Notice of Annual Meeting of Stockholders Page 1
N O L A N D
NOLAND COMPANY
80 29th Street, Newport News, Virginia 23607
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held at 10:00 A.M. on April 30, 1998
Notice is hereby given that the Annual Meeting of Stockholders of
Noland Company, a Virginia corporation (the Corporation), will be
held, in accordance with the Bylaws of the Corporation, on
Thursday, April 30, 1998, at 10:00 A.M. (Local Time) at the
principal office of the Corporation, 80 29th Street, Newport
News, Virginia, for the following purposes:
1. to elect six Directors to serve for the ensuing year;
2. to appoint Coopers & Lybrand L.L.P. to audit the consolidated
financial statements of the Corporation for the year ending
December 31, 1998; and
3. to transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 12,
1998, will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
James E. Sykes Jr.
Secretary
April 7, 1998
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO
THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND
IN ORDER THAT A QUORUM MAY BE ASSURED. THE PROMPT RETURN OF YOUR
SIGNED PROXY, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, WILL
AID THE CORPORATION IN AVOIDING THE EXPENSE OF ADDITIONAL PROXY
SOLICITATION. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT
TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING. ANY PERSON
GIVING A PROXY MAY REVOKE IT BEFORE IT IS VOTED BY DELIVERING
ANOTHER PROXY, OR WRITTEN NOTICE OF REVOCATION, TO THE SECRETARY
OF THE CORPORATION.
Page 2
NOLAND COMPANY
(a Virginia corporation)
80 29th Street
Newport News, Virginia 23607
Proxy Statement
Annual Meeting of Stockholders to be
held at 10:00 A.M., April 30, 1998
Approximate date of mailing .... April 7, 1998
SOLICITATION AND REVOCATION OF PROXY
The proxy accompanying this statement is solicited by the Board
of Directors on behalf of the Corporation. All proxies in the
accompanying form which are properly executed by stockholders and
returned to the Secretary will be voted. Any proxy delivered
pursuant to this solicitation is revocable at the option of the
person executing the same at any time before it is exercised.
The cost of soliciting proxies, including the cost of preparing
and mailing the proxy materials, will be borne by the
Corporation. In addition to the use of the mails, proxies may be
solicited, personally or by telephone, by regular employees of
the Corporation.
A copy of the Corporation's Annual Report to stockholders for the
year ended December 31, 1997, which includes consolidated
financial statements, is furnished concurrently with this Proxy
Statement.
PURPOSES OF MEETING
The purposes of the Annual Meeting of Stockholders will be (1) to
elect six Directors to serve for the ensuing year; (2) to
appoint Coopers & Lybrand L.L.P. as independent auditors of the
Corporation for the ensuing year; and (3) to transact such other
business as may properly come before the meeting, or any
adjournment thereof.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 12, 1998, there were outstanding 3,700,876 shares of
Common Stock, the sole class of voting securities of the
Corporation. Holders of record at the close of business on that
date are entitled to one vote for each share.
The following are, to the knowledge of the Corporation,
beneficial owners as of March 12, 1998, of over five percent of
the Corporation's Common Stock:
Proxy Statement
Page 3
Title and
Name and Class of Amount and Nature Percent of
address Voting Security of Beneficial Ownership Class
Jane K. Noland, Lloyd U.
Noland III, Susan C. Noland
and Anne N. Edwards
individually and as trustees of
The L. U. Noland 1982 Trust and
Lloyd U. Noland Jr.
80 29th Street Common 2,075,302(1) 56.08%
Newport News, Virginia 23607 Stock shares
Henley Management Company,
successor by merger to Concord
Investment Co.
Skokie Blvd, Suite 555 Common 479,750 12.96%
Northbrook, Illinois 60062 Stock shares
Franklin Resources, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd. Common 251,275
San Mateo, California 94404 Stock shares 6.79%
Marvin C. Schwartz
c/o Neuberger & Berman
605 Third Avenue Common 194,899
New York, New York 10158 Stock shares 5.27%
(1) The trustees of The L. U. Noland 1982 Trust 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. The trust
assets include 906,996 shares of Common Stock of the Corporation
and a majority of the outstanding voting stock of Basic
Construction Company, which, in turn, owns 893,967 shares of the
Corporation's Common Stock. Since the trustees have the sole
power to vote and to dispose of shares held in the L. U. Noland
1982 Trust, each trustee may be deemed to have beneficial
ownership of 1,800,963 shares of the Corporation's Common Stock
(including the shares owned by Basic Construction Company). The
trustees share the power to vote and direct the disposition of
such shares. Each trustee owns the following additional shares of
the Corporation's Common Stock, with sole power to vote and
dispose of all of such shares except for 155,138 shares
attributed to Jane K. Noland, but owned by her husband, Lloyd U.
