FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996 Commission file no. 2-27393
NOLAND COMPANY
A Virginia Corporation IRS Identification #54-0320170
2700 Warwick Boulevard
Newport News, Virginia 23607
Telephone: (804) 928-9000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Outstanding capital common stock, $10.00 par value at July 26, 1996,
3,700,876 shares.
This report contains 10 pages.
NOLAND COMPANY AND SUBSIDIARY
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1996 (Unaudited) and Dec. 31, 1995 (Audited).... 3
Unaudited Consolidated Statements of Income -
Three Months and Six Months Ended June 30, 1996 and 1995.. 4
Unaudited Consolidated Statements of Retained Earnings -
Six Months Ended June 30, 1996 and 1995.................. 5
Unaudited Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995.................. 6
Notes to Unaudited Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 8
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6.................................. 9
SIGNATURE ............................................................ 10
PART 1. FINANCIAL INFORMATION
NOLAND COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
Item 1. Financial Statements
June 30, December 31,
1996 1995
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 6,247,961 $ 12,577,642
Accounts receivable, net 54,414,931 50,504,021
Inventory, net 62,879,086 58,072,335
Deferred income taxes 1,901,915 1,901,915
Prepaid expenses 306,128 275,755
Total Current Assets 125,750,021 123,331,668
Property and Equipment, at cost:
Land 13,096,539 13,288,151
Buildings 73,380,715 70,621,815
Equipment and fixtures 52,953,676 51,518,836
Property excess to current needs 2,054,040 2,054,040
Total 141,484,970 137,482,842
Less accumulated depreciation 63,737,665 61,818,967
Property and Equipment, net 77,747,305 75,663,875
Assets Held for Resale 1,290,775 1,290,775
Prepaid Pension 12,107,254 11,991,504
Other Assets 1,154,542 1,242,063
$218,049,897 $213,519,885
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturity of long-term debt $ 4,956,108 $ 3,721,108
Book overdrafts 11,402,576 11,967,714
Accounts payable 27,779,800 21,349,691
Other accruals and liabilities 9,802,838 14,236,217
Federal and state income taxes 1,225,714 167,787
Total Current Liabilities 55,167,036 51,442,517
Long-term Debt 40,203,213 41,611,267
Deferred Income Taxes 8,352,682 8,352,682
Accrued Postretirement Benefits 560,299 425,724
Stockholders' Equity:
Capital common stock, par value $10;
authorized, 6,000,000 shares; issued,
3,700,876 shares 37,008,760 37,008,760
Retained earnings 76,896,443 74,836,888
Total 113,905,203 111,845,648
Less restricted stock 138,536 157,953
Stockholders' Equity 113,766,667 111,687,695
$218,049,897 $213,519,885
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Merchandise sales $124,574,466 $123,559,896 $230,814,263 $235,296,221
Cost of goods sold:
Purchases and freight-in 102,313,216 100,156,239 191,224,379 198,496,961
Inventory, beginning 61,373,232 72,559,444 58,072,334 64,458,250
Inventory, ending 62,879,086 72,707,108 62,879,086 72,707,108
Cost of goods sold 100,807,362 100,008,575 186,417,627 190,248,103
Gross profit on sales 23,767,104 23,551,321 44,396,636 45,048,118
Operating expenses 21,299,435 20,985,066 41,908,564 41,485,855
Operating profit 2,467,669 2,566,255 2,488,072 3,562,263
Other income:
Cash discounts, net 1,169,723 1,041,018 2,243,163 2,110,030
Service charges 381,034 354,224 765,584 695,411
Other gains
and recoveries 4,499 - - -
Miscellaneous 90,898 47,359 141,461 127,856
Total other income 1,646,154 1,442,601 3,154,707 2,933,304
Interest expense 706,597 911,033 1,391,384 1,661,209
Income before income taxes 3,407,226 3,097,823 4,251,395 4,834,358
Income taxes:
State 187,300 170,400 233,700 265,900
Federal 1,094,800 995,400 1,366,000 1,553,300
Total income taxes 1,282,100 1,165,800 1,599,700 1,819,200
Net income $ 2,125,126 $ 1,932,023 $ 2,651,695 $ 3,015,158
Earnings per share (based on
3,700,876 shares outstanding)$ .58 $ .52 $ .72 $ .81
Cash dividends per share $ .08 $ .06 $ .16 $ .12
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Retained Earnings
Six Months Ended
June 30,
1996 1995
Retained earnings, January 1 $74,836,888 $70,926,096
Add net income 2,651,695 3,015,158
Deduct cash dividends paid
($.16 and $.12 per share, respectfully) (592,140) (444,105)
Retained earnings, June 30 $76,896,443 $73,497,149
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Six Months
Ended June 30
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,651,696 $ 3,015,158
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,336,925 3,315,025
Amortization of prepaid pension cost (115,750) -
Provision for doubtful accounts 664,250 580,380
Amortization of unearned compensation-restricted stock 19,416 11,949
Gain on sale of property (4,499) -
