Noland Company

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Noland Company

80 29th Street
Newport News, Virginia 23607
U.S.A.
Telephone: (757) 928-9000
Fax: (757) 928-9170
Web site: http://www.noland.com

Public Company
Incorporated: 1919 as Newport Plumbing & Mill Supply Company
Employees: 1,512
Sales: $482.8 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: NOLD
NAIC: 421720 Plumbing and Heating Equipment and Supplies Wholesalers; 421730 Air Conditioning Equipment and Supplies Wholesalers; 421610 Electrical Apparatus and Equipment, Wiring Supplies and Construction Materials Wholesalers; 421830 Industrial Machinery and Equipment Wholesalers

Noland Company is a wholesale distributor of plumbing, heating, air conditioning, refrigeration, electrical, and industrial supplies. The company’s main product line is plumbing fixtures, including Jacuzzi bathtubs, fancy sinks, and related supplies. Noland Company serves over 24,000 customers— primarily the construction industry and industrial manufacturing—in 14 southeastern states through its more than 110 branches.

The Early Years: A Self-Made Man Seizes Opportunities

Beginning with his departure from an orphanage at the age of eleven, L.U. “Casey” Noland, founder of Noland Company, was the quintessential self-made man. At a young age, he went to Baltimore, where he worked at various jobs and eventually attained employment at a steelworks. He then found an apprenticeship with a plumber, which led to employment at the New-port News shipyard. Noland later took a position at an engineering firm, where he became vice-president at just 26 years of age. It was in 1915, however, that he truly began to make his mark. At that time, Noland and T.B. Clifford took advantage of new economic opportunities created by the advent of World War I, and formed a mechanical contracting business called the Noland-Clifford Company.

The Noland-Clifford Company did well, but it had difficulty procuring plumbing supplies. Locally, supplies were scarce and so most had to be shipped from Baltimore. Rather than purchase supplies on an as-needed basis, as most contractors did, the company began to stock an inventory of regularly required materials. It was when other local contractors began to seek supplies from Noland-Clifford’s stash that Casey Noland recognized a need for a wholesale distributor in the Newport News area. Thus, the Newport Plumbing & Mill Supply Company was formed in 1919.

By the time the company incorporated as Noland Company in 1922, Noland had opened branches in Roanoke, Virginia, and Goldsboro and Winston-Salem, North Carolina. The company prospered, selling modern bathtubs, sinks, toilets, and related supplies. Thus, it continued to open new branches throughout the southeastern states. Noland’s philosophy of strong sales support involved sales training, good employee benefits, and the incentive of a share in the company’s profits.

Growth had its obstacles, however, but Noland was always up to the challenge. For example, when a railroad embargo halted shipments of supplies to the West Palm Beach branch during the Florida building boom, Noland resolved the problem by acquiring a 3,000-ton steamship to transport supplies to West Palm Beach. In doing so, Noland Company became the only plumbing, heating and mill supplier in Florida. When the land boom later collapsed, Noland shipped the inventory from Florida to a new branch in Washington, D.C. As the business expanded and became more difficult to manage, Noland purchased a three-seat plane to speed travel to distant company branches.

Noland Company survived—and even thrived—during the Great Depression. In 1930, the company opened four new branches, filling what need existed as other companies failed. The only year the company experienced a financial loss due to the hard times was in 1932. Later, as President Roosevelt’s civil service programs expanded access to electricity, Noland Company started an electrical supply department in 1938 and added refrigeration supplies to its product line in 1940. Company headquarters were moved to a larger facility in downtown Newport News, a few blocks from the original office. During the postwar home-building boom, Noland Company continued to thrive, providing plumbing, electrical and other supplies to construction contractors. By 1952, Noland Company encompassed 25 branch units with 1,000 employees, and annual sales reached $50 million.

Postwar Era

Upon the death of Casey Noland in 1952, L.U. Noland, Jr. took over the company’s operations. Thankfully, the company continued to grow as Noland, Jr., emphasized customer service and satisfaction. His efforts, in fact, culminated in Supply House Times naming the Noland Company “Wholesaler of the Year” in 1960.

In the early 1960s, the company diversified its wholesale supply offerings, with central air conditioning equipment becoming a significant new source of sales in the hot and humid southern states. The company upgraded its warehousing facilities, transferring operations to new modern buildings that allowed for more efficient operations. Noland included showrooms at many of the new buildings to display luxury plumbing fixtures and home lighting.

