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Chairman Lloyd U. Noland III said the wholesale distribution firm's improved earnings stemmed from a combination of stronger plumbing and air conditioning sales and continued tight control of operating expenses.

"Strong residential construction activity and favorable weather conditions in most of our territory gave us heightened opportunities," he said, "and we took advantage of them." He said plumbing sales were 5.7 percent higher, aided in part by drought conditions that led to increased sales of well drilling rigs and water systems. Air conditioning sales rose 8.3 percent, which Noland attributed to higher demand for replacement air conditioning equipment brought on by unusually warm weather.

In contrast, he said, electrical/industrial sales declined 16.1 percent, reflecting continued erosion in the company's integrated supply business.

Total company sales for the quarter were $130,752,000, up 2.6 percent from the $127,470,000 in the second quarter of last year.

Gross profit on those second-quarter sales rose 6.9 percent on higher profit margins. Operating expenses were up 3.7 percent, principally due to higher bad debts stemming from two large accounts, as well as a decline in non-cash pension credits. This combination led to a 50.1 percent increase in operating profit.

Interest expense was down 37.3 percent for the quarter, due to lower interest rates and lower average borrowings. Noland said 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. "This reflects our continued focus on better managing our inventories in good times and bad," he said.

Through the first six months, Noland's sales totaled $240,448,000, slightly less than first-half 2001's $242,400,000. Net income totaled $3,021,000, or 85 cents per share (diluted), compared to $3,107,000, or 87 cents per share in the first six months of 2001.

Noland said he was pleased with the company's second-quarter performance, "especially after a weak first quarter." He said conditions appear to be favorable for growth in plumbing and air conditioning sales in the third quarter, "but there is too much uncertainty in the economy right now to predict a repeat of the second quarter's improved earnings for the remainder of the year."

1. Net income benefited in both years from noncash pension credits, net of tax, as follows: $205,000 (6 cents per share) and $409,000 (12 cents per share) for 2002's second quarter and first six months, respectively; and $400,000 (11 cents per share)and $800,000 (22 cents per share) for the comparable 2001 periods.
2. Based on 3,517,116 shares outstanding in 2002 and 3,540,811 shares outstanding in 2001.
3. Based on 3,551,097 shares outstanding in 2002 and 3,575,188 shares outstanding In 2001.
4. Based on 3,519,352 shares outstanding in 2002 and 3,545,272 shares outstanding in 2001.
5. Based on 3,553,546 shares outstanding in 2002 and 3,582,085 shares 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.