Change in operating assets and liabilities:
(Increase) in accounts receivable (4,575,160) (3,769,367)
(Increase) in inventory (4,806,751) (8,248,857)
(Increase) in prepaid expenses (30,373) (64,015)
Decrease in assets held for resale - 1
Decrease (increase) in other assets 57,521 (70,607)
(Decrease) increase in bank overdrafts (565,138) 2,523,235
Increase in accounts payable 6,430,109 5,541,699
(Decrease) in other accruals and liabilities (4,433,379) (4,173,933)
Increase (decrease) in federal and state income taxes 1,057,927 (1,052,586)
Increase in accrued post retirement benefits 134 576 90,921
Total adjustments (2,830,326) (5,316,155)
Net cash used by operating activities (178,630) (2,300,997)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,863,620) (4,983,842)
Proceeds from sale of assets 477,763 166,049
Net cash used by investing activities (5,385,857) (4,817,793)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (payments) net - 3,500,000
Long-term debt repayments (173,053) (1,980,625)
Dividends paid (592,141) (444,105)
Net cash (used) provided by financing activities (765,194) 1,075,270
CASH AND CASH EQUIVALENTS:
Decrease during first six months (6,329,681) (6,043,520)
Beginning of year 12,577,642 9,890,970
End of first six months $6,247,961 $3,847,450
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first six months for:
Interest $1,403,696 $1,619,812
Income taxes $ 541,773 $2,871,786
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
1. In the opinion of the Company, the accompanying unaudited
consolidated statements of income contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the results of operations for the six months
ended June 30, 1996 and 1995.
2. The Notes to Consolidated Financial Statements included in the
Company's December 31, 1995 Annual Report on Form 10-K are an
integral part of the interim unaudited financial statements
and remain substantially unchanged. The Company takes a
physical inventory annually on December 31 of each year. The
Company uses estimated gross profit rates to determine cost of
goods sold during interim periods.
3. Due to the seasonal nature of the construction industry
supplied by the registrant, interim results of operations of
each period are not necessarily indicative of earnings for the
year.
4. Accounts Receivable as of June 30, 1996 and 1995 are net of
allowance for doubtful accounts of $1,008,132 and $968,427,
respectively. Second quarter bad debt charges, net of
recoveries, were $269,577 for 1996 and $247,673 for 1995.
Year-to-date bad debt charges, net of recoveries, were
$566,847 for 1996 and $462,236 for 1995.
5. The dollar amount of Noland Company's backlog of orders
believed to be firm was approximately $43,211,821 at June 30,
1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company generally generates its cash needs through: (1) cash
flow from operations; (2) short-term borrowings, (3) bank lines of
credit arrangements, when needed; and (4) additional long-term debt,
when needed.
For the first six months of 1996, the Company used $6.3 million in
cash primarily to purchase property and equipment and pay dividends.
The Company's financial condition remains strong with working
capital of $70.6 million and a current ratio of 2.3. Management
believes the Company has adequate financial resources to meet the
needs of foreseeable future.
Results of Operations
Second-quarter sales of $124.6 million were only slightly greater
than the $123.6 million recorded in the second quarter of 1995.
Sluggish economic conditions in some parts of our 15-state territory
contributed to the disappointing sales performance in the second
quarter. The air conditioning/refrigeration department enjoyed
double-digit sales growth, industrial department sales were flat,
and the electrical and plumbing and heating departments recorded
sales declines. Sales for the first six months of 1996 were $230.8
million compared to $235.3 million for the year-earlier period.
The gross margin of profit for the second quarter remained the same
as the year-earlier period's at 19.1 percent. Operating expenses
for the quarter of $21.3 million were only slightly higher than the
$21 million for the year-earlier period. For the first six months,
operating expenses were up only one percent over a yearago.
Interest expense for the quarter and year-to-date decreased 22.4
percent and 16.2 percent, respectively. The decreases are largely
due to substantial reductions in our inventory investment.
We are anticipating a better sales performance in the third quarter
and another record sales year although the full-year total likely
will fall short of our target established at the beginning of the
year.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NOLAND COMPANY
July 26, 1996 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance