QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

A Virginia Corporation IRS Identification #54-0320170

80 29^th 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 October 29, 2004: 3,384,027 shares.

This report contains 19 pages.

Item 1. Financial Statements

Unaudited Consolidated Balance Sheets -

September 30, 2004 and December 31, 2003 . . . . . . . . . . . . . 3

Unaudited Consolidated Statements of Income -

Three Months and Nine Months Ended September 30, 2004 and 2003 . . 4

Unaudited Consolidated Statements of Cash Flows -

Nine Months Ended September 30, 2004 and 2003 . . . . . . . . . . 5

Notes to Unaudited Consolidated Financial Statements . . . . . .. 6

Item 2. Management's Discussion and Analysis of Financial

Condition and Results of Operations . . . . . . . .. . 9

Item 3. Qualitative and Quantitative Disclosures About

Market Risk . . . . . . . . . . . . . . . . . . . . . .12

Item 4. Controls and Procedures . . . . . . . . . . . . . . . . .13

Item 1. Legal Matters . . . . . . . . . . . . . . . . . . . . . . 14

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . .. . . . 14

SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . .. . . . .15

EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Current Assets:

Cash and cash equivalents $ 3,453,104 $ 3,703,719

Trade accounts receivable, net 60,952,854 48,122,094

Other accounts receivable 7,606,280 8,570,010

Inventory, net 69,157,017 67,690,838

Other current assets 2,802,371 1,678,995

Total Current Assets 143,971,626 129,765,656

Property and Equipment, at cost:

Land 19,631,107 19,062,864

Buildings 111,696,838 109,211,586

Equipment and fixtures 74,409,408 71,726,775

Property in excess of current needs 5,652,747 3,458,760

Total 211,390,100 203,459,985

Less accumulated depreciation 93,617,524 90,368,999

Property and Equipment, net 117,772,576 113,090,986

Assets Held for Resale 247,136 247,136

Prepaid Pension 27,536,556 27,067,056

Other assets 1,347,798 1,090,610

Total Assets $290,875,692 $271,261,444

Current Liabilities

Notes payable, short-term borrowing $ 6,055,135 $ 6,627,197

Current maturity of long-term debt 513,207 521,691

Bank overdrafts 6,235,602 5,677,062

Accounts payable 35,848,696 27,932,064

Other accruals and liabilities 17,597,057 18,891,885

Total Current Liabilities 66,249,697 59,649,899

Long-term Debt 32,039,180 35,144,703

Deferred Income Taxes 20,189,530 15,649,607

Accrued Postretirement Benefits 2,439,786 2,313,502

Total Liabilities 120,918,193 112,757,711

Stockholders' Equity:

Capital common stock, par value $10;

authorized, 6,000,000 shares; issued,

3,384,027 and 3,373,267 shares 33,840,270 33,732,670

Additional paid in capital 762,635 416,510

Retained earnings 136,686,723 125,715,351

Accumulated other comprehensive loss,

net of tax (627,099) (880,862)

Unearned compensation, stock plans (705,030) (479,936)

Total Stockholders' Equity 169,957,499 158,503,733

Total Liabilities and Stockholders' Equity$290,875,692 $271,261,444

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

Merchandise sales $140,260,444 $121,771,477 $408,656,948 $354,466,120

Cost of goods sold:

Purchases and freight-in 110,403,576 92,497,771 325,002,684 273,970,642

Inventory, beginning 69,787,625 61,517,106 67,690,838 60,869,800

Inventory, ending 69,157,017 60,412,234 69,157,017 60,412,234

Cost of goods sold 111,034,184 93,602,643 323,536,505 274,428,208

Gross profit on sales 29,226,260 28,168,834 85,120,443 80,037,912

Operating expenses 26,189,833 24,005,639 76,006,897 70,767,311

Rental income 283,278 351,779 907,459 884,170

Gains from sale of

property __ 85,654 672,338 _9,540,525 __4,517,657

Operating profit 3,405,359 5,187,312 19,561,530 14,672,428

Other income (expense):

Service charges 304,171 298,041 902,169 910,735

Miscellaneous (22,978) 259,648 126,317 467,144

Total other income 281,193 557,689 1,028,486 1,377,879

Interest expense 381,617 342,985 1,158,647 962,502

Income before taxes 3,304,935 5,402,016 19,431,369 15,087,805

Income taxes:

