
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PART I
Item 1 Business
(1) (a) A Virginia corporation founded in 1915, Noland Company is
a distributor of Plumbing, Air Conditioning and
Electrical/Industrial supplies, with branch facilities in
thirteen 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.
Noland Company owns a fifty percent interest in joint
ventures in Spain and Panama. In addition, the Company
sells air conditioning equipment to customers in several
South American countries.
(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:
1999 1998 1997 1996 1995
(In thousands)
Plumbing $264,768 $252,835 $250,327 $241,235 $245,407
Air Conditioning 119,331 114,043 112,013 115,963 110,920
Electrical/Industrial 98,731 98,601 102,625 108,507 113,185
$482,830 $465,479 $464,965 $465,705 $469,512
Not all branches have all three 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.
(vi) It is the practice of the Company to carry a full line of
inventory items for rapid delivery to customers. At times,
<PAGE>
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 $41,205,770 at December 31, 1999
and $39,210,142 at December 31, 1998.
(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 1999, 1998 and 1997 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, 1999, the Company employed 1,512 persons.
(d) The Company operates principally in the Southern
United States.
Item 2 Properties
The main properties of the Company consist of 100 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, Virginia and West Virginia. Thirteen are leased and the
remaining eighty-seven are Company owned. 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, III56Chairman of the Board,Chief Executive Officer of
President and Director.the Registrant.
Officer since 1981
A. P. Henderson, Jr.56Vice President-Finance.Chief Financial Officer of
Officer since 1983 the Registrant.
Kenneth C. King 57 Vice President-Marketing Responsible for the
and Branch Operations.Registrant's Marketing.
Officer since 1998
John E. Gullett 58 Vice President-Corporate Responsible for the
Communications. Registrant's Corporate
Officer since 1982 Communications Department.
Jean F. Preston 39 Vice President-CorporateResponsible for the
Data. Registrant's Corporate Data
Officer since 1999 Department. Previously
manager of Corporate Data
Department.
James E. Sykes, Jr.56 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, 1999 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 1995 through 1999 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, 1999.
Item 7 Management's Discussion and Analysis of Financial Condition and Results
ofOperations
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, 1999.
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Noland Company's market risk exposure from changes in interest rates
and foreign currency are not material. The Company does not engage in
<PAGE>
foreign currency hedging or the use of derivatives. The Company's
pension plan is overfunded, resulting in a prepaid pension asset. The
prepaid pension asset is subject to change based on the performance of
the plan investments and the discount rate. Changes in the investment
performance and discount rate may cause the amount ofpension income to
increase or decrease from year to year.
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, 1999, are incorporated herein by reference:
Annual
Report to
Stockholders
(page)
Report of Independent Accountants 12
Consolidated Statement of Income and Retained Earnings--
Years ended December 31, 1999, 1998 and 1997 13
Consolidated Balance Sheet--December 31, 1999, 1998 and 1997 14
Consolidated Statement of Cash Flows --
Years ended December 31, 1999, 1998 and 1997 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 2000 Noland Company Proxy Statement for the
April 20, 2000 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 2000 Noland Company Proxy Statement for the
April 20, 2000, 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 2000 Noland Company Proxy Statement for the
April 20, 2000, Annual Meeting of Stockholders is incorporated herein
by reference.
Item 13 Certain Relationships and Related Transactions
(a) The Company is in the fourth year of 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, 1999, 1998
and 1997
Consolidated Balance Sheet--December 31,
1999, 1998 and 1997
Consolidated Statement of Cash Flows
--Years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
With the exception of the aforementioned information incorporated by
reference and the information in the 1999 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 1999
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, 1999
Form 10-K Page(s)
Schedule II Valuation and Qualifying
Accounts 9
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 Schedule 11
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 - None
(c) The Index of Exhibits and any required Exhibits are included
beginning at page 12 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, 1999 $1,008,132 $858,970(1) $ - $858,970 $1,008,132
December 31, 1998 $1,008,132 $571,177(1) $ - $571,177 $1,008,132
December 31, 1997 $1,008,132 $745,062(1) $ - $745,062 $1,008,132
</TABLE>
[FN]
(1) Net of recoveries on bad debts of $781,028 for 1999, $757,765 for 1998 and
$855,090 for 1997.
(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 22, 2000 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 22, 2000
Lloyd U. Noland, III
Vice President-Finance,
Chief Financial Officer
Arthur P. Henderson, Jr. and Director March 22, 2000
Arthur P. Henderson, Jr.
Vice President-Marketing
and Branch Operations
Kenneth C. King and Director March 22, 2000
Kenneth C. King
James E. Sykes, Jr. Treasurer/Secretary March 22, 2000
James E. Sykes, Jr.
Allen C. Goolsby, III Director March 22, 2000
Allen C. Goolsby, III
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Noland Company:
Our audits of the consolidated financial statements referred to in our
report dated February 18, 2000 appearing in the 1999 Annual Report to
Shareholders of Noland Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Virginia Beach, Virginia
February 18, 2000
<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) (i) Restricted Stock Plan Previously Filed
(ii) 1999 Outside Directors Stock Plan 14 - 19
(iii) Noland Company Common Stock Benefit
Trust 20 - 25
(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 27 - 44
(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 45
(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.
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This page intentionally left blank.
<PAGE>
NOLAND COMPANY
1999 OUTSIDE DIRECTORS STOCK PLAN
<PAGE>
ARTICLE I DEFINITIONS .................................. 1
1.01. Account .......................................... 1
1.02. Affiliate ........................................ 1
1.03. Award Date ....................................... 1
1.04. Beneficiary ...................................... 1
1.05. Board ............................................ 1
1.06. Common Stock ..................................... 1
1.07. Company .......................................... 1
1.08. Fair Market Value ................................ 1
1.09. Participant ...................................... 2
1.10. Plan ............................................. 2
ARTICLE II PURPOSES .................................... 2
ARTICLE III ADMINISTRATION ............................. 2
ARTICLE IV STOCK SUBJECT TO PLAN ....................... 3
ARTICLE V AWARDS ....................................... 3
5.01. Awards ........................................... 3
5.02. Dividend Equivalents ............................. 3
5.03. Vesting .......................................... 3
5.04. Distributions .................................... 3
5.05. Shareholder Rights ............................... 4
5.06. Nontransferability ............................... 4
ARTICLE VI ADJUSTMENT UPON CHANGE IN COMMON STOCK ...... 4
ARTICLE VII COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES ...................... 4
ARTICLE VIII GENERAL PROVISIONS ........................ 5
8.01. Unfunded Plan .................................... 5
8.02. Rules of Construction ............................ 5
ARTICLE IX AMENDMENT ................................... 5
ARTICLE X EFFECTIVE DATE OF PLAN ....................... 5
<PAGE>
ARTICLE I
DEFINITIONS
1.01.Account
Account means an unfunded deferred compensation account established by the
Company in accordance with Article V.
