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 common stock, $10.00 par value at April 29, 2004: 3,373,544 shares.

This report contains 19 pages.

NOLAND COMPANY AND SUBSIDIARIES

Current Assets:

Cash and cash equivalents $ 3,375,547 $ 3,703,719

Trade accounts receivable, net 56,193,870 48,122,094

Other accounts receivable 5,110,060 8,570,010

Other current assets 1,046,524 1,678,995

Total Current Assets 138,524,002 129,765,656

Property and Equipment, at cost:

Land 19,720,058 19,062,864

Buildings 111,606,716 109,211,586

Equipment and fixtures 72,717,000 71,726,775

Property in excess of current needs 5,870,190 3,458,760

Total 209,913,964 203,459,985

Less accumulated depreciation 91,746,711 90,368,999

Property and Equipment, net 118,167,253 113,090,986

Assets Held for Resale 247,136 247,136

Prepaid Pension 27,223,556 27,067,056

Other Assets 1,103,905 1,090,610

$285,265,852 $271,261,444

Current Liabilities:

Notes payable - short term borrowings $ 14,178,291 $ 6,627 197

Current maturity of long-term debt 518,846 521,691

Bank overdrafts 3,303,606 5,677,062

Accounts payable 35,501,485 27,932,064

Other accruals and liabilities 14,869,005 18,041,681

Federal and state income taxes 1,565,504 850,204

Total Current Liabilities 69,936,737 59,649,899

Long-term Debt 37,093,885 35,144,703

Deferred Income Taxes 15,590,268 15,649,607

Accrued Postretirement Benefits 2,348,811 2,313,502

Total Liabilities 124,969,701 112,757,711

Stockholders' Equity:

Capital common stock, par value $10;

authorized, 6,000,000 shares; issued,

3,373,544 and 3,373,267 shares 33,735,440 33,732,670

Additional paid in capital 416,510 416,510

Retained earnings 127,551,596 125,715,351

Accumulated other comprehensive loss,

net of tax (978,090) (880,862)

Unearned compensation, stock plans (429,305) (479,936)

Total Stockholders' Equity 160,296,151 158,503,733

$285,265,852 $271,261,444

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

2004 2003

Merchandise sales, net $122,765,791 $110,162,607

Cost of goods sold:

Purchases and freight-in 100,484,842 85,259,266

Inventory, beginning 67,690,838 60,869,800

Inventory, ending (72,798,001) (60,883,700)

Cost of goods sold 95,377,679 85,245,366

Gross profit on sales 27,388,112 24,917,241

Operating expenses 24,237,170 23,115,452

Rental income 331,898 206,612

Gains from sale of property 10,586 3,420,886

Operating profit 3,493,426 5,429,287

Other income: 357,631 439,933

Interest expense 379,070 298,102

Income before income taxes 3,471,987 5,571,118

Income taxes 1,365,900 2,150,900

Net income $ 2,106,087 $ 3,420,218

Earnings per share:

Basic $ .63 $ .98

Diluted $ .63 $ .97

Average shares outstanding:

Basic 3,333,358 3,485,676

Diluted 3,360,230 3,512,538

Cash dividends per share $ .08 $ .08

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

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

The wholesale distribution of mechanical equipment and supplies is highly competitive. Competition results primarily from price, service and the availability of goods. The business may be affected to the extent the residential and commercial construction industries are affected by interest rate changes and the weather.

Management's discussion and analysis and other sections of this quarterly report contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "anticipate", "intend", "believe", and similar expressions are intended to identify forward-looking statements. Such 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 conditions, climatic conditions, competitive pricing pressures, and product availability.

The Company makes estimates and assumptions when preparing financial statements. These estimates and assumptions affect various matters, including:

• reported amounts of assets and liabilities in the Company's Consolidated Balance Sheets at the dates of the financial statements;
• disclosure of contingent assets and liabilities at the dates of the financial statements; and
• reported amounts of revenues and expenses in the Company's Consolidated Statements of Income during the reporting periods. These estimates involve judgments with respect to, among other things, future economic factors which are difficult to predict and are beyond management's control. Actual amounts could differ from these estimates.

