QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

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 July 16, 2002 -3,557,871 shares.

This report contains 12 pages.

NOLAND COMPANY AND SUBSIDIARY

Current Assets:

Cash and cash equivalents $ 3,420,888 $ 3,606,187

Accounts receivable, net 61,792,691 56,693,892

Inventory, net 64,494,758 57,743,020

Other current assets 575,270 678,451

Total Current Assets 130,283,607 118,721,550

Property and Equipment, at cost:

Land 14,102,394 13,721,496

Buildings 88,350,266 86,957,807

Equipment and fixtures 67,451,346 66,746,192

Property in excess of current needs 1,530,850 1,539,431

Total 171,434,856 168,964,926

Less accumulated depreciation 91,734,756 89,549,572

Property and Equipment, net 79,700,100 79,415,354

Assets Held for Resale 447,136 447,136

Prepaid Pension 26,463,184 25,804,184

Other Assets 1,046,201 896,199

$237,790,226 $225,434,425

Current Liabilities:

Notes payable - short term borrowings $ 5,309,340 $ 4,000,000

Current maturity of long-term debt 943,220 1,464,993

Book overdrafts 5,299,517 6,485,518

Accounts payable 34,860,105 23,669,591

Other accruals and liabilities 12,276,176 13,499,515

Federal and state income taxes 1,241,517 367,886

Total Current Liabilities 59,929,875 49,487,503

Long-term Debt 20,163,000 20,187,000

Deferred Income Taxes 10,497,512 10,666,190

Accrued Postretirement Benefits 2,203,515 2,090,231

Stockholders' Equity:

Capital common stock, par value $10;

authorized, 6,000,000 shares; issued,

3,557,871 and 3,557,829 shares 35,578,710 35,578,290

Retained earnings 110,367,316 108,088,104

Additional paid in capital 158,400 -

Accumulated other comprehensive loss, net of tax (579,814) (303,360)

Unearned compensation, stock plans (528,288) (359,533)

Stockholders' Equity 144,996,324 143,003,501

$237,790,226 $225,434,425

The accompanying notes are an integral part of the financial statements.

Merchandise Sales $130,751,726 $127,469,787 $240,447,642 242,400,488

Cost of goods sold:

Purchases and freight-in 111,543,218 101,543,715 198,997,000 192,805,793

Inventory, beginning 56,911,168 64,455,454 57,743,020 65,121,199

Inventory, ending 64,494,759 63,582,479 64,494,759 63,582,479

Cost of goods sold 103,959,627 102,416,690 192,245,261 194,344,513

Gross profits on sales 26,792,099 25,053,097 48,202,381 48,055,975

Operating expenses 24,201,978 23,327,646 46,018,045 45,451,071

Operating profit 2,590,121 1,725,451 2,184,336 2,604,904

Other income:

Cash discounts, net 1,294,182 1,320,073 2,357,949 2,371,265

Service charges 269,809 271,187 542,334 583,612

Miscellaneous 166,901 190,246 365,677 415,794

Total other income 1,730,892 1,781,506 3,265,960 3,370,671

Interest expense 283,436 452,247 580,152 967,786

Income before income taxes 4,037,577 3,054,710 4,870,144 5,007,789

Income taxes 1,532,600 1,159,600 1,848,900 1,900,900

Net income $ 2,504,977 $ 1,895,110 $ 3,021,244 3,106,889

Earnings per share:

Basic $ .71 $ .54 $ .86 $ .88

Diluted $ .71 $ .53 $ .85 $ .87

Average shares outstanding:

Basic 3,517,116 3,540,811 3,519,352 3,545,272

Diluted 3,551,097 3,575,188 3,553,546 3,582,085

Cash dividends per share $ .08 $ .08 $ .16 $ .16

The accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral part of the financial statements.

4. Accounts Receivable as of June 30, 2002 and December 31, 2001 are net of allowance for doubtful accounts of $2,361,353 and $2,311,755, respectively. Quarterly bad debt charges, net of recoveries, were $979,521 for 2002 and $262,522 for 2001. Year-to-date bad debt charges, net of recoveries, were $1,264,970 for 2002 and $529,488 for 2001.

Three Months Six Months

Ended June 30, Ended June 30,

Included in this discussion are forward-looking management comments and other statements which 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 and economic conditions, climatic conditions, competitive pricing pressures, and product availability.

The Company maintains its short- and long-term liquidity through: (1) cash flow from operations; (2) short-term borrowings from bank lines of credit arrangements, when needed; and (3) additional long-term debt, when needed.