Noland Company became a public company with an initial offering of stock in 1967. Proceeds from the sale of stock funded acquisitions and electronic data processing. In the late 1960s, the company began implementation of the computer-based Branch Data System which automated daily paperwork. The move streamlined purchase orders, vendor invoices, price changes, billing, and accounts receivables. After several years of branch level implementation, all branches were linked to a mainframe computer in the late 1970s, enabling accessibility to information from distant branch locations for analysis at the central corporate office. The system provided managers with sales and inventory reports on a daily basis, allowing them to better serve branch units from the supply warehouses. In conjunction with computerized inventory tracking, Noland also implemented the “First In, First Out” inventory method in 1974 to reduce the impact of inflation on profit.

Expansion in the 1970s centered primarily on the states of Tennessee, Arkansas, and Alabama. In 1971, Noland acquired two units of the Amstar Division of American Standard—one located in Knoxville, Tennessee, and the other in Birmingham, Alabama. Soon thereafter came the purchase of Amstar Supply Company in Little Rock, Arkansas in 1972. The company expanded with three more acquisitions and three new branches in 1978: three single-unit wholesale outlets were purchased near existing Noland outlets that had growth potential. The new locations were Superior Supply in West Memphis, Arkansas; Savannah, Tennessee; and Annapolis, Maryland. The new branches were located in Mechanicsville, Maryland; Mountain Home, Arkansas; and Columbus, Mississippi. In early 1979, the company acquired Southern Supply in Jackson, Tennessee. With 61 branches in 11 southeastern states, 1979 sales reached $272 million.

Meanwhile, Noland continued its program to modernize, expand, and renovate its facilities. In 1978, four branch units were replaced by newer, larger facilities, while six others were expanded and a new warehouse-office-showroom opened in Atlanta. Also, a sales and service center opened in Roanoke, Virginia, and the company’s new Drilling Equipment Branch completed its first full year of operations in 1978, selling and repairing new and used well drilling rigs. A 70,000 square-foot main branch facility was completed in Norfolk in 1979.

Upgrading branch facilities produced a favorable response from the industry, as a survey of manufacturer’s representatives voted 26 of the company’s 44 showrooms onto the blue-ribbon list of better plumbing showrooms in Supply House Times magazine. Twelve of the 26 showrooms were named “Best in Territory.”

The 1980s

The 1980s proved to be financially uncertain years as sales and earnings fluctuated. The high rate of inflation and high interest rates discouraged home building and industrial production, which were Noland Company’s key markets. The company took preventive measures and lowered its operating expenses—including staff cutbacks—to offset declining sales in 1980. The company halted capital expenditures for new equipment, branch expansion, and facilities upgrades, with the exception of those already in progress. Luckily, it was around this time that the Branch Data System, in its second full year of operation, began to realize effective stock management and reduced inventory costs.

As economic conditions improved, the company resumed its expansion and improvement programs. The company acquired Tropical Supply Company in 1981, which had five branches in southeast Florida. In 1983, the company expanded its product line to include maintenance and repair parts, and implemented a new advertising program designed to highlight the company’s showroom outlets. Noland Company added twelve new branches through both acquisition and new start-ups, but at the same time closed two small stores in 1984.

Company Perspectives:

Noland Company is one of America’s largest distributors of plumbing, HVAC, electrical, industrial and water systems supplies. Our warehouses are stocked with thousands of items that our customers need to complete projects large and small. From builders and homeowners to manufacturing plants and utility companies, we strive to make every transaction with every customer a satisfying one. This commitment is embodied in the Noland Credo—total customer satisfaction.

Noland also resumed its facilities improvement in the mid-1980s, remodeling eight branches in 1984 and seven branches in 1985. The company also built a new 84,000 square-foot facility in Frederick, Maryland. New facilities in Richmond included the Pipe, Valve, and Fitting Center and the Virginia Regional Distribution Center/Industrial. The latter facility was designed to serve the special requirements of the DuPont Company, including just-in-time delivery to area factories. This led to improvements in computer tracking of inventory.

The company also implemented a number of new technologies to improve customer service in the mid-1980s. The Customer Direct Order Entry System, a computer-to-computer ordering system, was introduced in 1982 and attracted large industrial customers. To facilitate faster counter service at its branches, the company invested in the Advanced Counter Computer System of electronic cash registers. The Counter Area Merchandising Program added self-service racks for tools, repair parts, and other frequently required items. The company also added industrial automation products to its supply line, primarily for customers in Nashville and Montgomery. The efforts to improve customer satisfaction proved valuable as Supply House Times once again named Noland Company “Wholesaler of the Year” in 1985.

Expansion continued with the June 1985 acquisition of Mars Plumbing Repair Parts and Mars Plumbing Supply Company; the latter supplied pipe, valves, and fittings to utility and mechanical contractors and industrial manufacturers through nine branches in San Antonio. With 17 new branches overall, Noland recorded its third year of record earnings in 1985, at $6.5 million. Sales at that time reached $380.9 million, representing an increase of 13.4 percent over those of 1984.