Noland Jr.; 1,095 shares attributed to Anne N. Edwards, but owned
by her husband; and 2,190 shares attributed to Lloyd U. Noland
III but owned by his wife and one of his children:
Jane K. Noland 182,270
Lloyd U. Noland III 43,502
Susan C. Noland 26,736
Anne N. Edwards 21,831
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Lloyd U. Noland III also has voting power only over 6,000 shares
of restricted stock. All of such shares are included in the above
table. As a group, the Noland family may be deemed to be the
owners of an aggregate of 2,075,302 shares or 56.08 percent of
the outstanding Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the forms required by Section 16(a)
of the Securities Exchange Act of 1934, as amended, that have
been received by the Corporation, the Corporation believes there
has been compliance with all filing requirements applicable to
its officers, directors and beneficial owners of greater than ten
percent of the Corporation's common stock.
THE BOARD OF DIRECTORS AND ITS STANDING COMMITTEES
The Corporation is managed under the direction of the Board of
Directors and its Executive Committee, by the Chairman of the
Board and other officers to whom authority has been delegated.
In 1997, each Director attended at least 75% of the aggregate of
(i) the total number of meetings of the Board of Directors held
during 1997 and (ii) the total number of meetings of all Board
committees on which the Director served.
During 1997, the Board of Directors met five times. On five
occasions, the Board acted by written consent. Members of the
Board who are employees of the Corporation serve without
compensation. Non-employee Directors received a quarterly
retainer of $1,875 and $500 for each Committee meeting attended.
The Board elected an Executive Committee consisting of Messrs.
Noland III and Henderson. When the Board is not in session, the
Executive Committee generally has the authority of the Board
except that the Virginia Stock Corporation Act prohibits certain
actions by committees. During 1997, the Executive Committee met
nine times.
The Board appointed an Executive Compensation Committee
consisting of Messrs. Allen, Goolsby and McElroy, with Mr.
McElroy acting as chairman. The Committee's primary functions
are to make recommendations to the Board of Directors concerning
remuneration arrangements for executive officers and to review
and make recommendations concerning the administration of certain
benefit plans. During 1997, the Executive Compensation Committee
met one time.
The Board appointed an Audit Committee consisting of Messrs.
Allen, Goolsby and McElroy, with Mr. Goolsby acting as chairman.
The Audit Committee functions in an oversight capacity with
respect to the Corporation's auditing, accounting, reporting, and
control functions and assists the entire Board in fulfilling its
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fiduciary responsibilities with respect to these functions.
During 1997, the Audit Committee met two times.
The Corporation does not have a nominating committee.
Mr. Frank Wimbush, reelected April 23, 1997 for a one year term,
was released from his employment contract with the Corporation in
September 1997. Mr. Wimbush resigned from the Board and
Executive Committee coincident with his leaving the Corporation.
In accordance with Mr. Wimbush's employment contract, he received
a severance payment equal to one years base salary, or $155,000.
At a special meeting of the Board held April 1, 1998, the number
of Directors was increased to six. Mr. Kenneth King was elected
to serve as the new Director. Mr. King will stand for election
at the April 30, 1998 stockholders' meeting.
ELECTION OF DIRECTORS
It is intended that proxies in the accompanying form will be
voted by the persons named therein (unless authority is withheld)
in favor of the nominees named for Directors for the term of one
year or until their successors are elected and qualified. In case
any of such nominees is unexpectedly unable to serve, the Proxies
will be voted for the election of the others so named and may be
voted for substitute nominees. The election of each nominee for
Director requires the affirmative vote of the holders of a
plurality of the shares of Common Stock cast in the election of
Directors.
Votes that are withheld and shares held in street name ("Broker
Non-Votes") that are not voted in the election of Directors will
not be included in determining the number of votes cast.