The Company's financial condition remains strong with working capital of $70.4 million and a current ratio of 2.17. Cash provided from operations for the first six months of 2002 was $5.3 million compared to $3.2 million for same period of 2001. The cash was used for capital expenditures, to pay down debt and to pay dividends. As discussed in Item 3 below, the Company took steps in 2001 to protect itself against the possibility of a rising interest rate environment. This was done by utilizing a pay-fixed receive-variable interest rate swap. Management believes the Company has adequate financial resources to meet the needs of the foreseeable future.

Second-quarter sales of $130.8 million were 2.6 percent more than the $127.5 million total for 2001's second quarter. Strong residential construction activity and favorable weather conditions in most of our territory gave us heightened opportunities and we took advantage of them. Plumbing sales increased 5.7 percent in part due to drought conditions that led to increased sales of well drilling rigs and water systems. Air conditioning sales rose 8.3 percent from higher demand for replacement air conditioning equipment brought on by unusually warm weather. Electrical/industrial sales declined 16.1 percent with the continual erosion of the Company's integrated supply business. Sales for the first six months of 2002 were $240.4 million, .8 percent less than the $242.4 million total for the year-earlier period. The Company has made the decision to cancel or not renew two of its larger integrated supply contracts due to continued losses. By December 31, 2002 the Company's Industrial Distribution Center outside of Richmond, Virginia which services these contracts, will cease operations. Other contracts will continue but will be managed from branch facilities located closer to the customers. The expected loss for the remainder of the year is not determinable at this time.

The gross margin of profit rose 4.1 percent in the second quarter from 19.7 percent in second quarter 2001 to 20.5 percent for second quarter 2002 despite a larger LIFO inventory adjustment for this year compared to 2001. Operating expenses were up 3.7 percent, largely due to higher bad debts stemming from two large accounts and a decline in non-cash pension credits. For the first six months, gross margins increased from 19.8 percent to 20.0 percent and operating expenses increased 1.2 percent. Operating expenses for the quarter and first six months were affected by pension credits generated by the Company's overfunded pension plan of $330,000 and $659,000 compared to $645,000 and $1,290,000 for the same periods a year ago.

Interest expense for the quarter and first six months is down 37.3 and 40.1 percent, respectively. Lower average borrowing and lower interest rates contributed to the declines. Also, the Company's overall inventory turns steadily improved during the first six months of 2002, and the average inventory investment was consistently lower than the prior-year period.

The Company's market risk exposure comes from changes in interest rates and inflationary pressures. Reported results, for the most part, reflect the impact of inflation/deflation because of the Company's use of the LIFO (last in, first out) inventory method. This method tends to remove artificial profits induced by inflation and presents operating results in truer, more absolute terms. The objective in managing the Company's exposure to interest rate changes is to limit the impact of rate changes on earnings, cash flow, and to lower overall borrowing cost. The Company is a party to two separate interest rate swaps to manage it's exposure to interest rate changes on it's borrowings. The swaps are with financial institutions that have investment grade credit ratings, minimizing the risk of credit loss. Both swaps are non-trading.

At June 30, 2002, the Company had two swap agreements at an aggregate notional amount of $20,075,000 to manage interest rate changes related to the Company's industrial revenue bonds and a portion of its revolving credit agreement. The swaps effectively convert the variable rate borrowings (LIBOR and BMA Municipal Swap Index) into fixed rate borrowings with fixed rates of 5.36% and 4.22%.

Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for Certain Derivative Instruments and Certain Hedging Activities," as amended by SFAS No. 138, requires all derivatives to be recorded as an asset or liability on the balance sheet at face value. For a derivative designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income and recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. Other comprehensive income was reduced by $377,770, net of a tax benefit of $230,497, for the quarter ended June 30, 2002 and $579,814, net of a tax benefit of $353,774, for the six months ended June 30, 2002.

In addition, the Company's pension plan is over-funded, 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 of pension income to increase or decrease from year to year. The discount rate used to calculate the 2002 pension credit has declined resulting in a lower pension credit for the second quarter and first six months of 2002 compared to the same periods of 2001.

Item 4. Submission of Matters to a Vote of Securities Holders

a) The Company's 2001 Annual Meeting of Stockholders was held on

April 18, 2002. Holders of 3,353,086 shares, 94.24 percent of

outstanding shares, were present in person or by proxy.

b) The Company's management solicited proxies pursuant to Regulation

14 under the Securities Exchange Act of 1934. There was no

solicitation in opposition to management's nominees as listed in the

proxy statement. The following nominees were elected pursuant to the

vote of the stockholders:

Name For Authority Withheld

Thomas N. Allen 3,352,733 353

Mark M. Gambill 3,352,733 353

Allen C. Goolsby 3,352,733 353

Arthur P. Henderson, Jr 3,352,686 400

Kenneth C. King 3,352,686 400

C. Edward Pleasants 3,352,733 353

Lloyd U. Noland, III 3,337,833 15,253

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.

July 29, 2002

Arthur P. Henderson, Jr.

Vice President - Finance