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 March 31, 1997 Commission file no. 2-27393
NOLAND COMPANY
A Virginia Corporation IRS Identification #54-0320170
80 29th Street
Newport News, Virginia 23607
Telephone: (757) 928-9000
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 April 24, 1997,
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 -
March 31, 1997 (Unaudited) and Dec. 31, 1996 (Audited).... 3
Unaudited Consolidated Statements of Income -
Three Months Ended March 31, 1997 and 1996................. 4
Unaudited Consolidated Statements of Retained Earnings -
Three Months Ended March 31, 1997 and 1996................ 5
Unaudited Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996................ 6
Notes to Unaudited Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 8-9
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6.................................. 10
SIGNATURES ............................................................ 11
PART 1. FINANCIAL INFORMATION
NOLAND COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
Item 1. Financial Statements
March 31, December 31,
1997 1996
(Unaudited) (Audited)
Assets
Current Assets:
Cash and cash equivalents $ 4,807,647 $ 3,507,588
Accounts receivable, net 52,236,540 52,866,928
Inventory, net 69,630,325 67,782,230
Deferred income taxes 2,182,606 2,182,606
Prepaid expenses 498,946 389,524
Total Current Assets 129,356,064 126,728,876
Property and Equipment, at cost:
Land 13,113,531 13,026,030
Buildings 74,698,927 74,530,963
Equipment and fixtures 52,798,094 54,654,300
Property excess to current needs 2,054,040 2,054,040
Total 142,664,212 144,265,333
Less accumulated depreciation 65,107,195 65,367,803
Property and Equipment, net 77,557,017 78,897,530
Assets Held for Resale 1,290,775 1,290,775
Prepaid Pension 12,353,003 12,223,004
Other Assets 482,694 744,498
$221,039,553 $219,884,683
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable - short term borrowings $ 5,000,000 $ 6,000,000
Current maturity of long-term debt 3,227,880 $ 3,227,880
Book overdrafts 8,055,028 6,337,972
Accounts payable 25,280,494 19,199,304
Other accruals and liabilities 7,714,808 14,096,550
Federal and state income taxes 845,600 487,650
Total Current Liabilities 50,123,810 49,349,356
Long-term Debt 45,035,613 45,038,833
Deferred Income Taxes 8,544,103 8,544,103
Accrued Postretirement Benefits 685,589 660,275
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 79,857,552 79,516,091
Total 116,866,312 116,524,851
Less restricted stock 215,874 232,735
Stockholders' Equity 116,650,438 116,292,116
$221,039,553 $219,884,683
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Income
Three Months Ended
March 31,
1997 1996
Merchandise sales $110,929,637 $106,239,797
Cost of goods sold:
Purchases and freight-in 90,494,378 88,911,163
Inventory, beginning 67,782,230 58,072,334
Inventory, ending (69,630,325) (61,373,232)
Cost of goods sold 88,646,283 85,610,265
Gross profit on sales 22,283,354 20,629,532
Operating expenses 21,982,956 20,609,129
Operating profit 300,398 20,403
Other income:
Cash discounts, net 1,102,566 1,073,440
Service charges 296,128 384,550
Miscellaneous 77,555 50,563
Total other income 1,476,249 1,508,553
Interest expense 754,416 684,787
Income before income taxes 1,022,231 844,169
Income taxes 384,700 317,600
Net income $ 637,531 $ 526,569
Earnings per share (based on
3,700,876 shares outstanding) $ .17 $ .14
Cash dividends per share $ .08 $ .08
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Retained Earnings
Three Months Ended
March 31,
1997 1996
Retained earnings, January 1 $79,516,091 $74,836,888
Add net income 637,531 526,569
Deduct cash dividends paid
($.08 per share) (296,071) (296,071)
Retained earnings, March 31 $79,857,552 $75,067,386
The accompanying notes are an integral part of the financial statements.
NOLAND COMPANY AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
Three Months
Ended March 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 637,531 $ 526,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,684,203 1,652,431
Amortization of prepaid pension cost (129,999) 62,181
Provision for doubtful accounts 365,216 333,585
Amortization of unearned compensation-restricted stock 16,862 9,708
Change in operating assets and liabilities:
Decrease in accounts receivable 265,172 467,185
(Increase) in inventory (1,848,095) (3,300,897)
(Increase) in prepaid expenses (109,422) (145,961)
Decrease in other assets 245,304 57,029
Increase (decrease) in bank overdrafts 1,717,056 (3,542,034)
Increase in accounts payable 6,081,190 4,675,090
(Decrease) in other accruals and liabilities (6,381,742) (6,446,827)
Increase in federal and state income taxes 357,950 648,504
Increase in accrued post retirement benefits 25,314 61,029
Total adjustments 2,289,009 (5,468,977)
Net cash provided (used) by operating activities 2,926,540 (4,942,408)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,369,228) (2,652,531)
Proceeds from sale of assets 1,042,037 66,010
Net cash used by investing activities ( 327,191) (2,586,521)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term (payments) borrowings-net (1,000,000) -
Long-term debt (payments) borrowings-net ( 3,220) (21,526)
Dividends paid (296,070) (296,071)
Net cash (used) by financing activities (1,299,290) (317,597)
CASH AND CASH EQUIVALENTS:
Increase (decrease) during first quarter 1,300,059 (7,846,526)
Beginning of year 3,507,588 12,577,642
End of first quarter $4,807,647 $ 4,731,116
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the first quarter for:
Interest $ 773,094 $ 710,264
Income taxes $ 26,750 $ -
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 three months
ended March 31, 1997 and 1996.
2. The Notes to Consolidated Financial Statements included in the
Company's December 31, 1996, 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 March 31, 1997 and December 31, 1996
are net of allowance for doubtful accounts of $1,008,132,
respectively. Quarterly bad debt charges, net of recoveries,
were $295,330 for 1997 and $297,270 for 1996.
5. Statement of Financial Accounting Standards No.128 "Earnings
Per Share" is effective for financial statements issued for
periods ending after December 15, 1997. Early application is
not permitted. Adoption of SFAS No.128 will not be material
to the financial condition or results of operation of the
Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company maintains its short and long-term liquidity 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.
The Company's financial condition remains strong with working
capital of $79.2 million and a current ratio of 2.6. Total debt at
March 31, 1997 was $8.0 million more than at March 31, 1996 but
$1,000,000 less than December 31,1996. Management believes the
Company has adequate financial resources to meet the needs of
foreseeable future.
Results of Operations
For the first-quarter of 1997 the Company had net income of
$638,000, or 17 cents per share, compared to net income of $527,000
or 14 cents per share, for the first quarter of 1996.
Sales of $110.9 million for the first quarter of 1997 were up 4.4
percent compared to sales of $106.2 million for the first quarter
of 1996. Most of the increase can be attributed to the nine new
branches acquired in the second half of 1996. Same-store sales were
up 1.2 percent. A major realignment of our sales organization, which
went into effect on January 1, should begin having a positive impact
on sales in the months ahead.
The Company's gross margin of profit increased over the year-earlier
period, from 19.4 percent to 20.1 percent. The gross margin of
profit increased for both delivered and counter sales and declined
slightly for direct sales.
Operating expenses increased only $1.4 million, or 6.7 percent,
compared to the first quarter of 1996. The increase can be
attributed to the additional costs of operating the nine new
branches.
Interest expense increased 10.2 percent from a year ago,largely due
to higher average borrowings required to finance the inventories of
the newer branches.
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. None
SIGNATURES
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
April 22, 1997 Arthur P. Henderson, Jr.
Arthur P. Henderson, Jr.
Vice President-Finance