NOMINEES FOR DIRECTOR
There are no family relationships among any of the nominees and
any officer; nor is there any arrangement or understanding
between any nominee and any other person pursuant to which the
nominee was selected. Each of the nominees for the office of
Director is a member of the present Board of Directors.
Mr. Allen, Mr. Goolsby, Mr. Henderson, Mr. McElroy and Mr. Noland
III have served in the respective positions shown for more than
five years.
Shares of
Common Stock
First Beneficially Percent
Name, Age, Position Became Owned on of
and Directorships Director March 12, 1998 Class(1)
Thomas N. Allen - Age 59 1995 500 -
Chairman, East Coast Oil Corp.
(Retail Gasoline/Convenience Stores)
Page 6
Allen C. Goolsby - Age 58 1989 700 -
Partner, Hunton & Williams
(Attorneys)
Arthur P. Henderson Jr. - Age 54 1983 3,234 -
Vice President-Finance
Kenneth C. King - Age 55 1998 762 -
Vice President-Marketing since
April 1, 1998. Previously Manager
of Noland Company's Frederick,
Maryland Complex since 1977.
John L. McElroy Jr. - Age 67 1990 1,500 -
Chairman Emeritus of the Board,
Wheat First Union(2)
(Investment Bankers)
Lloyd U. Noland III - Age 54 1979 1,844,465(4) 49.84%
Chairman of the Board and
President; Director of Wachovia
Corporation.(3)
All officers and directors of 1,855,128 50.13%
the Corporation as a group (11) shares
(1) Less than .2 percent except as indicated.
(2) Wheat First Union maintains a primary market in the
Corporation's Common Stock and, from time to time, holds
Noland Company shares in its trading account.
(3) The Corporation maintains a banking relationship with
Wachovia Bank. During 1997, the Corporation had outstanding
a $10,000,000 promissory note at market rates. Wachovia
Bank was the Trustee for an irrevocable direct pay letter of
credit in favor of Wachovia in the amount of $12,486,000 to
ensure payment of Industrial Development Revenue Bonds
issued by the Corporation. Wachovia Bank is also the
depository bank for several of the Corporation's branch
offices.
(4) See Voting Securities and Principal Holders Thereof on
page 1.
Except as described on page 2 with respect to shares held by the
Noland family, each Director and Officer has the sole power to
vote the shares of common stock attributed to him in this table.
CERTAIN TRANSACTIONS
The Corporation has a ten-year agreement to lease an existing
office building for its corporate headquarters. The building is
owned by Basic Construction Company (see Voting Securities and
Principal Holders Thereof). Under the terms of the lease, the
Corporation will pay an annual rental fee of approximately
$260,000 per year. The Corporation 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.
Page 7
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents information relating to total
compensation of the Chief Executive Officer and the four next
most highly compensated executive officers of the Corporation who
earned more than $100,000 for the fiscal year ended December 31,
1997. Other than Mr. Noland, there were only three executive
officers who earned more than $100,000 for 1997.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Restricted Stock All Other
Name and Salary Bonus Awards(2) Compensation(1)
Principal Position Year $ $ $ $
Lloyd U. Noland III 1997 $135,233 $ 30,000 $ - $ 2,311
Chief Executive
Officer 1996 $135,280 $ 46,000 $46,000 $ 3,116
1995 $115,140 $ 55,000 $36,000 $ 2,931
Charles A. Harvey 1997 $ 90,318 $ 23,000 $ - $ 1,456
Vice President -
Corporate Data 1996 $ 80,716 $ 32,500 $23,000 $ 1,843
1995 $ 83,805 $ 35,500 $18,000 $ 2,035
Arthur P. Henderson Jr. 1997 $ 83,889 $ 30,000 $ - $ 1,428
Vice President -
Finance 1996 $ 81,136 $ 38,000 $23,000 $ 1,860
1995 $ 81,130 $ 41,000 $18,000 $ 1,963
Frank A. Wimbush 1997 $101,134 $ - $ - $ -
Sr. Vice President-
Marketing and Branch 1996 $150,136 $ 34,000 $46,000 $ 3,458
Operations (3)
1995 $120,968 $ 41,700 $36,000 $ 3,743
(1) Profit sharing allocation
(2) Restricted stock awards valued at market price of $23 per share on
December 31, 1996 and $18 per share on December 31, 1995.
