SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31, 1999.
Commission File Number 0-15708
HANDY HARDWARE WHOLESALE, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 74-1381875
(State of incorporation or (I.R.S. Employer Identification
organization) Number)
8300 Tewantin Drive
Houston, Texas 77061
(713) 644-1495
(Address and telephone number of principal executive offices)
Registrant's telephone number: (713) 644-1495
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 (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- --------
The number of shares outstanding of each of the Registrant's classes of common
stock as of March 31, 1999, was 9,000 shares of Class A Common Stock, $100 par
value, and 56,969 shares of Class B Common Stock, $100 par value.
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
INDEX
-----
<S> <C> <C>
PART I Financial Information Page No.
Item 1. Financial Statements
Condensed Balance Sheet March 31, 1999
and December 31, 1998 ....................... 3 - 4
Condensed Statement of Earnings - Three Months
Ended March 31, 1999 and 1998................. 5
Condensed Statement of Cash Flows - Three Months
Ended March 31, 1999 and 1998................. 6 - 7
Notes to Condensed Financial Statements........... 8 - 14
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations.......... 15 - 20
Item 3. Quantitative & Qualitative Disclosures About
Market Risk.................................. 20
PART II Other Information 21
Item 1. Legal Proceedings 21
Items 2-6. None 21
Signatures
22
</TABLE>
Page # 2 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,687,426 $ 1,113,122
Accounts Receivable, net of
subscriptions receivable in
the amount of $69,957 for 1999
and $51,735 for 1998 17,616,659 10,335,445
Notes Receivable (Note 3) 11,338 10,174
Inventory 15,269,754 14,106,010
Other Current Assets 286,772 371,322
Prepaid Income Tax -0- 105,884
------------ ------------
$ 37,871,949 $ 26,041,957
------------ ------------
PROPERTY, PLANT AND EQUIPMENT (Note 2)
At Cost Less Accumulated Depreciation
of $4,757,772(1999) and $4,517,166 (1998) $ 10,552,452 $ 9,516,835
------------ ------------
OTHER ASSETS
Notes Receivable (Note 3) $ 128,061 $ 130,362
Deferred Compensation Funded 330,689 329,084
Other Noncurrent Assets -0- 23,959
------------ ------------
$ 458,750 $ 483,405
------------ ------------
TOTAL ASSETS $ 48,883,151 $ 36,042,197
------------ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable-Line of Credit $ 571,886 $ -0-
Notes Payable-Stock (Note 4) 26,750 26,750
Notes Payable-Capital Lease 53,482 58,308
Accounts Payable - Trade 27,133,880 14,912,983
Other Current Liabilities 387,985 896,390
Federal Income Taxes Payable (Note 5) 20,056 -0-
------------ ------------
$ 28,194,039 $ 15,894,431
------------ ------------
NONCURRENT LIABILITIES
Note Payable-Line of Credit $ 571,886 $ -0-
Notes Payable-Stock (Note 4) 531,280 521,280
Notes Payable-Capital Lease 59,873 66,864
Notes Payable-Vendor 112,934 114,707
Deferred Compensation Payable 330,689 329,084
Deferred Income Taxes Payable (Note 5) 246,880 248,033
------------ ------------
$ 1,853,542 $ 1,279,968
------------ ------------
TOTAL LIABILITIES $ 30,047,581 $ 17,174,399
----------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page # 3 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED BALANCE SHEET (CONTINUED)
<S> <C> <C>
MARCH 31, 1999 DECEMBER 31,1998
-------------- ----------------
STOCKHOLDERS' EQUITY
Common Stock, Class A,
authorized 20,000 shares, $100
par value per share, issued
9,110 & 8,930 shares $ 911,000 $ 893,000
Common Stock, Class B,
authorized 100,000 shares, $100
par value per share, issued
57,277 & 55,667 shares 5,727,700 5,566,700
Common Stock, Class B
Subscribed 4,510.85 & 4,309.98
shares 451,085 430,998
Less Subscription Receivable (34,979) (25,867)
Preferred Stock 10% Cumulative,
authorized 100,000 shares, $100
par value per share, issued
59,926.50 & 58,246.50 shares 5,992,650 5,824,650
Preferred Stock, Subscribed
4,510.85 & 4,309.98 shares 451,085 430,998
Less Subscription Receivable (34,978) (25,868)
Paid in Surplus 343,828 339,238
------------ ------------
$ 13,807,391 $ 13,433,849
Less: Cost of Treasury Stock
756 & -0- shares (75,600) -0-
------------ ------------
$ 13,731,791 $ 13,433,849
Retained Earnings exclusive of other
comprehensive earnings (Note 7) 5,038,013 5,368,885
Retained Earnings applicable to other
comprehensive earnings (Note 7) 65,766 65,064
------------ ------------
5,103,779 5,433,949
------------ ------------
Total Stockholders' Equity $ 18,835,570 $ 18,867,798
------------ ------------
TOTAL LIABILITIES &
-------------------
STOCKHOLDERS' EQUITY $ 48,883,151 $ 36,042,197
-------------------- ============ ============
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page # 4 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
<S> <C> <C>
REVENUES
Net Sales $43,459,797 $37,704,353
Sundry Income 475,718 548,319
----------- -----------
TOTAL REVENUES $43,935,515 $38,252,672
-------------- ----------- -----------
EXPENSE
Net Material Costs $39,693,476 $34,122,126
Payroll Costs 1,772,223 1,631,093
Other Operating Costs 2,102,552 1,896,985
Interest Expense 19,003 5,655
----------- -----------
TOTAL EXPENSE $43,587,254 $37,655,859
------------- ----------- -----------