A Third Generation Leads Noland into the 1990s

Sales and earnings continued to fluctuate as the third generation of Nolands assumed leadership of the company when L.U. Noland III became chairman of the Board and CEO in 1987. Competitive pricing lowered profit margins and a slowdown in the economy led to a reduction in sales. The company responded by closing its unprofitable units, reducing the total number of branches to 94 in 1989; by laying-off some of its employees; and by decreasing its inventory. Unfortunately, a high rate of bankruptcy among the company’s customers in the construction industry led to losses from uncollectible accounts payable. In 1991, Noland Company experienced a 10.3 percent decline in sales, to $384.5 million, and its first net loss since the Great Depression.

As the 1990s continued, however, modest improvements in the economy resulted in slow growth in the construction and industrial manufacturing industry. Noland lowered operating expenses by reducing its sales staff, thus increasing the average sales per employee and its gross profit margins. In 1992, sales reached $492.1 million. Sales of air conditioners and supplies did well at this time, but business in the company’s other departments declined.

In 1994, the company experienced a 15 percent increase in sales of industrial maintenance, repair and operating supplies through a systems-oriented sales and service approach. Noland Company added six new branches through both acquisition and new store openings. While Maryland branches served the company’s Pennsylvania markets, it operated for the first time within Pennsylvania with an acquisition in Hanover. Noland Company’s conservative control of expenses improved profit margins from 18.7 percent in 1992 to 19.6 percent in 1994. This resulted in an 89 percent rise in net income in 1994, and a 9.2 percent increase in sales to $440.2 million.

The up and down trend of the 1990s continued in 1995, however, as lower-than-expected sales in the company’s major markets—housing construction and industrial production— resulted in a 20.5 percent decline in earnings. Although the company’s sales had actually risen 6.7 percent that year, excess stock had hurt the company financially. Sales in the air conditioner/refrigeration department made a significant contribution to total revenue. The dramatic increase resulted from Noland Company’s entry into the export market in Latin American countries. Operating a new branch in Miami, Noland International sought exclusive distributors in Latin America.

The company continued to expand in profitable markets as the 1990s wore on. Noland Company acquired two plumbing supply houses in Clearwater and Tampa, which increased the number of branches in Florida to 18, and gave Noland a branch in every major market. The acquisition of Raub Supply Company added seven locations in Pennsylvania and Virginia, as well, raising the company’s total number of branch locations to 107 in 14 states.

The company again designed a new branch computer system to improve inventory turnover and reduce excess inventory. The new system utilized bar-coding technology instituted at company warehouses and branch units in 1990. With implementation of the new system at 55 branches in 1995, excess inventory declined $1.7 million. The company therefore planned to complete implementation of the system the following year, in 1996.

Key Dates:

1919:: Newport Plumbing & Mill Supply Company is established.
1922:: Company name changes to Noland Company.
1938:: Company adds electrical supply division.
1952:: L.U. Noland, Jr., becomes president.
1960:: Noland named “Wholesaler of the Year” by Supply House Times.
1978:: Implementation of Branch Data System significantly improves inventory control.
1991:: Only net loss since the Great Depression.
1995:: International expansion into Latin America.
1999:: State-of-the-art inventory technology implemented.

In the late 1990s, L.U. Noland III implemented a reorganization strategy to stabilize earnings and sales. Reorganization involved changes in staffing at both the sales and management levels. The company altered its approach to sales, shifting to a commission-based program with no salary. The sales staff was reduced from 333 to 250 people, which resulted in relocating employees to other positions in the company. L.U. Noland III also renewed the company’s emphasis on employee training for all areas of the company. Its new headquarters included a multimedia training center—Noland University—to provide the continual development of new classes. Four regional management positions were added to address problems early, rather than wait for problems to reach the corporate office. The company also replaced branch credit managers with area credit managers, providing better controls and less bad-credit losses.

Noland Company continued to build on its success through new and time-tested methods. In 1999, the company decided to withdraw from the Texas market, and closed its six unprofitable branches in order to focus instead on the profitable southern and southeastern markets. The company updated and improved its inventory management strategy with state-of-the-art technology for more precise monitoring and forecasting. The system, implemented in 1999 for one-third of the company’s branch units, included a Stock Locator System and Systematic Cycle Counting in all warehouses.

The company also instituted an Internet-based catalog to facilitate business-to-business sales, while at the same time, promotions for the company’s 35 Bath & Idea Centers resulted in a 22 percent increase in showroom sales. A central Industrial Distribution Center opened in 2000 to improve service to the company’s industrial integrated supply accounts.