Recipients have the right to receive dividends and vote the
restricted shares.
(3) Mr. Wimbush is no longer with the Corporation. All restricted
stock awards were forfeited.
RETIREMENT BENEFITS
Payments by the Corporation to the Improved Retirement Plan for
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Employees of Noland Company (the Plan), are made based on
recommendations by the Plan's actuary. The Plan is a defined
benefit "Career Average" plan. Annual retirement benefits are
computed by adding, for each year of credited service, the sum of
1.333 percent of compensation (up to "Covered Compensation") and
1.933 percent of compensation over "Covered Compensation."
Covered Compensation is generally the average of the Social
Security wage bases over a working career.
The amounts shown below do not include Social Security benefits
and are not subject to any reductions on account of such
benefits.
Estimated annual benefits (assuming continued employment to age
65 on a life-only annuity basis) accrued to date and payable at
age 65 to Lloyd U. Noland III, Charles A. Harvey and Arthur P.
Henderson Jr. are $69,498, $50,669, and $48,644, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee consists of Messrs. Allen,
Goolsby and McElroy. Mr. Goolsby is a member of the law firm
Hunton & Williams, which has provided legal services to the
Corporation for many years.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the Committee) is charged
with the responsibility of making an initial determination
regarding any changes in executive compensation policy and making
recommendations to the Board of Directors with respect to
compensation of the Corporation's executive officers.
The Committee believes that the Corporation's compensation
program should provide competitive overall compensation for
executive officers, including base salaries and short and long-
term incentives. The Committee has concluded that the close link
between the Corporation's business and the cyclical building and
construction industry make it prudent for the Corporation to
maintain a conservative approach to base compensation, while at
the same time providing competitive total pay opportunities to
its executive officers through long and short-term incentives.
Targeted bonuses range from 25% of base compensation for certain
key employees to 50% of base compensation for the principal
executive officer.
Base compensation for executive officers in 1997 reflected the
Committee's conservative approach to base compensation with only
a small increase in aggregate base compensation for executive
officers. In determining executive cash bonuses for 1997, the
Committee focused primarily on revenues; profits before LIFO
inventory adjustments, extra compensation and income taxes, and
each executive officer's performance for the year against
previously established targets. The Committee did not assign a
specific value to each factor. A maximum of 3.3% of adjusted
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pre-tax, pre-LIFO, pre-bonus income was available for bonus
awards to key corporate managers nominated by the Chief Executive
Officer and approved by the Committee (19 individuals). While
$321,000 was available for awards, only $291,060 was awarded.
The Committee was concerned that while some goals had been
achieved, the two most important goals, revenues and net income
before LIFO adjustment, extra compensation and taxes were well
below targeted levels. Especially for the principal executive
officers, 1997 bonuses were significantly below bonus levels for
1995 and 1996.
Mr. Noland's base compensation for 1997 was fixed at $135,000,
which was the same as his base compensation as of the end of
1996. For 1997, Mr. Noland was awarded a cash bonus of $30,000
in recognition of Mr. Noland's achievement of a number of
performance goals established by the Committee at the beginning
of the year, including targeted improvements in pre-LIFO margins.
His 1997 bonus is less than the bonus for the preceding year,
reflecting the fact that gross revenues did not increase for the
year, and as a result, profits before LIFO inventory adjustments,
extra compensation and income taxes were substantially below the
targeted level. In establishing the 1997 bonus, the Committee
did not assign a specific value to any one factor.
Overall, the Committee believes that its compensation plan
provides significant incentives to the executive officers to
improve performance and shareholder return. To provide increased
incentive for 1998, the bonus pool will have an increased amount
available for awards if earnings are in excess of targeted
levels.
Because none of the Corporation's executive officers receives
annual compensation in excess of $1 million, the Corporation has
not taken any position with respect to the cap on tax
deductibility of compensation in excess of that amount
established under the Omnibus Budget Reconciliation Act of 1993.
John L. McElroy Jr., Chairman
Allen C. Goolsby
Thomas N. Allen
Page 10
Comparison of Five Year Cumulative Total Return Among Noland
Company, NASDAQ Market Value Index and Hughes Supply, Inc.
(Assumes $100 Invested on January 1, 1993)
(Assumes Dividend Reinvested)
A performance graph appears here. the following chart is the
information presented in the graph.