NET EARNINGS BEFORE PROVISIONS
FOR ESTIMATED FEDERAL INCOME TAX $ 348,261 $ 596,813
--------------------------------
PROVISIONS FOR ESTIMATED
FEDERAL INCOME TAX (Note 5) (124,787) (208,014)
-------------------------- ----------- -----------
NET EARNINGS $ 223,474 $ 388,799
------------
OTHER COMPREHENSIVE EARNINGS
Unrealized Gain on Securities (Note 7) $ 1,063 $ -
Provision for Federal Income Tax(Note 5) 361 -
----------- -----------
Other Comprehensive Earnings
Net of Tax $ 702 $ -
----------- -----------
TOTAL COMPREHENSIVE EARNINGS $ 224,176 $ -
----------------------------
LESS ACCRUAL FOR DIVIDENDS ON
-----------------------------
PREFERRED STOCK (138,587) (170,592)
--------------- ---------- -----------
NET EARNINGS APPLICABLE TO
--------------------------
COMMON STOCKHOLDERS $ 85,589 $ 218,207
------------------- =========== ===========
NET EARNINGS PER SHARE OF
-------------------------
COMMON STOCK, CLASS A &
-----------------------
CLASS B (Note 1) $ 1.23 $ 3.30
--------------- =========== ===========
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page # 5 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITY
Net Earnings $ 223,474 $ 388,799
------------ ------------
Adjustments to Reconcile Net
Earnings to Net Cash Provided by
Operating Activities:
Depreciation $ 240,605 $ 206,336
Increase (Decrease) in Deferred
Income Tax (1,153) (3,734)
Unrealized gain (increase in fair
market value of securities) 702 -
Changes in Assets and Liabilities
Increase in Accounts Receivable $(7,281,214) $ (4,919,575)
(Increase) Decrease in Notes Receivable 1,137 (19,488)
(Increase) Decrease in Deferred Compensation
Investment (44,183) -
Increase in Inventory (1,163,744) (2,176,516)
Decrease in Other Assets 214,393 81,011
Increase (Decrease)in Note Payable-Vendor (1,773) 6,744
Increase in Accounts Payable 12,220,897 10,175,084
Decrease in Other Liabilities (508,405) (654,013)
Increase in Federal Income
Taxes Payable 20,056 166,495
Increase (Decrease) in Deferred Compensation
Payable 44,183 -
----------- -----------
TOTAL ADJUSTMENTS $ 3,741,501 $ 2,862,344
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 3,964,975 $ 3,251,143
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures $(1,276,221) $ (92,524)
Disposition of Fixed Assets - -
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES $(1,276,221) $ (92,524)
----------- -----------
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page # 6 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDY HARDWARE WHOLESALE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)Cont.
THREE MONTHS ENDED MARCH 31,
1999 1998
---------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase Note Payable - Line of Credit $ 1,143,772 $ -0-
Increase in Notes Payable - Stock 10,000 129,840
Decrease in Notes Payable - Capital Lease (11,817) (17,039)
Increase in Subscription Receivable (18,223) (25,561)
Proceeds From Issuance of Stock 391,764 385,186
Purchase of Treasury Stock (75,600) (189,800)
Dividends Paid (554,346) (682,368)
----------- -----------
NET CASH USED FOR FINANCING
ACTIVITIES $ 885,550 $ (399,742)
----------- -----------
NET INCREASE
IN CASH & CASH EQUIVALENTS $ 3,574,304 $ 2,758,877
--------------------------
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,113,122 1,123,842
--------- ----------- -----------
CASH & CASH EQUIVALENTS AT END OF
PERIOD $ 4,687,426 $ 3,882,719
------ =========== ===========
ADDITIONAL RELATED DISCLOSURES
TO THE STATEMENT OF CASH FLOWS
Interest Expense Paid $ 19,003 $ 5,655
Income Taxes Paid 105,884 -0-
</TABLE>
The accompanying notes are an integral part of the Condensed Financial
Statements.
Page # 7 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
NOTE 1 - ACCOUNTING POLICIES
- ----------------------------
(1) Description of Business:
-----------------------
Handy Hardware Wholesale, Inc., ("Handy"), was incorporated as a Texas
corporation on January 6, 1961. Its principal executive offices and
warehouse are located at 8300 Tewantin Drive, Houston, Texas 77061.
Handy is owned entirely by its member-dealers and former
member-dealers.
Handy sells to its member-dealers products primarily for retail
hardware, lumber and home center stores. In addition, Handy offers
advertising and other services to member-dealers.
(2) General Information:
-------------------
The condensed consolidated financial statements included herein have
been prepared by Handy. The financial statements reflect all
adjustments, which were all of a recurring nature, which are, in the
opinion of management, necessary for a fair presentation. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC). Handy believes that the
disclosures made are adequate to make the information presented not
misleading. The condensed consolidated financial statements should be
read in conjunction with the audited financial statements and the notes
thereto included in the latest Form 10-K Annual Report.
(3) Cash
----
For purposes of the statement of cash flows, Handy considers all highly
liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
(4) Inventories
-----------
Inventories are valued at the lower of cost or market method,
determined by the first in, first out method, with proper adjustment
having been made for any old or obsolete merchandise.
