Noland Company is a Virginia corporation founded in 1915 and incorporated in 1922. As of December 31, 2003 the Company employed 1,290 persons. The Company is a wholesale distributor of plumbing, air conditioning and electrical/industrial supplies, with branch facilities in a 13 state territory that ranges from Pennsylvania to Florida. It handles products of over 2,000 vendors and sells to thousands of customers in the commercial construction, residential construction and industrial markets of the southeastern United States. The Company also sells air conditioning equipment to customers in Panama and several South American countries.

The wholesale distribution of all products in which the Company is engaged is highly competitive. Competition results primarily from price, service and the availability of goods. Industry statistics indicate that Noland Company is one of the larger companies in its chosen territory.

The Company continues to focus efforts on growing air conditioning sales. Sales of Ruud air conditioning equipment in Florida, our biggest market for air conditioning, rose a modest 7% over 2002 while sales in other regions grew at a greater rate causing an overall 10% increase over 2002. Air conditioning sales in 2002 were 11% greater than 2001. At the same time, the demand for electrical/industrial products has declined. Several significant, unprofitable integrated supply contracts were terminated resulting in the closing, in late 2002, of the Company's Industrial Distribution Center.

Total sales of each class of similar products for the last five years are as follows:

Not all branches have all three departments. If a product department does not exist in a particular branch, any sales of that department's products are attributed to the department that makes the sale.

Recognizing the need to improve the efficiency of its supply chain, the Company in 2002 began construction of an $8.4 million Distribution Logistics Center ("DLC") near Richmond, Virginia. This 200,000 square-foot facility, which opened in September 2003, allows us to make more products available to our branches in a cost-effective manner and, over time, reduce our total inventory investment. The DLC also serves as a buffer between our vendors and our branches, allowing delivery lead times to be stabilized.

It is the practice of the Company to carry a full line of inventory items for rapid delivery to customers. At times, advance buying is necessary to ensure the availability of products for sale. The Company also extends credit, and maintains an adequate supply of merchandise which together use most of the Company's working capital. The business in general is seasonal to the extent of the construction industry it supplies.

The amount of the Company's backlog of orders believed to be firm was approximately $30,702,000 and $30,700,000 at December 31, 2003 and 2002, respectively.

The portion of the Company's business with the government and subject to renegotiation is not considered material.

Expenditures for Company-sponsored research and development activities and environmental control facilities in 2003, 2002 and 2001 were immaterial. The Company believes it is in compliance with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment.

Noland Properties, Inc., the Company's property management subsidiary, continues its efforts to sell excess property and re-invest the proceeds in new branch facilities or other income-producing property. These activities are expected to contribute to net income in 2004 and beyond.

Noland Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports are available without charge through Noland's website, www.noland.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to the Securities and Exchange Commission. Except as otherwise stated in these reports, the information contained on our website is not incorporated into this annual report on Form 10-K or other documents we file with, or furnish to, the Securities and Exchange Commission.

The main properties of the Company consist of 102 facilities, including warehouses, offices, showrooms, paved outside storage areas and covered pipe storage sheds. These are located in the following states: Alabama, Arkansas, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia, of which 18 are leased and the remaining 84 are Company owned. The executive office of the Company is located at 80 29^th Street, Newport News, Virginia 23607.

In the opinion of management, the aforementioned facilities are suitable for the purposes for which they are used, are adequate for the needs of the business and are in continuous use in the day-to-day course of operations. Management believes the underlying economic value of its facilities is significantly higher than the historical cost shown in the consolidated balance sheet as of December 31, 2003. The Company's policy is to maintain, repair and renovate its properties on a continuing basis, replacing older structures with new buildings and yard facilities as the need for such replacement arises. In addition, reference is made to Note 2 (d), page 15 of the Annual Report to Stockholders, filed as an exhibit hereto, with respect to property in excess of current needs.

The information set forth under the above caption is incorporated herein by reference from page 20, Note 14 of the Noland Company Annual Report to Stockholders for the year ended December 31, 2003.