1.02.Affiliate
Affiliate means any "subsidiary" or "parent" corporation (within the meaning of
section 424 of the Internal Revenue Code of 1986, as amended) of the Company.
1.03.Award Date
Award Date means each March 31, June 30, September 30 and December 31 during
the term of the Plan.
1.04.Beneficiary
Beneficiary means the person or persons or entity or entities designated by a
Participant, on a form provided by the Company, to receive any Plan benefits
that are distributable following the Participant's death. In the absence of
such designation or if such person predeceases the Participant or such entity
is not in existence at the Participant's death, the Participant's Beneficiary
shall be the Participant's estate.
1.05.Board
Board means the Board of Directors of the Company.
1.06.Common Stock
Common Stock means the Common Stock of the Company.
1.07.Company
Company means Noland Company.
1.08.Fair Market Value
Fair Market Value means the average of the closing price of a share of Common
Stock as reported by the National Association of Securities Dealers, Inc. or,
if no closing price is reported, the average of the bid and asked prices of a
share of Common Stock as reported by the National Association of Securities
Dealers, Inc. on the last business day of each of the three months ending on or
before the Award Date, all as reported by such source as the Board may select.
If a closing price or bid and asked prices are not reported for any such
business day, Fair Market Value shall be determined using closing or the bid
and asked prices reported for the next preceding business day for which such
prices are reported (with the closing price controlling if a closing price and
bid and asked prices are reported on such day).
1.09.Participant
Participant means, on each Award Date during the term of the Plan, an
individual who is a member of the Board but who is not an employee of the
Company or an Affiliate.
<PAGE>
1.10.Plan
Plan means the Noland Company 1999 Outside Directors Stock Plan.
ARTICLE II
PURPOSES
The Plan is intended to provide incentive and award to Participants by
enabling them to participate in the Company's future success through ownership
of Common Stock. The Plan is also intended to promote a greater identity of
interests between Participant's and the Company's shareholders.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have
authority to make awards in accordance with Article V hereof. The Board shall
have complete authority to interpret all provisions of the Plan; to adopt,
amend, and rescind rules and regulations pertaining to the administration of
the Plan; and to make all other determinations necessary or advisable for the
administration of the Plan. The express grant in the Plan of any specific
power to the Board shall not be construed as limiting any power or authority of
the Board. Any decision made, or action taken, by the Board in connection with
the administration of the Plan shall be final and conclusive. The Board shall
be not liable for any act done in good faith with respect to the Plan. All
expenses of administering the Plan shall be borne by the Company.
ARTICLE IV
STOCK SUBJECT TO PLAN
In satisfaction of its obligations under the Plan, the Company may issue
shares of Common Stock from its authorized but unissued Common Stock, may
acquire shares of Common Stock for distribution under the Plan, may cause the
distribution of Common Stock from a "grantor trust" (as defined in Section 671
of the Internal Revenue Code of 1986, as amended) that is established for
purposes of the Plan or a combination of the foregoing.
ARTICLE V
AWARDS
5.01.Awards
Awards. As of each Award Date, beginning with the September 30, 1999,
Award Date and during the term of the Plan, each Participant's Account shall
be credited with a number of whole and fractional shares (maintained to two
decimal places) of Common Stock having an aggregate Fair Market Value (as of
the applicable Award Date) that is equal to $3,000.
5.02.Dividend Equivalents
Each Participant's Account shall be credited with the number of whole and
fractional shares of Common Stock that the Participant could have purchased
based on the number of whole and fractional shares of Common Stock then
credited to his Account, the amount of dividends that would have been payable
if the Participant owned that number of shares (and assuming that a pro rata
dividend would be payable on any such fractional shares of Common Stock) and
the Fair Market Value as of the Award Date coincident with or immediately
preceding the day before such dividends were payable on the Common Stock.
<PAGE>
5.03.Vesting
Each Participant's interest in his Account shall be immediately vested and
nonforfeitable.
5.04.Distributions
Each Participant shall be entitled to a distribution pursuant to this
Plan as soon as practicable after the Participant ceases to be a member of the
Board; provided, however, that the distribution shall be payable to the
Participant's Beneficiary in the event of a Participant's death before
receiving a distribution of his benefits under this Plan. The distribution
shall be made in whole shares of Common Stock equal to the number of whole
shares of Common Stock credited to the Participant's Account as of the day
preceding the date of distribution with a cash payment equal to the value of
any fractional share of Common Stock credited to the Participant's Account.
5.05.Shareholder Rights
No Participant shall have any rights as a shareholder of the Company on
account of his participation in the Plan until and except to the extent that he
receives a distribution of Common Stock under the Plan.
5.06.Nontransferability
A Participant's interest in the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge or encumbrance
except that a Participant's interest in the Plan may be transferred by will or
the laws of descent and distribution.
ARTICLE VI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The balances of Accounts shall be adjusted as the Board shall determine to
be equitably required in the event that (a) the Company (i) effects one or more
stock dividends, stock split-ups, subdivisions or consolidations of shares or
(ii) engages in a transaction to which Code section 424 applies or (b) there
occurs any other event that, in the judgment of the Board, necessitates such
action. Any determination made under this Article VI by the Board shall be
final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the Plan's
share authorization or Account balances.
ARTICLE VII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No certificates for shares of Common Stock shall be delivered, and no
payment shall be made under the Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any stock listing agreement to which the Company
is a party, and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock distributed pursuant to the Plan may bear such legends
and statements as the Board may deem advisable to assure compliance with
federal and state laws and regulations. No Common Stock shall be issued, and
no certificate for shares shall be delivered, until the Company has obtained
such consent or approval as the Board may deem advisable from regulatory bodies
having jurisdiction over such matters.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.01.Unfunded Plan
The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by awards under the Plan; provided, however, that the Company may
establish a "grantor trust" (as defined in Section 671 of the Internal Revenue
Code of 1986, as amended) in conjunction with the Plan. Any liability of the
Company to any person with respect to any grant under the Plan shall be based
solely upon any contractual obligations that may be created pursuant to the
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
8.02.Rules of Construction
Headings are given to the articles and sections of the Plan solely as a
convenience to facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.