(5) Earnings Per Share:
------------------
Net earnings per common share (Class A and Class B Combined) are based
on the weighted average number of shares outstanding in each period
after giving effect to the stock issued, stock subscribed, accrued
dividends on preferred stock, and treasury stock as set forth by
Accounting Principles Board Opinion No. 15 as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
Calculation of Net Earnings Per Share
of Common Stock
<S> <C> <C>
Net Earnings $ 224,176 $ 388,799
Less: Accrued Dividends
On Preferred Stock (138,587) (170,592)
----------- ---------
$ 85,589 $ 218,207
Weighted Average
Shares of Common Stock
(Class A & Class B)
outstanding 69,304 66,076
Net Earnings Per Share
of Common Stock $ 1.23 $ 3.30
=========== =========
</TABLE>
Page # 8 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
(6) Revenue Recognition:
-------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles. Accordingly, revenues
and expenses are accounted for using the accrual basis of accounting.
Under this method of accounting, revenues and receivables are
recognized when merchandise is shipped or services are rendered and
expenses are recognized when the liability is incurred.
(7) Accounting for Dividends on Preferred Stock
-------------------------------------------
Handy pays dividends on Preferred Stock during the first quarter of
each fiscal year. Only holders of Preferred Stock on January 31 are
entitled to receive dividends. Dividends are prorated for the portion
of the twelve-month period ending January 31 during which the Preferred
Stock was held.
Because Handy is unable to anticipate the amount of the Preferred Stock
dividends, Handy does not accrue a liability for the payment of those
dividends on its balance sheet. To more properly reflect net earnings,
however, on the Condensed Statement of Earnings included herein, Handy
shows an estimated portion of the dividends to be paid in the first
quarter of 2000 based on the dividends paid in the first quarter of
1999.
When dividends on Preferred Stock are actually paid, there is a
reduction of retained earnings. Retained earnings on the Condensed
Balance Sheet for the three months ended March 31, 1999, contained
herein, therefore, are net of dividends actually paid during the first
quarter of 1999 in the amount of $554,346.
NOTE 2 - PROPERTY, PLANT & EQUIPMENT
- ------------------------------------
<TABLE>
<CAPTION>
Property, Plant & Equipment Consists of:
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Land $ 3,201,569 $ 2,027,797
Building & Improvements 7,871,224 7,859,100
Furniture, Computer, Warehouse 3,812,159 3,721,832
Transportation Equipment 425,272 425,272
----------- -----------
$15,310,224 $14,034,001
Less: Accumulated Depreciation (4,757,772) (4,517,166)
----------- -----------
$10,552,452 $ 9,516,835
=========== ===========
</TABLE>
Page # 9 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
NOTE 3 - NOTES RECEIVABLE
- -------------------------
Notes receivable reflect amounts due to Handy from its member-dealers under a
deferred payment agreement and an installment sale agreement.
Under the deferred agreement, Handy supplies member-dealers with an initial
order of General Electric Lamps. The payment for this order is deferred so long
as the member-dealer continues to purchase General Electric lamps through Handy.
If a member-dealer ceases to purchase lamp inventory or sells or closes his
business, then General Electric bills Handy for the member-dealer's initial
order and the note becomes immediately due and payable in full to Handy.
Under the installment sale agreement, Handy sells computer hardware to
member-dealers, the purchase price of which is due and payable by member-dealers
to Handy in thirty-six monthly installments of principal and interest.
<TABLE>
<CAPTION>
Notes Receivable are classified as follows:
CURRENT PORTION NONCURRENT PORTION
MARCH 31, DEC. 31, MARCH 31, DEC. 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Deferred Agreement $ -0- $ -0- $112,934 $114,707
Installment Sale Agreement 11,338 10,174 15,127 15,655
---------- ------- ----------------------------
$11,338 $10,174 $128,061 $130,362
========== ==----- ============================
</TABLE>
NOTE 4 - NOTES PAYABLE STOCK
- ----------------------------
The five year, interest bearing notes payable - stock reflect amounts due from
Handy to former member-dealers for the repurchase of shares of Handy stock owned
by these former member-dealers. According to the terms of the notes, only
interest is paid on the outstanding balance of the notes during the first four
years. In the fifth year, both interest and principal are paid. Interest rates
range from 5.5% to 7.0%.
Notes payable - stock are classified as follows:
<TABLE>
<CAPTION>
CURRENT PORTION NON-CURRENT PORTION
-------------------------- ---------------------------
MARCH 31, DEC. 31, MARCH 31, DEC. 31,
--------- -------- --------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
$26,750 $26,750 $531,280 $521,280
</TABLE>
Principal payments due over the next five years are as follows:
1999 $ 26,500
2000 107,200
2001 57,000
2002 32,800
2003 324,280
------------
$ 521,280
============
Page # 10 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
NOTE 5 - INCOME TAXES
- ---------------------
Handy adopted FASB Statement No. 109, "Accounting for Income Taxes," effective
January 1, 1993. The adoption of this standard changed the method of accounting
for income taxes from the deferred method to the liability method.