The information set forth on the inside back cover of the Annual Report to Stockholders contains information concerning the market price of Noland Company's common stock for the past two years, the number of holders thereof and the dividend record with respect thereto for the past two years. This information is incorporated herein by reference.

The information set forth under the caption "Ten-Year Review of Selected Financial Data" relating to sales, net income, total assets, long-term debt, net income per share and dividends per share for the years 1994 through 2003 is incorporated herein by reference from page 22 of the Noland Company Annual Report to Stockholders for the year ended December 31, 2003.

The information set forth under the above caption is incorporated herein by reference from pages 8, 9 and 10 of the Noland Company Annual Report to Stockholders for the year ended December 31, 2003.

The information set forth under the above caption is incorporated herein by reference from page 10 of the Noland Company Annual Report to Stockholders for the year ended December 31, 2003.

The following consolidated financial statements of Noland Company, included in the Annual Report to Stockholders for the year ended December 31, 2003, are incorporated herein by reference:

None

(a) Evaluation of disclosure controls and procedures: The Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the year covered by this annual report. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures are effective as of the end of the year covered by this annual report.

(b) Change in internal controls: During the year ended December 31, 2003, there have been no changes in the Company's internal control over financial reporting, identified in connection with our evaluation thereof, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Data relating to Directors is incorporated herein by reference from pages 3, 4 and 5 of the 2004 Noland Company Proxy Statement for the April 29, 2004 Annual Meeting of Stockholders.

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company's directors, officers and employees, as well as a separate code of ethics for its Chief Executive Officer, Vice President - Finance, Secretary/Treasurer, and Assistant Vice President - Finance. Both codes are posted at www.noland.com.

The information set forth under the caption "Compensation of Executive Officers" on page 6 of the 2004 Noland Company Proxy Statement for the April 29, 2004 Annual Meeting of Stockholders is incorporated herein by reference.

The information set forth under the captions "Voting Securities and Principal Holders Thereof" and "Nominees for Director" on pages 2, 4 and 5 of the 2004 Noland Company Proxy Statement for the April 29, 2004 Annual Meeting of Stockholders is incorporated herein by reference.

(a) The Company is in the eighth year of a ten-year agreement to lease its corporate headquarters office building. The building is owned by Basic, Inc. Basic, Inc. owns 893,967 shares of Noland Company stock. The majority of Basic, Inc. stock is owned by The L.U. Noland 1982 Trust, whose trustees 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 Company pays an annual rental fee of approximately $290,000 per year and bears 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 and are considered by management to be an arms length transaction.

The information required by Item 9(e) of Schedule 14A appearing in the section entitled "Selection of Independent Public Accountants" on page 11 of the 2004 Noland Company Proxy Statement for the April 29, 2004 Annual Meeting of Stockholders is incorporated herein by reference.

The summary of the pre-approval policy for services by the independent public accountants appearing in the section entitled "Report of Audit Committee" on pages 9 and 10 of the 2004 Noland Company Proxy Statement for the April 29, 2004 Annual Meeting of Stockholders is incorporated herein by reference.

(a)Consolidated Financial Statements included in PART II, Item 8 of this report:

With the exception of the aforementioned information incorporated by reference and the information in the 2003 Annual Report to Stockholders on the inside back cover and pages 8, 9, 10 and 22 incorporated in response to Items 5, 6, 7 and 7A in this Form 10-K Annual Report, the 2003 Annual Report to Stockholders is not to be deemed "filed" as part of this report. The individual financial statements of the registrant have not been filed because consolidated financial statements are filed. The registrant is an operating company and the subsidiary is wholly owned.

Other financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the consolidated financial statements or notes thereto.

(c)The Index of Exhibits and any required Exhibits are included beginning at page 12 of this report.

(d)Financial Statement Schedule II

(1) Including recoveries on bad debts of $396,955 for 2003, $563,823 for 2002 and $670,734 for 2001.