ARTICLE IX
AMENDMENT
The Board may amend the Plan from time to time or terminate it. No
amendment shall, without a Participant's consent, adversely affect any rights
of such Participant under any award made prior to the time of such amendment
or termination.
ARTICLE X
EFFECTIVE DATE OF PLAN
The Plan is effective on July 1, 1999.
<PAGE>
NOLAND COMPANY
COMMON STOCK BENEFIT TRUST
This Agreement made as of the 1st day of July, 1999, by and between Noland
Company (the Company) and Lloyd U. Noland, III and Arthur P. Henderson, Jr.
(the Trustees);
WHEREAS, the Company has adopted the Noland Company Outside Directors Stock
Plan (the Plan);
WHEREAS, the Company has incurred or expects to incur liability under the terms
of the Plan with respect to the individuals participating therein;
WHEREAS, the Company wishes to establish a trust (hereinafter called the Trust)
and to contribute to the Trust assets that shall be held hereunder, subject to
the claims of the Company's creditors in the event of the Company's Insolvency,
as herein defined, until paid to participants and beneficiaries of the Plan and
other programs designated by the Company in such manner and at such times as
specified in the Plan or such other programs;
WHEREAS, it is the intention of the parties that this Trust shall constitute an
unfunded arrangement and shall not affect the status of any such other program
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended (ERISA); and
WHEREAS, it is the intention of the Company to make contributions to the Trust
from time to time to provide itself a source of funds to assist it in meeting
its obligations under the Plan and such other programs;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
trust shall be comprised, held and disposed as of follows:
ARTICLE I
ESTABLISHMENT OF TRUST
1.01 The Company hereby deposits with the Trustees in trust $1,000 which shall
become the principal of the Trust to be held, administered and disposed of by
the Trustees as provided in this Trust Agreement.
1.02 The Trust hereby established shall be revocable.
1.03 The Trust is intended to be a grantor trust, of which the Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the Code), and
shall be construed accordingly.
1.04 The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and the participants
of such other programs as may be designated by the Company and general
<PAGE>
creditors of the Company as herein set forth. Participants and beneficiaries
of the Plan and such other programs shall have no preferred claim on, or any
beneficial ownership interest in, any asset of the Trust. Any rights created
under the Plan, any other program designated by the Company and this Trust
Agreement shall be mere unsecured contractual rights of participants and their
beneficiaries against the Company. Any assets held by the Trust will be subject
to the claims of the Company's general creditors under federal and state law in
the event of Insolvency, as defined in Section 3.01 herein.
1.05 The Company, may in its sole discretion, at any time, and from time
to time, make additional deposits of cash or other property in trust with the
Trustees to augment the principal to be held, administered and disposed of by
the Trustees as provided in this Trust Agreement. Neither the Trustees nor
any participant or beneficiary of the Plan or other program designated by the
Company shall have any right to compel such additional deposits.
ARTICLE II
PAYMENTS TO PARTICIPANTS AND THEIR BENEFICIARIES
2.01 The Company shall deliver to the Trustees a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each participant
(and his or her beneficiaries), in the Plan and such other programs as may be
designated by the Company that provides a formula or other instructions
acceptable to the Trustees for determining the amounts so payable, the form in
which such amount is to be paid, and the time of commencement for payment of
such amounts. Except as otherwise provided herein, the Trustees shall make
payments to participants and their beneficiaries in accordance with such
Payment Schedule. The Trustees shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits and shall pay amounts withheld
to the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
2.02 The entitlement of a participant or his or her beneficiaries in the Plan
and such other programs as may be designated by the Company to benefits under
the Plan or such other program shall be determined by the Company or such party
as it shall designate and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Plan or such other program.
2.03 The Company may make payment of benefits directly to participants or their
beneficiaries of the Plan and such other programs as may be designated by the
Company as they become due. The Company shall notify the Trustees of its
decision to make payment of benefits directly prior to the time amounts are
payable to participants or their beneficiaries. In addition, if the principal
of the Trust, and any earnings thereon, are not sufficient to make payments of
benefits, the Company shall make the balance of each such payment as it falls
due. The Trustees shall notify the Company where principal and earnings are
not sufficient.
ARTICLE III
TRUSTEES' RESPONSIBILITY REGARDING PAYMENTS
TO TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT
3.01 The Trustees shall cease payment of benefits to participants and their
beneficiaries of the Plan and such other programs as may be designated by the
Company if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable
to pay its debts as they become due, or (ii) the Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
<PAGE>
3.02 At all times during the continuance of this Trust, as provided in
Section 1.03 hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(a) The Board of Directors and the President of the Company shall
have the duty to inform the Trustees in writing of the Company'sInsolvency.
If a person claiming to be a creditor of the Company allegesin writing to the
Trustees that the Company has become Insolvent, the Trustees shall determine
whether the Company is Insolvent and, pending such determination, the Trustees
shall discontinue payment of benefits from the Trust.
(b) Unless the Trustees have actual knowledge of the Company's
Insolvency, or have received notice from the Company or a person claiming
to be a creditor alleging that the Company is Insolvent, the Trustees
shall have no duty to inquire whether the Company is Insolvent. The
Trustees may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustees and that
provides the Trustees with a reasonable basis for making a
determination concerning the Company's solvency.
(c) If at any time the Trustees have determined that the Company is
Insolvent, the Trustees shall discontinue payments from the Trust and
shall hold the assets of the Trust for the benefit of the Company's
general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of participants or their beneficiaries of the Plans
or any other program to pursue their rights as general creditors of the
Company with respect to benefits due under the Plan or otherwise.
(d) The Trustees shall resume the payment of benefits to Plan
participants or their beneficiaries of the Plan and such other programs as
may be designated by the Company only after the Trustees have determined
that the Company is not Insolvent (or is no longer Insolvent).
3.03 Provided that there are sufficient assets, if the Trustees discontinue the
payment of benefits from the Trust pursuant to Section 3.02 hereof and
subsequently resume such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
participants or their beneficiaries of the Plan and such other programs as may
be designated by the Company for the period of such discontinuance, less the
aggregate amount of any payments made to such participants or their
beneficiaries by the Company in lieu of the payments provided for hereunder
during any such period of discontinuance.
ARTICLE IV
INVESTMENT AUTHORITY
The Trustees may invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company. All rights associated with assets
of the Trust shall be exercised by the Trustees or the person designated by the
Trustees, and shall in no event be exercisable by or rest with participants of
the Plan or any other program. The Company shall have the right at anytime,
and from time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is exercisable
by the Company in a nonfiduciary capacity without the approval or consent of
any person in a fiduciary capacity.