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Excess of tax over book depreciation $ 1,270,212 $ 1,270,884
Allowance for Bad Debt (7,195) (7,195)
Inventory - Ending inventory adjustment
for tax recognition of Sec. 263A
Uniform Capitalization Costs (292,813) (292,008)
Deferred Compensation (244,088) (242,173)
------------- --------------
Total $ 726,116 $ 729,508
Statutory Tax Rate 34% 34%
Cumulative Deferred Income Tax Payable $ 246,880 $ 248,033
============= ==============
Classified as:
Current Liability $ -0- $ -0-
Noncurrent Liability 246,880 248,033
------------- --------------
$ 246,880 $ 248,033
============= ==============
</TABLE>
Reconciliation of income taxes on the difference between tax and financial
accounting is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Principal Components of Income Tax Expense
Federal:
Current
Income tax paid $ -0- $ -0-
Carry-over of prepayment from
prior year 105,884 -0-
Refund received for overpayment
from prior year -0- -0-
------------ --------------
$ 105,884 $ -0-
Federal Income Tax Payable 20,056 211,748
Carry-over to subsequent year -0- -0-
Income tax for tax reporting
at statutory rate of 34% $ 125,940 $ 211,748
Deferred
Adjustments for financial reporting:
Depreciation (228) (3,083)
263A Uniform Capitalization Costs (274) -0-
Other (651) (651)
------------ --------------
Provision for federal income tax $ 124,787 $ 208,014
============ ==============
</TABLE>
Handy is not exempt from income tax except for municipal bond interest
earned in the amount of $542.
Handy is not classified as a nonexempt cooperative under the provisions
of the Internal Revenue Code and is not entitled to deduct preferred dividends
in determining its taxable income.
Page # 11 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
NOTE 6 - STOCKHOLDERS' EQUITY
- -----------------------------
(1) Terms of Capital Stock
----------------------
The holders of Class A Common Stock are entitled to one vote for each
share held of record on each matter submitted to a vote of shareholders.
Holders of Class A Common Stock must be engaged in the retail sale of
goods and merchandise, and may not be issued or retain more than ten
shares of Class A Common Stock at any time. The holders of Class B Common
Stock are not entitled to vote on matters submitted to a vote of
shareholders except in those circumstances of matters which would change
their rights as shareholders.
The holders of Preferred Stock are entitled to cumulative dividends.
Handy's Articles of Incorporation require the Board of Directors to
declare a dividend each year of not less than 7 percent nor more than 20
percent of the par value ($100.00 per share) of the shares of Preferred
Stock. The Preferred Stock has a liquidation value of $100 per share. The
holders of Preferred Stock are not entitled to vote on matters submitted
to a vote of shareholders except in those circumstances of matters which
would change their rights as shareholders. The shares of Preferred Stock
are not convertible, but are subject to redemption (at the option of
Handy) by vote of Handy's Board of Directors, in exchange for $100 per
share and all accrued unpaid dividends.
(2) Capitalization
--------------
To become a member-dealer, an independent hardware dealer must enter into
a Subscription Agreement with Handy for the purchase of ten shares of
Handy Class A Common Stock, $100 par value per share or ten shares of
Preferred Stock for any additional store, with an additional agreement to
purchase a minimum number of shares of Class B Common Stock, $100 par
value per share and Preferred Stock, $100 par value per share. Class B
Common Stock and Preferred Stock are purchased to a formula based upon
total purchases of merchandise by the member-dealer from Handy, which
determines the "Desired Stock Ownership" for each member-dealer. The
minimum Desired Stock Ownership is $10,000.
Each member-dealer receives from Handy a semimonthly statement of Total
Purchases made during the covered billing period and additional charge
("Purchase Funds") of 2 percent of warehouse purchases until the
memberdealer's Desired Stock Ownership is attained. The Subscription
Agreement entitles Handy to collect 2 percent of total purchases. Since
May 1, 1983, however, the Board of Directors has determined to collect 2
percent of warehouse purchases only. On a monthly basis, we review the
amount of unexpended Purchase Funds being held for each member-dealer. If
a memberdealer has unexpended Purchase Funds of at least $2000, Handy
applies such funds to the purchase of ten shares of Class B Common Stock
and ten shares of Preferred Stock at $100 per share.
(3) Transferability
---------------
Holders of Class A Common Stock may not sell those shares to a third
party without first offering to sell them back to Handy. There are no
specific restrictions on the transfer of our Class B Common or Preferred
Stock.
Page # 12 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
- -----------------------------------------
(4) Membership Termination
----------------------
Following written request, Handy will present to the Board of Directors a
member-dealer's desire to have his stock repurchased and the
member-dealer's Contract terminated. According to the current procedures
established by the Board of Directors, a member-dealer's stock may be
repurchased according to either of two options.
Option - I The member-dealer's Class A Common Stock is repurchased at $100
per share. Any funds remaining in the member-dealer's Purchase
Fund Account will be returned at the dollar value of such
account. Twenty percent or $3000, whichever is greater, of the
total value of the Class B Common and Preferred Stock will be
repurchased. The remaining value of the Class B Common and
Preferred Stock is converted to a five-year interest bearing
note. During the first four years, this note only pays interest.
In the fifth year, both interest and principal are paid. The
interest rate is determined by Handy's Board of Directors at the
same time they approve the repurchase.
Option - II Same as Option I except that the remaining value of the Class B
Common and Preferred Stock is discounted 15 percent and
reimbursed to the member-dealer immediately at the time of
repurchase.
Page # 13 of 22 Pages
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
---------------------------------------------------
NOTE 7 - COMPREHENSIVE EARNINGS
- -------------------------------
The following disclosures include those required by FASB 115 for financial
statements beginning after December 15, 1997.
1. Deferred compensation funded in the amount of $330,689 on the Balance
Sheet as a non-current asset at March 31, 1999, includes equity
securities classified as investments available for sale in the amount of
$281,249 at fair market value. The $281,249 includes $99,644 unrealized
gain on securities resulting from the increase in fair market value.