State 246,000 325,600 1,230,900 911,300

Federal 1,117,500 1,811,000 6,417,900 4,986,600

Total income taxes 1,363,500 2,136,600 7,648,800 5,897,900

Net income $ 1,941,435 $ 3,265,416 $ 11,782,569$ 9,189,905

Earnings per share:

Basic $ .58 $ .98 $ 3.53 $ 2.69

Diluted $ .57 $ .97 $ 3.50 $ 2.67

Average shares outstanding:

Basic 3,340,672 ,329,515 3,337,459 3,412,619

Diluted 3,377,478 3,365,328 3,370,010 3,443,630

Cash dividends per share $ .08 $ .08 $ .24 $ .24

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

The accompanying notes are an integral part of the 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 and have not changed since December 31, 2003 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 three and nine months ended September 30, 2004 and 2003:

In Thousands Three Months Ended September 30 Nine Months Ended September 30

Strong construction activity and rising prices contributed to a 15.2% increase in sales for the third quarter of 2004 despite hurricanes and related bad weather in August and September that disrupted business for days in several southern markets. Air conditioning sales in Florida were especially hard hit. However, increased business with HVAC dealers in other parts of our territory allowed us to continue our growth with an 11.2% increase in air conditioning sales for the quarter compared to the third quarter of 2003. Plumbing and electrical/industrial sales benefited from strong construction levels increasing 17.8% and 14.8%, respectively. Gross profit margins declined due to higher freight costs, pursuit of lower-profit commodity sales and costs associated with the LIFO method of accounting for inventory costs. Rising prices resulted in a charge to cost of goods sold of $2,043,000 for the third quarter of 2004 compared to a charge of $250,000 for the third quarter of 2003. The Co mpany believes that some key products will continue to experience inflation into 2005.

Operating profit for the third quarter of 2004 decreased $1,782,000, or 34.4%, from the third quarter of 2003 due in part to a $587,000 year-to-year decrease in gains from the disposal of surplus real property. Operating expenses for the third quarter of 2004 were $2,184,000, or 9.1%, higher than the year earlier total largely due to costs associated with the Company's new central distribution center and five new branches opened since mid-2003. Operating expenses benefited from pension income in the third quarter of 2004 in the amount of $156,500 compared to a pension expense of $52,000 in the third quarter of 2003.

Through the first nine months sales totaled $408,657,000 or 15.3% more than the first nine months of 2003's $354,466,000. After'tax gains from the disposal of surplus real property totaled $5,817,000 in the first nine months of 2004 versus $2,803,000 in the year-earlier period.

Customer orders for future delivery business as of September 30, 2004 were 15% higher than a year ago reflecting a continued bright outlook for construction activity for the remainder of the year. We believe we are still on track to turn in a solid performance in 2004, on top of our record earnings year in 2003.

The Company's primary capital requirements for the third quarter of 2004 were for property and equipment expenditures and working capital. The Company maintains its short- and long-term liquidity through: (1) cash flow from operations; (2) short-term borrowings from bank line of credit arrangements, when needed; and (3) additional long-term debt, when needed.

The Company's financial condition remains strong with working capital of $77,722,000 and a current ratio of 2.2 to 1. During the first nine months of 2004 the Company's cash position decreased $251,000.

The Company's main properties consist of 102 branch facilities in thirteen southeastern states. Eighteen of the properties are leased and Noland Properties, Inc., a wholly owned subsidiary of Noland Company, owns the remaining eighty-four. Independent appraisals of most of the owned properties indicate that the fair market value of the owned properties is higher than the historical cost shown on the consolidated balance sheet as of September 30, 2004.

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 its exposure to interest rate changes on its 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 September 30, 2004, the Company had three swap agreements with an aggregate notional amount of $22.1 million to manage interest rate changes related to the Company's industri al 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 and SFAS No. 149, 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 decreased $60,000, net of a tax benefit of $25,000, for the three months ended September 30, 2004 and increased $406,000, net of a tax expense of $152,000, for the nine months ended September 30, 2004. OCI increased for the three and nine months ended September 30, 2003 by $199,000, net of a tax benefit of $121,000 and $28,000, net of a tax expense of $17,000, 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 and several have been settled through the Company's insurance carrier and some are still pending and are being defended. 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 twenty one 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 is 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.

October 29, 2004 Arthur P. Henderson, Jr.

Arthur P. Henderson, Jr.

Vice President ' Finance