ARTICLE V
DEPOSITION OF INCOME
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
<PAGE>
ARTICLE VI
ACCOUNTING BY TRUSTEES
The Trustees shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustees. Within sixty (60) days following the close of each
calendar year and within thirty (30) days after the removal or resignation of
the Trustees, the Trustees shall deliver to the Company a written account of
their administration of the Trust during such year or during the period from
the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by them, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end
of such year or as of the date of such removal or resignation, as the case
may be.
ARTICLE VII
RESPONSIBILITY OF TRUSTEES
7.01 The Trustees shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims. In addition, the Trustees shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by the Company which is contemplated by, and in conformity
with, the terms of the Plan, any program designated by the Company or this
Trust and is given in writing by the Company. In the event of a dispute
between the Company and a party (including the Trustees), the Trustees may
apply to a court of competent jurisdiction to resolve the dispute.
7.02 If the Trustees undertake or defend any litigation arising in connection
with this Trust, the Company agrees to indemnify the Trustees against the
Trustees' costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustees may obtain payment from
the Trust.
7.03 The Trustees may consult with legal counsel (who may also be counsel for
the Company generally) with respect to any of their duties or obligations
hereunder.
7.04 The Trustees may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist them in performing any
of their duties or obligations hereunder.
7.05 The Trustees shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, the Trustees shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor trustee, or to loan to
any person (other than the Company) the proceeds of any borrowing against such
policy.
7.06 Notwithstanding any powers granted to the Trustees pursuant to this Trust
Agreement or to applicable law, the Trustees shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
<PAGE>
ARTICLE VIII
COMPENSATION AND EXPENSES OF TRUSTEES
All administrative fees, including Trustees' fees and expenses, shall be paid
from the Trust unless paid by the Company.
ARTICLE IX
RESIGNATION AND REMOVAL OF TRUSTEES
9.01 A Trustee may resign at any time by written notice to the Company, which
shall be effective thirty (30) days after receipt of such notice unless the
Company and the Trustee agree otherwise.
9.02 A Trustee may be removed by the Company on thirty (30) days' notice or
upon shorter notice accepted by Trustee.
9.03 Upon resignation or removal of a Trustee and appointment of a successor
trustee, all assets shall subsequently be transferred to the successor trustee.
The transfer shall be completed within thirty (30) days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.
9.04 If a Trustee resigns or is removed, a successor shall be appointed, in
accordance with Article X hereof, by the effective date of resignation or
removal under Section 9.01 or 9.02 of this section. If no such appointment
has been made, the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of the Trustees
in connection with the proceeding shall be allowed as administrative expenses
of the Trust.
ARTICLE X
APPOINTMENT OF SUCCESSOR
10.01 If a Trustee resigns or is removed in accordance with Section 9.01 or
9.02 hereof, the Company may appoint any third party, including a bank trust
department with trust powers under state law or other party that may validly
exercise trustee powers under state law, as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted
in writing by the new trustee, who shall have all of the rights and powers of
the former Trustee, including ownership rights in the Trust assets. The former
Trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
10.02 A successor Trustee need not examine the records and acts of any prior
Trustee and may retain or dispose of existing Trust assets, subject to Articles
VI and VII hereof. A successor Trustee shall not be responsible for and the
Company shall indemnify and defend a successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes
successor Trustee.
ARTICLE XI
AMENDMENT OR TERMINATION
11.01 This Trust Agreement may be amended or terminated by a written instrument
executed by the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plan or any program designated by the
Company.
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.01 Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
12.02 Benefits payable under this Trust Agreement to participants and their
beneficiaries of the Plan and any program designated by the Company may not be
anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
12.03 This Trust Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, other than its choice of law
provisions.
ARTICLE XIII
EFFECTIVE DATE
The effective date of this Trust Agreement shall be July 1, 1999.
To implement this Trust Agreement, the authorized officers of the Company and
the Trustees have executed this document on the dates indicated below,
effective as of July 1, 1999.
NOLAND COMPANY
July 1, 1999 By: Lloyd U. Noland, III.
Lloyd U. Noland, III
Chairman and Chief Executive Officer
July 1, 1999 Lloyd U. Noland, III.
Lloyd U. Noland, III
July 1, 1999 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
<PAGE>
EXHIBIT 13
INDEX
Page
Management's Discussion 27-29
Report of Independent Accountants 30
Quarterly Financial Data 31
Consolidated Statement of Income 32
Consolidated Balance Sheet 33
Consolidated Statement of Cash Flows 34
Notes to Consolidated Financial Statements 35-40
Ten Year Review 41-42
Inside Back Cover 43-44
<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 1999 totaled $482.8 million, 3.7 percent more than 1998 sales of
$465.5 million. After a respectable 7.0 percent gain in sales in the first
six months, we suffered a relatively flat second half. Major factors in the
disappointing second half were the closing of several branches, including our
three Texas operations, and the devastating storm and flooding along the East
coast in September. Plumbing and air conditioning sales increased five
percent while the electrical/industrial business remained flat. Sales for
1998 were $465.5 million compared to $465 million for 1997.
The gross profit margin was 20.1 percent for 1999 and 1998, down from 20.2
percent for 1997. The Company completed implementation of its new inventory
management system in 1999, and continued to improve the quality of inventory
management through a series of physical control initiatives. In addition, we
began implementing a centralized approach to stock replenishment. These
initiatives are enhancing the accuracy and completeness of our inventories,
which should translate into improved levels of customer service and lower
overall inventory levels. 1999's gross profit margin suffered from the year-
end LIFO adjustment which increased cost of goods sold by $1,391,000 compared
to $381,000 a year ago. Over-all inflation contributed to the 1999
adjustment. The 1997 LIFO inventory adjustment decreased cost of goods sold
by $1,040,000. The increase in sales accounted for a $3,500,000 increase in
gross profit for 1999 compared to 1998.
<PAGE>
Operating expenses increased slightly from 1998's $87.9 million to $88.1
million. The 1997 operating expenses were $87.7 million. Factors
contributing to the increase include the cost of regionalization, central
stock replenishment and an $855,000 increase in casualty insurance. Expenses
benefitted in 1999, 1998 and 1997 from pension credits of $3.8 million, $2.0
million, and $700,000, respectively as a result of the Plan's over-funded
position.