The critical accounting policies considered most important to the Company's financial condition and results of operations that require management's most difficult, subjective, or complex judgments that have not changed in the first three months of 2004 are as follows:

• Allowance for Doubtful Accounts

• Consideration Received from Vendors

• Self Insurance Reserves

For interim reporting purposes there is an additional critical accounting policy that is not applicable for full year reporting. The Company uses estimated gross profit rates to determine cost of goods sold during interim periods. This process includes estimates for inventory shrink and the LIFO reserve adjustment. For the interim LIFO reserve adjustment the Company estimates the final year-end FIFO inventory and the rate of inflation/deflation. The rate of inflation/deflation for an interim period is not necessarily consistent with the full year rate of inflation/deflation. Year-end inventory adjustments to reflect actual inventory levels are made in the fourth quarter.

The following table highlights changes in the results of operations for the quarters ended March 31, 2004 and 2003:

An improving economy, good weather and increasing prices resulted in an 11.4% increase in sales. All three product categories benefited with plumbing sales and electrical/industrial sales rising 12% each and air conditioning sales increasing 11%. Plumbing sales benefited from the opening of three new satellite branches and strong demand by customers in advance of price increases. Gross profit margins declined slightly, reflecting intense competition especially in commodity products, resulting in a 9.9% increase in gross profit dollars.

Operating profit declined $1.9 million, or 35.7%, as a result of an increase in operating expenses and a decline in gains from the sale of property. Operating expenses were $1.1 million, or 4.9%, higher than the year earlier total. The increase is due to higher personnel-related expenses stemming in part from new operations. Operating expenses benefited from pension income in the first quarter of 2004 in the amount of $156,500 compared to a pension expense of $52,000 in the first quarter of 2003. Gains from the sale of property declined from $3,420,886 in the first quarter of 2003 to $10,586 in the first quarter of 2004.

The Company is optimistic about the Company's short-term sales prospects. The first quarter ended with a strong March and customer orders for future delivery business are higher than a year ago. If the weather cooperates our recent sales momentum should continue in the second quarter.

The Company's financial condition remains strong with working capital of $68.6 million and a current ratio of 2.0 to 1. During the first quarter of 2004 the Company's cash position declined $328,000. Property and equipment expenditures were $7.5 million in the first quarter of 2004 and were paid for with cash provided by financing activities.

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 three 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. All swaps are non-trading. At March 31, 2004, the Company had three swap agreements with an aggregate notional amount of $22.2 million to manage interest rate changes related to the Company's ind ustrial revenue bonds, a portion of its revolving credit agreement and its term loan. The swaps effectively convert the variable rate borrowings (LIBOR and BMA Municipal Swap Index) into fixed rate borrowings with fixed rates of 5.36%, 4.22% and 5.27%, respectively.

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 fair 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 OCI 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. OCI was reduced $97,000, net of a tax benefit of $59,000 and $43,000, net of a tax benefit of $26,000, for the quarters ended March 31, 2004 and 2003, respectively.

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.

As reported previously, Noland Company is a defendant in personal injury claims based on alleged past exposure to asbestos-containing products or materials produced by others and allegedly distributed by the Company years ago. Since the early 1990s, the Company has been sued many times, along with a large number of other companies, by one law firm in cases that allege asbestos-related injuries to persons in the maritime industry. In none of these suits has a link to the Company been substantiated, and most of them already have been dismissed.

The Company also has been named as one of the defendants in various other asbestos-related suits within its operating footprint in which a connection to the Company was alleged. Some of these suits have been dismissed with prejudice, others have been settled through the Company's insurance carrier and others are still pending. Management does not consider the foregoing suits, individually or in the aggregate, to be material to the Company.

The Company has also been named as one of the defendants in approximately nineteen hundred asbestos-related suits filed by one law firm in the Circuit Court for Newport News, Virginia or in the Circuit Court for Portsmouth, Virginia. At this time it is still not possible to fully evaluate the merits of these new suits. The Company is not aware of any relationship between the Company and any of the plaintiffs; nor does it have any information as to the extent of any injury that may have been suffered by any of them. All of these cases will be defended vigorously.

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.

May 51, 2004 Arthur P. Henderson, Jr.

Arthur P. Henderson, Jr.

Vice President-Finance