2. Changes in Equity securities
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended
March 31, 1999 Cumulative
Beginning Balance-January 1, 1999 $ 279,644 $ -0-
Purchases - 0 - 98,890
Dividends, interest and capital gains 542 82,715
Unrealized gains on securities
resulting from increase in
fair market value 1,063 99,644
------------ -------------
Balance-March 31, 1999 $ 281,249 $ 281,249
============ =============
</TABLE>
<TABLE>
<CAPTION>
3. Components of Comprehensive Earnings
Total Other Comprehensive Net Earnings Exclusive
Comprehensive Earnings-Unrealized Of Other
Earnings Gains on Securities Comprehensive Earnings
<S> <C> <C> <C>
Net Earnings Before
Provision for
Federal Income Tax $ 349,324 $ 1,063 $ 348,261
Provision for
Federal Income Tax 125,148 361 124,787
----------- --------- -------
Net Earnings $ 224,176 $ 702 $ 223,474
=========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
4. Components of Comprehensive Earnings
Retained Earnings Retained Earnings
Applicable to Other Exclusive of Other
Total Comprehensive Earnings Comprehensive Earnings
<S> <C> <C> <C>
Balance-January 1, 1999 $5,433,949 $ 65,064 $5,368,885
Add: Net earnings year
Ended March 31, 1999 224,176 702 223,474
Deduct: Cash Dividends on
Preferred Stock 554,346 -0- 554,346
---------- ---------- ----------
Balance-March 31, 1999 $5,103,779 $ 65,766 $5,038,013
========== ========== ==========
</TABLE>
Page # 14 of 22 Pages
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
We maintained our steady growth in the first quarter of 1999 while
continuing to meet our goal of providing quality goods to our member-dealers at
our cost plus a reasonable mark-up charge. Net sales in the first quarter of
1999 increased 15.3% ($5,755,444) over sales during the same period in 1998,
compared to a 13.8% growth rate ($4,584,713) in the first quarter of 1998 over
1997.
Net Sales. Strong economic growth, continuing strength in consumer
confidence and a positive response to our lumber and building materials program
have resulted in higher rates of sales growth during the first quarter of 1999
than experienced in previous periods, evidenced by increased sales in all but
two territories. Through the building materials program we pass along to
member-dealers discounts we receive for early payment to building material
vendors. In addition member-dealers receive longer payment terms from us than if
they were to order such materials from vendors directly. These discounts in the
traditionally low margin area of building materials have caused member-dealers
to significantly increase their orders of these materials through us. Orders of
building materials account for $2,208,396 of the increase in net sales, which is
approximately 38.4% of the increase between the 1998 and 1999 periods.
<TABLE>
<CAPTION>
The following table summarizes sales during 1998 and 1999 by sales
territory:
First Quarter 1999 First Quarter 1998
------------------------------------------- ----------------------------
% Increase
in Sales
From First % of % of
Quarter Total Total
Sales Territory Sales 1998 Sales Sales Sales
- --------------- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Houston Area $ 11,287,731 17% 26.0% $ 9,608,176 25.5%
Victoria, San Antonio,
Corpus Christ &
Rio Grande Valley Area* 8,467,839 16% 19.5% 7,277,112 19.4%
North Texas, Dallas
& Fort Worth Area 4,662,427 -6% 10.8% 4,942,941 13.1%
Austin, Brenham &
Central Texas Area 5,654,012 23% 13.0% 4,585,611 12.2%
Southern Louisiana Area 5,342,992 24% 12.3% 4,317,114 11.5%
Baton Rouge, New Orleans,
Mississippi, Alabama &
Florida Area 3,508,670 15% 8.1% 3,055,331 8.1%
Arkansas Area 1,534,714 -4% 3.5% 1,596,382 4.2%
Oklahoma Area 2,937,417 31% 6.8% 2,249,885 6.0%
------------ ------ ------------ ------
Totals: $ 43,395,802 (1) 100.0% $ 37,632,552 100.0%
============ ====== ============ ======
<FN>
- ------------------------------------------------------
* Includes sales to Mexico and Central America member-dealers.
(1) Total does not include sales to dealers who were no longer member-dealers at
end of period.
</FN>
</TABLE>
The North Texas, Dallas and Fort Worth area continues to feel the
pressure from retail warehouses which continue to erode the market share of
independent hardware stores. In addition, this territory lost a significant
member-dealer who generated $371,779 in sales during the first quarter of 1998.
Further, sales in the Arkansas territory declined 4 percent due to a decline in
the number of member-dealers in this territory.
Page # 15 of 22 Pages
<PAGE>
Net Material Costs and Rebates. Net material costs for the first quarter
of 1999 were $39,693,476 compared to $34,122,126 for the same period in 1998, a
16.3 percent increase, which is higher than the 15.3 percent increase in net
sales in the same periods. Net material costs as a percentage of net sales were
91.3 percent in the first quarter of 1999 as compared to 90.5 percent for the
same period in 1998. This slight percentage increase was the result of an
increase in the number of inventory items sold at a lower gross margin. Sales
with a markup ranging from 0 to 2 percent increased from $16,839,627 in the 1998
period to $20,729,528 in the 1999 period, an increase of 23.1 percent. Further,
in order to promote sales of lumber and building materials, we are foregoing our
manufacturer's purchase discount by passing on the discount to the
member-dealers through the building materials program.