The combination of higher gross profit and flat operating expenses resulted
in a 59.8 percent increase in operating profits compared to 1998. Interest
expense decreased 19.4 percent to $2.8 million in 1999 from $3.5 million in
1998. Lower inventory levels throughout the year and less debt contributed to
the decline.
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 1999 net cash provided by operating activities was $23.3 million
compared to $1.9 million in 1998 and $17.4 million in 1997. The cash from
operations was used to pay down long-term debt by $14.9 million and for
capital expenditures of $7 million. The costs associated with branch closings
were insignificant. The Company's financial position remains strong with
working capital of $67.8 million and a current ratio of 2.1 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.
At December 31, 1998, the Company was not in compliance with a loan
covenant relating to debt which the lender permanently waived. The loan was
paid off in March 1999 from operating funds.
Outlook
In 1999, the years-long effort to reshape the Company began to pay off.
Improved productivity and the closing of several underperforming branches
strengthened operations and allowed us to enter 2000 as a tighter, more
focused Company.
<PAGE>
Included in this discussion and in other sections of this Annual Report 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
In 1997, the Company developed and implemented a plan to address
significant Year 2000 deficiencies in its internal computer hardware,
software, related systems, non-information technology systems and third-party
risks.
The Company paid a contractor $20,000 to address specific Year 2000 issues
while all other Year 2000 work was accomplished by existing staff. All
programs and modules were bench tested and migrated into production before
January 1, 2000. All funds for Year 2000 remediation costs came from
operations.
Noland Company did not experience any disruption in its business due to
Year 2000 issues. Programs and modules worked without interruption and all
supply chains were available without disruption.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP
To the Board of Directors and Stockholders of Noland Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Noland
Company and its subsidiary at December 31, 1999, 1998, and 1997, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and the
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Virginia Beach, Virginia
February 18, 2000
<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>
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
Sales $114,250 $103,885 $125,137 $119,919 $126,276 $124,851 $117,167 $116,824 $482,830 $465,479
Gross Profit $ 21,661 $ 20,551 $ 24,099 $ 23,743 $ 23,869 $ 24,385 $ 27,309 $ 24,767 $ 96,938 $ 93,446
Net Income $ 822 $ 656 $ 1,837 $ 1,640 $ 1,383 $ 1587 $ 4,105(A) $ 1,987(A) $ 8,147 $ 5,870
Basic Earnings$ .22 $ .18 $ .50 $ .44 $ .38 $ .43 $ 1.12(A) $ .54(A) $ 2.22 $ 1.59
Per Share
Diluted Earnings
Per Share$ .22 $ .18 $ .50 $ .44 $ .37 $ .43 $ 1.11(A) $ .54(A) $ 2.20 $ 1.59
(A) The Company uses estimated gross profit rates to determine cost of goods
sold during interim 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 (decreasing) net
income for the fourth quarter of 1999 and 1998 by approximately
$1,729,000 ($.47 per share) and $82,000 ($.02 per share), respectively.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Noland Company and Subsidiary
<CAPTION>
For the years ended December 31, 1999, 1998, and 1997
(In thousands, except per share amounts) 1999 1998 1997
<S> <C> <C> <C>
Sales $482,830 $465,479 $464,965
Cost of Goods Sold:
Purchases and freight in 385,161 376,133 369,900
Inventory, January 1 70,570 66,470 67,782
Inventory, December 31 (69,839) (70,570) (66,470)
Cost of Goods Sold 385,892 372,033 371,212
Gross Profit on Sales 96,938 93,446 93,753
Operating Expenses 88,115 87,927 87,659
Operating Profit 8,823 5,519 6,094
Other Income:
Cash Discounts, net 4,719 4,534 4,096
Service charges 1,440 1,251 1,195
Miscellaneous 1,149 1,385 577
Total Other Income 7,308 7,170 5,868
Interest Expense 2,819 3,498 3,078
Income Before Income Taxes 13,312 9,191 8,884
Income Taxes 5,165 3,321 3,341
Net Income $ 8,147 $ 5,870 $ 5,543
Retained Earnings, January 1 88,561 83,875 79,516
Cash Dividends Paid ($ .32 per share) (1,184) (1,184) (1,184)
Retained Earnings, December 31 $ 95,524 $ 88,561 $ 83,875
Basic Earnings Per Share $ 2.22 $ 1.59 $ 1.50
Diluted Earnings Per Share $ 2.20 $ 1.59 $ 1.50
</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, 1999, 1998, and 1997
(In thousands) 1999 1998 1997
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,528 $ 3,319 $ 5,674
Accounts receivable (net of
allowance for doubtful accounts) 55,704 55,451 49,984
Inventory (net of reduction to LIFO) 69,839 70,570 66,470
Deferred income taxes 1,147 1,948 1,706
Prepaid expenses 236 299 185
Total Current Assets 129,454 131,587 124,019
Property and Equipment, at cost:
Land 13,407 13,127 13,384
Buildings 83,414 81,348 76,945
Equipment and fixtures 64,620 63,815 55,714
Property in excess of current needs 1,699 1,876 1,873
Total 163,140 160,166 147,916
Less accumulated depreciation 79,599 74,361 68,491
Total Property and Equipment, net 83,541 85,805 79,425
Assets Held for Resale 1,021 1,021 1,241
Prepaid Pension 18,618 14,847 12,874
Other Assets 985 1,068 889
$233,619 $234,328 $218,448
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable, short-term borrowings $ 7,800 $ 7,500 $ 5,750
Current maturity of long-term debt 4,398 14,872 2,896
Book overdrafts 8,403 10,525 5,348
Accounts payable 26,895 21,890 21,030
Other accruals and liabilities 13,177 10,997 12,277
Federal and state income taxes 1,029 535 873
Total Current Liabilities 61,702 66,319 48,174
Long-term Debt 28,015 32,413 39,784
Deferred Income Taxes 10,197 9,122 8,807
Accrued Postretirement Benefits 1,543 1,241 916
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 95,524 88,561 83,875
Total 132,533 125,570 120,884
Less unearned compensation, stock plans 371 337 117
Stockholders' Equity 132,162 125,233 120,767
$233,619 $234,328 $218,448
</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, 1999, 1998, and 1997
(In thousands) 1999 1998 1997
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 8,147 $ 5,870 $ 5,543
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,450 7,977 6,890
Amortization of prepaid pension cost (3,771) (1,973) (651)
Deferred income taxes 1,876 73 740
Provision for doubtful accounts 1,823 1,441 1,710
Other non-cash adjustments (98) (88) (119)
Change in operating assets and liabilities:
(Increase) decrease in accounts
receivable (2,076) (6,908) 1,173
Decrease (increase) in inventory 731 (4,100) 1,312
Decrease (increase) in prepaid
expenses 63 (114) 204
Decrease in assets held for resale - 220 50
Decrease (increase) in other assets 20 (258) (230)
Increase in accounts payable 5,005 860 1,831
Increase (decrease) in other
accruals and liabilities 2,180 (1,280) (1,820)
Increase (decrease) in federal and
state income taxes 494 (338) 385
Increase in postretirement benefits 302 325 256
Total adjustments 15,195 (3,987) 11,863
Net cash provided by operating
activities 23,342 1,883 17,406
Cash Flows From Investing Activities:
Capital expenditures (7,018) (14,751) (9,339)
Proceeds from sale of assets 894 473 2,017
Net cash used by investing
activities (6,124) (14,278) (7,322)
Cash Flows From Financing Activities:
(Decrease) increase in book overdrafts (2,122) 5,177 (990)
Short-term borrowings 189,650 203,800 169,300
Short-term payments (189,350) (202,050) (169,500)
Long-term borrowings 7,500 7,500 12,660
Long-term repayments (22,372) (2,896) (18,247)
Dividends paid (1,184) (1,184) (1,184)
Purchase (sale) of restricted stock (131) (307) 93
Net cash (used) provided by
financing activities (18,009) 10,040 (7,918)
Cash and Cash Equivalents:
(Decrease) increase during year (791) (2,355) 2,166
Beginning of year 3,319 5,674 3,508
End of year $ 2,528 $ 3,319 $ 5,674
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 2,847 $ 3,448 $ 3,104
Income taxes $ 3,208 $ 3,790 $ 2,222
</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, air conditioning,
and electrical/industrial.