Data points are as follows:
1992 1993 1994 1995 1996 1997
Noland Company $100 $108.16 $128.46 $125.06 $162.42 $161.15
Hughes Supply, Inc. $100 $136.87 $130.25 $201.96 $313.13 $384.77
NASDAQ Market Index $100 $119.95 $125.94 $163.36 $202.99 $248.38
The return for Hughes Supply, Inc. has been adjusted to reflect
differences in market capitalization.
Page 11
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors will offer a resolution to reappoint Coopers &
Lybrand L.L.P. as independent accountants of the Corporation for the
year 1998. Coopers & Lybrand L.L.P., a nationally known firm of
independent certified public accountants, has audited the
Corporation's financial statements for the past thirty years. The
Corporation has been advised by Coopers & Lybrand L.L.P. that neither
that firm nor any of its partners has any direct financial interest or
material indirect financial interest in the Corporation other than as
public accountants and auditors. Coopers & Lybrand L.L.P. will be
represented at the stockholders' meeting. The firm's representative
will be available to respond to appropriate questions from
stockholders and will have an opportunity to make a statement, if
desired.
ANNUAL REPORT TO STOCKHOLDERS
The Noland Company 1997 Annual Report to stockholders, portions of
which are incorporated by reference into the annual report on Form 10-
K for the year ended December 31, 1997, as filed with the Securities
and Exchange Commission, accompanies this proxy statement.
Stockholders may obtain, without charge, a copy of the Corporation's
Form 10-K by forwarding a written request to R. L. Welborn, Assistant
Vice President - Finance, Noland Company, 80 29th Street, Newport
News, Virginia 23607.
PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder desiring to make a proposal to be acted upon at the
1999 annual meeting of stockholders must present such proposal to the
Corporation at its principal office in Newport News, Virginia, not
later than December 5, 1998, in order for it to be considered for
inclusion in the Corporation's Proxy Statement.
GENERAL
Unless contrary instructions are indicated on the proxy, all shares of
Common Stock represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted FOR
the election of the nominees for Director named herein, and FOR the
proposal to approve the appointment of Coopers & Lybrand L.L.P. as
independent public accountants for the year ended December 31, 1998.
The Board of Directors knows of no business other than that set forth
above to be transacted at the meeting, but if other matters requiring
the vote of the stockholders arise, the persons designated as proxies
will vote the shares of Common Stock represented by the proxies in
accordance with their judgment on such matters. If a stockholder
specifies a different choice on the proxy, his or her shares of Common
Stock will be voted in accordance with the specification so made.
By order of the Board of Directors,
James E. Sykes Jr.
Secretary
Newport News, Virginia
April 7, 1998
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Proxy Card
(Side 1)
PROXY
NOLAND COMPANY
80 29th Street
Newport News, VA 23607
Annual Meeting of Stockholders April 30, 1998
This Proxy solicited on behalf of the Board of Directors
The undersigned hereby appoints L. U. Noland III and A. P. Henderson Jr. or
either of them, Proxies, with full power of substitution in each to vote all
shares of the capital stock of Noland Company held of record by the
undersigned on March 12, 1998, at the Annual Meeting of Stockholders to be
held on April 30, 1998, or at any adjournment thereof:
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked below to to vote for all
the contrary) nominees listed below
Thomas N. Allen, Allen C. Goolsby, Arthur P. Henderson Jr., Kenneth C. King,
John L. McElroy Jr., Lloyd U. Noland III, (Instruction: To withhold
authority to vote for any individual nominee(s) write that nominee's name(s)
in the space provided below).
2. PROPOSAL TO APPROVE THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. as the
independent public accountants of the Corporation.
FOR AGAINST ABSTAIN
3. Vote upon such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder.
If no specification is made, this proxy will be voted for items 1 and 2.
(continued)
Please date and sign on reverse
- ------------------------------------------------------------------------(Side 2)
Continued from other side
Dated: ,1998
Signature
Signature if held jointly
(Stockholder's signature should conform exactly to the
name printed hereon. When shares are held by joint
tenants, both should sign. When signing as Attorney,
Executor, Administrator, Trustee or Guardian, please
give full title as such. If a corporation, please sign
in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership
name by authorized person).
Please mark, sign, date and return the proxy card promptly
using the enclosed envelope.