Payroll Costs. With unemployment at a three decade low, the U.S. labor
market has seldom been tighter. The increase in payroll costs for the first
quarter of 1999 resulted from salary increases needed to attract or retain
high-quality employees. As a result, payroll costs during the quarter ended
March 31, 1999, increased $141,130, an 8.6 percent increase over the same period
in 1998, but much lower than the percentage increase in net sales. Despite the
pressure on wages, payroll costs as a percentage of both total expenses and net
sales remained fairly constant. Payroll costs for the first quarter of 1999
constituted 4.1 percent of both total expenses and net sales, compared to 4.3
percent for the first quarter of 1998. The relative stability in payroll costs
has been a result of a continuing effort to maintain employee productivity.
Other Operating Costs. During the first quarter of 1999, other operating
costs increased $205,567 (10.8%) compared to the same costs in the first quarter
of 1998, but declined slightly as a percentage of net sales and total expenses.
The amount spent for other operating costs for the first quarter of 1999 totaled
$2,102,552 (4.8% of both net sales and total expenses) as compared to $1,896,985
spent for other operating costs during the same period of 1998 (5.0% of both net
sales and total expenses).
Over 42.7% of the 1999 first quarter increase in other operating costs resulted
from an increase in warehouse expenses (an increase of $145,275 over 1998
levels), while another 40% of the increase is the result of delivery costs
increases (an increase of $152,562 over 1998 levels).
Net Earnings and Earnings Per Share
- -----------------------------------
While net sales for the first quarter of 1999 increased $5,755,444
(15.3%) and net material costs increased $5,571,350 (16.3%) from levels in the
first quarter in 1998, gross margin increased by $184,094 (5.1%). This increase
in gross margin was offset by the more substantial increases in payroll costs
(8.6%) and in other operating costs (10.8%). Thus pretax net earnings decreased
41.6 percent, from $596,813 for the first quarter of 1998 to $348,261 in the
same 1999 period, while after-tax net earnings decreased by 42.3 percent. Net
earnings in the first quarter of 1999 decreased primarily due to an increase in
sales with markups of only 0 to 2 percent, with fewer sales occurring with
markups of 3 percent or greater, as previously discussed.
Our earnings per share decreased 62.7 percent in the first quarter of 1999 as
compared to the same period of 1998 due to a decrease in net earnings in the
first quarter of 1999. In addition, dividends accrued in the first quarter of
1999 represented a larger percentage of 1999 net earnings than dividends accrued
in the first quarter of 1998.
Quarter-to-quarter variations in our earnings per share (in addition to the
factors discussed above) reflect our commitment to lower pricing of our
merchandise in order to deliver the lowest cost buying program to our
memberdealers, (who own all of our stock), although this often results in lower
net earnings. Because virtually all of our stockholders are also member-dealers,
these trends benefit our individual stockholders who purchase our merchandise.
Page # 16 of 22 Pages
<PAGE>
Therefore, there is no demand from shareholders that we focus greater attention
upon earnings per share.
Seasonality
- -----------
Our quarterly net earnings traditionally have been subject to two
primary factors. First and third quarter earnings have been negatively affected
by the increased level of direct sales (with no markup) resulting from our
semiannual trade show always held in the first and third quarters. Secondly,
sales during the fourth quarter traditionally have been lower, as hardware sales
are slowest during winter months preceding ordering for significant sales in the
spring. However, net earnings have varied substantially from year to year in the
fourth quarter as a result of corrections to inventory made at year-end.
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
Financial Condition and Liquidity. During the period ending March 31,
1999, we maintained our financial condition and ability to generate adequate
amounts of cash while continuing to make significant investments in inventory,
warehouse and computer equipment, software and delivery equipment to better meet
the needs of our member-dealers.
Our operating activities provided net cash of $3,741,501 and $2,862,344 in the
first three months of 1999 and 1998, respectively. Net cash provided by our
operating activities may vary substantially from year to year. These variations
result from (i) the timing of promotional activities such as our spring trade
show, (ii) payment terms available to us from our suppliers, (iii) payment terms
offered by us to our member-dealers, and (iv) the state of the regional economy.
During the first quarter of 1999 there was an increase of $804,707 in our cash
and cash equivalents as compared to a decrease of $10,720 in the same 1998
period. Cash flow from operating activities increased during the first three
months of 1999 to $3,964,975, as compared to $3,251,143 in 1998. This increase
in cash flow was principally attributable to an increase in accounts payable and
a smaller growth of inventory as compared to the same 1998 period. This increase
in cash flow was offset by a larger increase in accounts receivable in the first
quarter of 1999 than in the first quarter of 1998.
Accounts payable increased $12,220,897 during the first three months of 1999 as
compared to an increase of $10,175,084 during the same period in 1998. This
increase was due to extended dating terms for payment offered to us by
suppliers.
Inventory had 35,509 stockkeeping units in the period ending March 31, 1999,
which were maintained in response to member-dealer demand for more breadth of
inventory. The increase in inventory in the first three months of 1999, although
significant, was not as large as in the same period in 1998 due to constraints
of the availability of warehouse space. In addition, in the first three months
of 1999, accounts receivable increased 48 percent above the accounts receivable
level in the first three months of 1998. This was mainly attributable to the
strong economy which gave member-dealers confidence to make significant
purchases at the spring trade show and to extended dating terms for payment
offered to member-dealers at this trade show.
Net cash used for investing activities increased significantly in the first
quarter of 1999. This increase was almost entirely due to the purchase of thirty
acres of land to be used for future warehouse expansion.
Net cash provided by financing activities was $885,550 in the period ending
March 31, 1999 as compared to net cash used for financing activities of $399,742
during the same period in 1998. This difference was principally attributable to
borrowing on our line of credit to meet short term cash requirements as well as
a decline in dividends paid from $682,368 in the first quarter of 1998 to
$554,346 in the first quarter of 1999.