Markets for these products include contractors, industrial plants,
utilities and others. The Company operates in only one segment of business.
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 owns a fifty percent interest in two foreign joint ventures
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 accounting
principles generally accepted in the United States 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.
<PAGE>
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.
The Company reevaluates property, plant, and equipment whenever
significant events or changes occur which might impair recovery of recorded
costs. Impaired assets, if any, are written down to fair value.
Property in excess of current needs consists primarily of land held for
possible future expansion.
e. Income Taxes
A deferred tax asset or liability is recognized for the deferred tax
consequences of all temporary differences.
f. 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.
Cash is maintained in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents. There are no requirements for compensating balances.
g. 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
$2,150,000 in 1999, $1,654,000 in 1998 and $1,604,000 in 1997.
h. Unearned Compensation - Stock Plans
The Company provides a restricted stock plan for certain 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 on 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 amortized over seven years. The number of shares
granted in 1999 and 1998 was 10,000 and 9,700 with a fair value of $238,000
and $236,000, respectively. There was no awards in 1997. The amount
amortized to compensation expense in 1999, 1998 and 1997 was $118,000, $88,000
and $67,000, respectively. In addition, 1,500 and 2,000 shares were forfeited
in 1999 and 1997, respectively.
Effective July 1, 1999 the Company adopted the 1999 Outside Directors
Stock Plan (the Plan) to provide incentive and award to the Company's Outside
Directors. The Common Stock Benefit Trust (the Trust), a grantor trust, was
established to provide a source of funds to meet the obligations of the Plan.
The Trust is consolidated with Noland Company and all dividend transactions
are eliminated. The cost of the shares held by the Trust is shown as a
reduction of stockholders' equity. In 1999, $44,000 was charged against
stockholders' equity with $23,000 recorded as director compensation.
<PAGE>
i. Earnings Per Share
Basic earnings per share for 1999, 1998, and 1997 is calculated based on
3,676,276, 3,681,976, and 3,689,676, respectively. Diluted earnings per share
are calculated on 3,700,876 shares outstanding. The dilutive potential shares
consist of restricted stock.
j. Professional Standards
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
for Derivative Instruments and Hedging Activities" as amended by SFAS No. 137,
is effective for periods beginning after June 15, 2000. The Company has no
derivative instruments or hedging activities.
k. Reclassification
Certain amounts in prior years' financial statements have been
reclassified to conform to the 1999 presentation.
3. Accounts Receivable
Accounts receivable are net of an allowance for doubtful accounts of
$1,008,000 for 1999, 1998 and 1997. Bad debt charges, net of recoveries, were
$1,042,000 for 1999, $684,000 for 1998 and $855,000 for 1997.
4. Inventory
Comparative year-end inventories are as follows:
(In thousands) 1999 1998 1997
Inventory, at approximate
replacement cost $104,106 $103,446 $98,965
Reduction to LIFO 34,267 32,876 32,495
LIFO inventory $ 69,839 $ 70,570 $ 66,470
Liquidation of certain inventory layers carried at the higher/lower
costs which prevailed in prior years as compared with the costs of 1999, 1998
and 1997 purchases had the effect of increasing 1999 and 1997 net income
$47,000 ($.01 per share) and $393,000 ($.11 per share) and decreasing 1998
net income $150,000 ($.04 per share).
5. Notes Payable
a. Short-term Borrowings:
Amounts payable to banks at December 31, 1999, 1998 and 1997 were
$7,800,000, $7,500,000 and $5,750,000, respectively. The average interest
rate, which is based on existing Federal Funds rates, was 5.4 percent at
December 31, 1999, 5.2 percent at December 31, 1998, and 7.1 percent at
December 31, 1997. 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 $40.7 million at
December 31, 1999.
b. Long-term Debt:
(In thousands) 1999 1998 1997
Promissory note, 9.6% interest payable
quarterly, $1,850,000 due June 2000
with balance due June 2001. (1) $ 3,800 $ 5,650 $ 7,500
Promissory note, 6.6% interest
plus $83,333 principal payable
monthly 2000 through 2002. (1) 3,000 4,000 5,000
Promissory note, variable interest
payable weekly principal due
March 30, 1999. (1) - 10,000 10,000
Promissory note, variable interest
payable monthly (6.6% at December
31, 1999), principal due August
2001. (2) 15,000 15,000 7,500
<PAGE>
Industrial revenue financings, variable
interest payable quarterly (5.6% at
December 31, 1999) with varying
maturities from 2000 to 2004. (1) (3) 10,075 12,050 12,050
Other 538 585 630
32,413 47,285 42,680
Less current maturities 4,398 14,872 2,896
$28,015 $32,413 $39,784
(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 $17,271,000.
(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 $10,440,000. 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.
