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The wholesale distribution firm blamed the earnings decline on lower plumbing and electrical/industrial sales and thinner profit margins. First-quarter sales totaled $109,696,000, 4.6 percent less than the first-quarter 2001's $114,931,000.

Chairman Lloyd U. Noland, III said construction and manufacturing activity remained sluggish in many parts of Noland's territory in the first quarter, "severely cutting into demand for our products and services." Plumbing sales declined 4.7 percent while electrical/industrial sales were 15.1 percent less. Contributing to the steep decline in electrical/industrial sales was a softening in the company's integrated supply business, Noland said.

"In contrast," he said, "our air conditioning sales--which rely heavily on the equipment replacement market--enjoyed a 4.6 percent growth in the first quarter."

"He attributed the increase to new business from the company's newer air conditioning operations in Florida, "which continue to exceed our expectations."

Gross margins declined from 20.0 percent a year ago to 19.5 percent, reflecting increasingly competitive pricing conditions, according to Noland. This led to a 6.9 percent decline in gross profit.

Operating expenses were $307,000, or 1.4 percent, less than the year-earlier total. "This reduction was achieved even with a 49 percent decline in non-cash pension credits," said Noland, "and documents the success of the aggressive expense-control efforts we launched in the second half of 2001." But the reduction was not enough to offset the drop in gross profit, he said, and the company suffered a $406,000 operating loss for the quarter.

Noland said lower interest rates and reduced borrowings led to a 42 percent reduction in interest expense. "We continued to improve our inventory management practices in the first quarter," he said, "achieving an $11.6 million reduction in inventory investment as of March 31 versus a year ago and improving our inventory turns." This helped reduce total borrowings as of March 31 by $15 million from 2001's March 31 level.

Noland said recent encouraging economic news suggests business conditions could improve later in the year. "But there is still too much uncertainty to predict any immediate improvement," he said. "For now, we are anticipating little or no growth in most of our markets until the second half of the year."

1. Net income benefitted in both years from noncash pension credits as follows: $204,000 (6 cents per share) in 2002 and $400,000 (11 cents per share) in 2001, on a diluted basis.
2. Based on 3,522,580 shares outstanding in 2002 and 3,550,683 outstanding in 2001.
3. Based on 3,549,517 shares outstanding in 2002 and 3,581,221 outstanding in 2001.

Note: Included in this news release 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.