Page # 17 of 22 Pages
<PAGE>
In August 1996, Chase Bank of Texas ("the Bank") extended to us an unsecured
$7.5 million revolving line of credit with an April 30, 1998, maturity date at
an interest rate of prime minus one and one-half percent (1.5%) or, at our
option, the London Interbank Offering Rate ("LIBOR") plus one and one-quarter
percent (1.25%). In April 1997 the maturity date on the line of credit was
extended to April 30, 1999 and in April 1998 further extended to April 30, 2000.
It is anticipated that in April 1999 the line of credit will again be extended
to April 30, 2001. The line of credit may be used from time to time for our
working capital and other financing needs. On March 31, 1999, there was an
outstanding balance on the line of credit of $1,143,772.
Our continuing ability to generate cash to meet our needs for funding our
activities is highlighted by comparing three key liquidity measures -- working
capital, current ratio (current assets to current liabilities) and long-term
debt as a percentage of capitalization, as shown in the following table:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1999 1998 1998
--------------------------------------------------------
<S> <C> <C> <C>
Working Capital $9,677,910 $10,147,526 $9,284,639
Current Ratio 1.3 to 1 1.6 to 1 1.4 to 1
Long-Term Debt as Percentage
of Capitalization 9.8% 6.9% 6.4%
</TABLE>
During the remainder of 1999, we expect to further expand our existing customer
base in Oklahoma and Arkansas. We will finance this expansion with receipts from
the sale of stock to new and current member-dealers and with anticipated
increased revenues from sales to member-dealers in Oklahoma and Arkansas. We
expect that this expansion will have a beneficial effect on its ability to
generate cash to meet our funding needs.
In the first three months of 1999, we maintained a 95.1 percent service level
(the measure of our ability to meet member-dealers' orders out of current stock)
as compared to a service level of 95.8 percent for the same period of 1998.
Inventory turnover was 6.0 times during the first three months of 1999 and 6.1
times for the first three months of 1998. This rate of inventory turnover, which
is higher than the national industry average of 3.8, is primarily the result of
tight control of the product mix, increase in depth of inventory and continued
high service level.
Capital Resources
- -----------------
In the three month periods ending March 31, 1999, and March 31, 1998, our
investment in capital assets (net of dispositions) was $1,276,221 and $92,524,
respectively. Approximately 89.6 percent ($1,143,772) of the amount expended in
the first three months of 1999 was used to complete the purchase of thirty acres
of land for future warehouse expansion. By comparison, of the total amount
expended in the first three months of 1998, $41,705 was used to purchase
warehouse equipment, $34,517 was used to upgrade our fleet of automobiles and
$15,720 was used to purchase computer hardware and software.
In January, 1999 we purchased from Catellus Development Corporation 29.96 acres
of land located across the street from our current warehouse facility. The
purchase price for the land is $0.90 per square foot ($1,174,774). The land will
be used to relocate our retention pond, provide additional parking facilities
and allow for future expansion of our current warehouse facility. The purchase
was funded by drawing down on our line of credit.
Significant outlays of cash equivalents foreseen by us for the remainder of the
year include the payment of accounts payable and increased inventory purchases.
Additional cash outlays anticipated for the remainder of the year include:
approximately $2,626,000 will be used to relocate our current retention pond,
construct additional parking and outside storage as well as prepare the site and
begin construction on an expansion to our current warehouse facility.
Page # 18 of 22 Pages
<PAGE>
Approximately $25,000 has been allocated to the purchase of warehouse equipment,
while $35,000 has been allocated to upgrading computer equipment. Finally, we
have allocated $25,000 for purchasing office equipment and $60,000 to improve
our automobile fleet.
Our cash position of $3,882,719 at March 31, 1999, is anticipated to be
sufficient to fund all planned capital expenditures, although some third party
financing, including draws on our line of credit may be needed to fund all or a
portion of the expansion project.
Year 2000
- ---------
The Year 2000 issue relates to the problems associated with the inability
of computer programs, computer hardware and other equipment to properly
calculate, store and use data after December 31, 1999. Hardware and software
systems which only use a two-digit convention for keeping track of dates would
improperly interpret the Year 2000 as the Year 1900. Errors of this type can
result in system failures, miscalculations and the disruption of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar business functions. Although the extent of
the problem is not yet known, the ramification of Year 2000 failures are
expected to have a global impact. In response to the Year 2000 issues, we have
developed a strategic plan divided into the following phases: assessment of
in-house systems and review of vendor representations, in-house testing and
implementation of remedial actions, third party communications and development
of a contingency plan, as needed.
The first phase of our Year 2000 assessment program began in 1997 at which time
we out-sourced the upgrade of all accounting software. In addition, we upgraded
our midrange hardware platform and midrange software. To date, all such software
has been upgraded and installed, and the licensor of our software systems has
certified that such software is programmed to properly address Year 2000
scenarios. In addition, our department of Management Information System (the
"MIS department") is continuing to evaluate our information and non-information
technology systems. This review is enabling the MIS department to identify
in-house software and non-information technology and equipment that is date
sensitive and should therefore undergo testing.
After upgrading our accounting software and midrange hardware platform, we began
conducting our in-house testing phase. In 1998 all upgraded midrange software,
recently purchased software and other operating systems identified for testing
were presented to our MIS department. The MIS department completed a portion of
the testing phase during the fourth quarter of 1998. We did not encounter any
material system disruption as a result of the Year 2000 during testing, and
therefore, we expect that the performance of such systems will not be
substantially disrupted when addressing the Year 2000.