At December 31, 1998, the Company was not in compliance with a loan
covenant on a $10,000,000 promissory note. The lender permanently waived non
- -compliance and the loan converted to a short-term credit facility on March
30, 1999 and was retired on
that date.
The fair value of the remaining $22.3 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 approximately $22.4 million at December 31, 1999.
Annual maturities of long-term debt for the five years
subsequent to December 31, 1999, are as follows: 2000, $4,398,000; 2001,
$19,427,000; 2002, $1,013,000; 2003, $7,000,000; 2004, $575,000.
6. Postretirement Benefits
The following tables reconcile the plan's change in benefit obligation
and show the plan's funded status at December 31, 1999 1998, and 1997.
(In thousands) 1999 1998 1997
Change in benefit obligation
Benefit obligation at the end
of the prior year $ 4,869 $ 4,654 $ 4,264
Service cost 55 50 47
Interest cost 316 320 318
Plan participants' contributions 71 68 54
Actuarial loss (602) 114 338
Benefit payments (361) (337) (367)
Benefit obligation at year end $ 4,348 $ 4,869 $ 4,654
<PAGE>
Reconciliation of funded status
Funded status $(4,348) $(4,869) $(4,654)
Unrecognized net actuarial loss 160 780 687
Unrecognized transition obligation 2,645 2,848 3,051
Accrued cost $(1,543) $(1,241) $ (916)
The discount rate used to calculate the benefit obligation was 8.0
percent for 1999, 6.75 percent for 1998, and 7.0 percent for 1997. There are
no plan assets. Employer paid benefits are limited to a fixed reimbursement
allowance based on years of service at retirement. No health care cost trend
assumption is necessary.
The components of the provision for net periodic postretirement benefit
costs are:
(In thousands) 1999 1998 1997
Service cost $ 55 $ 50 $ 47
Interest cost $ 316 $ 320 $ 318
Net amortization $ 222 $ 224 $ 203
Net postretirement benefit cost $ 593 $ 594 $ 568
7. Retirement Plan
The following tables reconcile the plan's change in benefit obligation
and change in plan assets and show the funded status at December 31, 1999,
1998 and 1997.
(In thousands) 1999 1998 1997
Change in benefit obligation
Benefit obligation at the end
of the prior year $ 42,903 $ 39,768 $ 34,466
Service cost 1,222 1,159 976
Interest cost 2,755 2,734 2,647
Actuarial (gain) loss (6,556) 1,832 4,363
Benefit payments (2,806) (2,590) (2,684)
Benefit obligation at year end $ 37,518 $ 42,903 $ 39,768
Change in plan assets
Fair value of plan assets at
beginning of year $ 77,153 $ 66,243 $ 55,069
Actual return on plan assets 5,451 13,500 13,979
Benefits paid (2,806) (2,590) (2,684)
Fair value of plan assets at year end $ 79,798 $ 77,153 $ 66,364
Reconciliation of funded status
Funded status $ 42,280 $ 34,250 $ 26,596
Unrecognized net actuarial (gain) 23,662 (19,403) (14,034)
Unrecognized prior service cost - - 312
Prepaid benefit $ 18,618 $ 14,847 $ 12,874
Weighted-average assumptions as of the end of the year were:
1999 1998 1997
Discount rate 8.0% 6.75% 7.0%
Rate of compensation increase 4.0% 4.0% 4.0%
Expected return on plan assets 8.25% 8.25% 8.25%
The components of the credits for the net periodic pension benefit are:
(In thousands) 1999 1998 1997
Service cost $ 1,222 $ 1,159 $ 976
Interest cost 2,755 2,734 2,647
Expected return on plan assets (6,266) (5,365) (4,446)
Amortization of prior service cost - 312 359
Amortization of net
actuarial (gain)
(1,482) (813) (187)
Net pension benefit $(3,771) $(1,973) $(651)
<PAGE>
8. Income Taxes
The components of income tax expense are as follows:
(In thousands) 1999 1998 1997
Federal:
Current $ 3,368 $ 2,583 $ 2,612
Deferred 1,017 247 285
State:
Current 606 451 369
Deferred 174 40 75
Total $ 5,165 $ 3,321 $ 3,341
The components of the net deferred tax liability are:
(In thousands) 1999 1998 1997
Current deferred (assets)
Accounts receivable $ (190) $ (95) $ -
Inventory (338) (1,237) (1,100)
Accrued vacation (619) (616) (606)
Total net current deferred (asset) (1,147) (1,948) (1,706)
Noncurrent deferred (assets) liabilities
Property and equipment 4,349 4,435 4,639
Pension asset 7,006 5,587 4,845
Postretirement benefit liability (581) (467) (345)
Other (577) (433) (332)
Total net non current deferred
liability 10,197 9,122 8,807
Net deferred liability $ 9,050 $ 7,174 $ 7,101
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) 1999 1998 1997
Statutory rate applied to
pretax income $ 4,526 $ 3,125 $ 3,021
State income taxes, net
of federal tax benefit 496 297 244
Other 143 (101) 76
Total tax expense $ 5,165 $ 3,321 $ 3,341
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 1999, 1998, and 1997 was
$1,558,000, $1,553,000 and $1,694,000, respectively.
Minimum payments due for years after 1999 under noncancelable operating
leases are $1,476,000 in 2000, $1,132,000 in 2001, $981,000 in 2002, $930,000
in 2003 and $2,836,000 thereafter.