During the initial review and testing phase, we determined to take certain
actions to reduce the effects of Year 2000 related disruptions on our
activities. Beginning with upgrading the accounting software in 1997, we are
continuing to take preventive measures to address issues which are identified by
our MIS department during testing. The testing of accounting and midrange
software was completed in the first quarter of 1999. Implementation of any
remedial actions will commence during the second quarter of 1999. In addition,
testing of warehouse management software is expected to begin during the second
quarter of 1999, followed by performance of remedial actions in the third
quarter. Remedial actions may include upgrading or replacing software or other
technology before the end of 1999.
In 1998 we began a third phase, which consists of informal communications with
our member-dealers, third party suppliers, service providers and distributors,
to evaluate the status of their Year 2000 readiness programs. We have received
and are relying on Year 2000 readiness reports and statements periodically
issued by third parties, such as telephone service carriers, insurance carriers,
financial services providers and various vendors of our software programs. In
addition, our MIS department responds to all third party requests for
information concerning the status of our Year 2000 review. All such third party
Page # 19 of 22 Pages
<PAGE>
communications are expected to be completed during the third quarter of 1999.
While there can be no guarantee that the systems of other companies on which we
rely will be timely converted or that the conversion will be compatible with our
systems, based on the representations received to date, we do not foresee
material disruptions in our business as a result of Year 2000 issues involving
third parties.
Although we cannot predict with certainty all effects of Year 2000 issues, we
have developed contingency plans to the extent necessary to continue business
functions in the event an unforeseen material disruption occurs. We believe that
such event, at most, will require employees to manually complete otherwise
automated tasks or calculations, such as receiving, filling and shipping
customer orders. We do not expect that any additional training would be required
to perform these tasks on a manual basis, although performing such tasks may
require additional time or personnel. We have determined an alternate method for
memberdealers to forward purchase orders via telecopier, having received
favorable Year 2000 readiness reports from all third parties involved in
providing our telecopier service. In addition, we are continuing to identify, to
the extent possible, other vendors, purchasers or third party contractors to
provide services in order to maintain normal business operations.
Our core business activities consist of purchasing and warehousing hardware
inventory which is sold and shipped to member-dealers. We maintain a computer
system through which member-dealers transmit orders for goods directly to us. In
addition, our software catalogs inventory, receives purchase orders, performs
accounting functions and tracks shipping of inventory. Because our "mission
critical" equipment consists mainly of computer software and hardware, the most
reasonably likely worst case Year 2000 scenario for us would involve either a
failure of operating systems to properly address Year 2000 scenarios or a
prolonged disruption of power sources on which these systems rely. Such events
could result in a business interruption that could materially affect our
operations, liquidity or capital resources. We are continuing to test operating
systems to predict and reduce the effects of Year 2000 disruptions. However, no
economically feasible contingency plan has been developed for maintaining a
separate and duplicate secondary power supply for every major component of our
core equipment. We are relying upon representations by these third parties that
no material disruption of services are anticipated as a result of the Year 2000.
As of March 31, 1999, the cost for implementing our Year 2000 program is
$368,000. We will continue to utilize both internal and external resources to
anticipate and address the effects of Year 2000 scenarios.
QUANTITATIVE & QUALITATIVE DISCLOSURES
--------------------------------------
ABOUT MARKET RISKS
------------------
Not Applicable
Page # 20 of 22 Pages
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings -
In August 1997, a Handy truck struck two passenger vehicles in a
multivehicle accident in Harris County, Texas. Three lawsuits have been filed in
the District Court of Harris County, Texas, arising out of the accident, two
wrongful death actions by the parents of two women killed in the accident, and
one case for damages related to disabling injuries to a third person in the same
accident. All but one of the wrongful death actions have been settled within
insurance limits. The remaining wrongful death suit is scheduled to go to trial
in September 1999.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits & Reports on Form 8-K - None
Item 7. Signatures
Page # 21 of 22 Pages
<PAGE>
Signatures
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.
HANDY HARDWARE WHOLESALE, INC.
/s/ James D. Tipton
----------------------------------------
JAMES D. TIPTON
President
(Chief Executive Officer)
/s/ Tina S. Kirbie
----------------------------------------
TINA S. KIRBIE
Senior Vice President, Finance
Secretary and Treasurer
(Chief Financial and Accounting Officer)
Date 5/14/99
------------------
Page # 22 of 22 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Statement for Handy Hardware Wholesale, Inc. - 10-Q Data
</LEGEND>
<CIK> 0000354053
<NAME> Handy Hardware Wholesale, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 4,687,426
<SECURITIES> 0
<RECEIVABLES> 17,627,997
<ALLOWANCES> 7,195
<INVENTORY> 16,269,764
<CURRENT-ASSETS> 37,671,949
<PP&E> 10,552,452
<DEPRECIATION> 4,757,772
<TOTAL-ASSETS> 48,883,151
<CURRENT-LIABILITIES> 28,194,039
<BONDS> 671,886
0
6,374,957
<COMMON> 7,013,006
<OTHER-SE> 6,447,607
<TOTAL-LIABILITY-AND-EQUITY> 48,883,151
<SALES> 43,459,797
<TOTAL-REVENUES> 43,935,515
<CGS> 39,693,476
<TOTAL-COSTS> 39,693,476
<OTHER-EXPENSES> 2,102,662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,003
<INCOME-PRETAX> 349,324
<INCOME-TAX> 125,146
<INCOME-CONTINUING> 224,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,176
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