<PAGE>
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. 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) 1999 1998 1997
Income Statement Data
<S> <C> <C> <C>
Sales $482,830 $465,479 $464,965
Gross Profit 96,938 93,446 93,753
Operating Expenses 88,115 87,927 87,659
Operating Profit (Loss) 8,823 5,519 6,094
Interest Expense 2,819 3,498 3,078
Interest Expense as Percent of
Total Assets 1.2 1.5 1.4
Income (Loss) Before Income Taxes 13,312 9,191 8,884
Pretax Profit as Percent of Sales 2.8 2.0 1.9
Income Taxes Payable (Receivable) 5,165 3,321 3,341
Effective Tax Rate 38.8 36.1 37.6
Net Income (Loss) 8,147 5,870 5,543
Income Paid to Stockholders
(Cash Dividends) 1,184 1,184 1,184
Income Reinvested 6,963 4,686 4,359
Property and Equipment Expenditures 7,018 14,751 9,339
Depreciation and Amortization 8,450 7,977 6,890
Balance Sheet Data
Stockholders' Equity 132,162 125,233 120,767
Working Capital 67,752 65,268 75,845
<PAGE>
Current Ratio 2.1 2.0 2.6
Total Assets 233,619 234,328 218,448
Long-term Debt 28,015 32,413 39,784
Borrowed Funds 40,213 54,785 48,430
Borrowed Funds as Percent of
Total Assets 17.2 23.4 22.2
Total Liabilities as Percent of
Total Assets 43.4 46.6 44.7
Per Share Data*
Diluted Earnings (Loss) 2.20 1.59 1.50
Cash Dividends Paid to Stockholders .32 .32 .32
Stockholders' Equity (Book Value) 35.71 33.84 33.63
Return on Average Stockholders' Equity 6.3 4.8 4.7
Stock Price Range:
Average High 22.95 27.17 24.59
Average Low 18.25 22.27 21.72
Number of Employees at December 31 1,512 1,554 1,606
Number of Branches at December 31 100 106 107
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 98,329 93,827 92,713
Income (Loss) Before Income Taxes 14,703 9,572 7,844
Income Taxes Payable (Receivable) 5,705 3,455 2,949
Net Income (Loss) 8,998 6,117 4,895
Net Income (Loss) Per Share 2.43 1.65 1.32
Stockholders' Equity (Book Value)
Per Share 39.71 37.99 37.32
Return on Average Stockholders' Equity 6.3 4.3 3.6
</TABLE>
[FN]
*Based on 3,700,876 shares outstanding
<PAGE>
<TABLE>
1996 1995 1994 1993 1992 1991 1990
<C> <C> <C> <C> <C> <C> <C>
$465,705 $469,512 $440,202 $402,941 $412,086 $384,535 $428,473
90,789 89,087 86,166 77,306 77,265 71,000 79,982
84,383 83,389 78,259 74,692 73,227 74,355 75,641
6,406 5,698 7,907 2,614 4,038 (3,355) 4,341
2,828 3,239 2,626 2,422 3,058 3,724 4,742
1.3 1.5 1.2 1.2 1.7 2.0 2.5
9,657 8,237 10,568 5,291 6,610 (1,203) 6,377
2.1 1.8 2.4 1.3 1.6 NA 1.5
3,794 3,290 4,341 1,996 2,518 (478) 2,651
39.3 39.9 41.1 37.7 38.1 (39.7) 41.6
5,863 4,947 6,227 3,295 4,092 (725) 3,726
1,184 1,036 888 888 888 1,702 1,665
4,679 3,911 5,339 2,407 3,204 NA 2,061
10,890 9,735 10,858 7,611 6,191 7,075 10,798
6,868 6,655 6,232 6,178 6,365 6,543 6,433
116,292 111,688 107,865 102,596 100,189 96,985 99,412
77,379 71,889 65,575 65,203 65,509 64,433 70,701
2.6 2.4 2.0 2.3 2.8 2.6 2.8
219,885 213,520 217,085 201,029 185,372 189,072 192,887
45,039 41,611 36,914 38,505 40,511 42,898 44,299
54,267 45,332 53,130 47,485 46,097 54,299 56,131
24.7 21.2 24.5 23.6 24.9 28.7 29.1
47.1 47.7 50.3 48.9 46.0 48.7 48.5
1.58 1.34 1.68 .89 1.11 (.20) 1.01
.32 .28 .24 .24 .24 .46 .45
31.42 30.18 29.15 27.72 27.07 26.21 26.86
5.1 4.5 5.9 3.2 4.2 NA 3.8
21.81 21.31 20.94 18.13 16.13 14.88 19.19
18.89 18.38 17.56 15.06 13.91 12.25 15.00
1,692 1,655 1,741 1,683 1,720 1,704 1,797
107 99 99 93 93 92 92
90,582 91,187 86,404 77,318 76,541 70,888 80,429
9,450 10,337 10,806 5,303 5,886 (1,315) 6,824
3,714 4,124 4,441 2,000 2,226 (495) 2,770
5,736 6,213 6,365 3,303 3,660 (820) 4,054
1.55 1.68 1.72 .89 .99 (.22) 1.10
36.32 34.39 33.69 32.21 31.19 30.81 31.17
4.4 4.9 5.2 2.8 3.2 NA 3.5
</TABLE>
<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.
400 Wachovia Bank Building
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:
PricewaterhouseCoopers LLP
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
<PAGE>
Stock Information
The Company's common stock is traded over the counter as part of NASDAQ's
National Market System (symbol: NOLD). On March 8, 2000, the approximate
number of holders of record of the Company's common stock was 2,500.
Market Prices:
The following table sets forth the reported high and low prices for the
common stock on the NASDAQ system:
High Low
1999
Qtr. 4 $20.19 $16.50
Qtr. 3 $21.00 $18.00
Qtr. 2 $21.75 $18.50
Qtr. 1 $28.88 $20.00
1998
Qtr. 4 $28.94 $20.56
Qtr. 3 $28.75 $22.50
Qtr. 2 $26.50 $23.50
Qtr. 1 $24.50 $22.50
P/E Ratio:*
High Low
1999 10 8
1998 17 14
*Based on final, full-year earnings
Dividend Policy:
Noland has paid regular cash dividends for 66 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
1999 and 1998.
Registrar:
Noland Company
Transfer Agent:
Continental Stock Transfer and Trust Company
2 Broadway
New York, New York 10004
(212) 509-4000
Annual Meeting:
April 20, 2000, 10:00 a.m.
Noland's Corporate Headquarters
Newport News, Virginia
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,528,000
<SECURITIES> 0
<RECEIVABLES> 56,712,000
<ALLOWANCES> 1,008,000
<INVENTORY> 69,839,000
<CURRENT-ASSETS> 129,454,000
<PP&E> 163,140,000
<DEPRECIATION> 79,599,000
<TOTAL-ASSETS> 233,619,000
<CURRENT-LIABILITIES> 61,702,000
<BONDS> 0
0
0
<COMMON> 37,009,000
<OTHER-SE> 95,153,000
<TOTAL-LIABILITY-AND-EQUITY> 233,619,000
<SALES> 482,830,000
<TOTAL-REVENUES> 482,830,000
<CGS> 385,892,000
<TOTAL-COSTS> 79,948,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 859,000
<INTEREST-EXPENSE> 2,819,000
<INCOME-PRETAX> 13,312,000
<INCOME-TAX> 5,165,000
<INCOME-CONTINUING> 8,147,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,147,000
<EPS-BASIC> 2.22
<EPS-DILUTED> 2.20
</TABLE>
