United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
---------
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended June 30, 1998 Commission File Number 1-878
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BLAIR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 25-0691670
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001
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(Address of principal executive offices) (Zip Code)
(814) 723-3600
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed since
last report)
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 periods 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
----- -----
As of August 12, 1998 the registrant had outstanding 8,907,593 shares of its
common stock without nominal or par value.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
June 30 December 31
1998 1997
------------ ------------
ASSETS
Current assets:
Cash $ 6,374,359 $ 3,468,483
Customer accounts receivable, less allowances
for doubtful accounts and returns of
$37,179,593 in 1998 and $38,479,888 in 1997 147,046,253 157,636,096
Inventories - Note F
Merchandise 71,984,740 68,143,275
Advertising and shipping supplies 9,613,327 10,584,134
------------ ------------
81,598,067 78,727,409
Deferred income taxes 10,297,000 9,910,000
Prepaid federal and state taxes 5,249,227 6,499,412
Prepaid expenses 614,515 391,532
------------ ------------
Total current assets 251,179,421 256,632,932
Property, plant and equipment:
Land 1,142,144 1,142,144
Buildings 63,372,780 63,263,399
Equipment 39,262,587 38,859,725
------------ ------------
103,777,511 103,265,268
Less allowances for depreciation 53,713,160 51,322,255
------------ ------------
50,064,351 51,943,013
Trademarks 885,502 921,623
------------ ------------
TOTAL ASSETS $302,129,274 $309,497,568
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable _ Note H $ 32,175,000 $ 38,600,000
Trade accounts payable 36,089,027 46,358,297
Advance payments from customers 2,441,652 1,393,814
Accrued expenses - Note D 10,525,180 9,033,411
------------ ------------
Total current liabilities 81,230,859 95,385,522
Deferred income taxes 1,481,000 1,683,000
Stockholders' equity:
Common Stock without par value:
Authorized 12,000,000 shares; issued
10,075,440 shares (including shares held
in treasury) - stated value 419,810 419,810
Additional paid-in capital 13,193,208 13,230,251
Retained earnings 233,791,292 223,868,940
------------ ------------
247,404,310 237,519,001
Less 1,184,647 shares in 1998 and
1,067,724 shares in 1997 of common stock
in treasury - at cost 26,144,521 23,161,169
Less receivable from Employee Stock
Purchase Plan 1,842,374 1,928,786
------------ ------------
219,417,415 212,429,046
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $302,129,274 $309,497,568
============ ============
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $126,726,735 $127,545,653 $242,613,611 $238,427,744
Other income - Note G 9,579,288 10,353,436 20,504,877 21,049,055
------------ ------------ ------------ ------------
136,306,023 137,899,089 263,118,488 259,476,799
Costs and expenses:
Cost of goods sold 61,241,208 63,638,637 118,156,653 118,755,726
Advertising 31,475,698 34,901,385 60,681,874 65,615,471
General and administrative 25,887,831 24,716,492 51,611,671 49,299,535
Provision for doubtful accounts 5,787,829 7,830,419 11,316,607 14,405,909
Interest 483,718 1,093,706 1,059,594 2,579,104
------------ ------------ ------------ ------------
124,876,284 132,180,639 242,826,399 250,655,745
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 11,429,739 5,718,450 20,292,089 8,821,054
Income taxes - Note E 4,338,000 2,098,000 7,682,000 3,236,000
------------ ------------ ------------ ------------
NET INCOME $ 7,091,739 $ 3,620,450 $ 12,610,089 $ 5,585,054
============ ============ ============ ============
Basic and diluted earnings per share based on
weighted average shares outstanding - Note C $ .80 $ .40 $1.41 $ .61
===== ===== ===== =====
<FN>
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810
Additional paid-in capital:
Balance at beginning of period 13,202,657 12,928,260 13,230,251 12,928,260
Issuance of Common Stock to
non-employee directors 22,588 13,688 22,588 13,688
Forfeitures of Common Stock under
Employee Stock Purchase Plan (32,037) (22,470) (59,631) (22,470)
------------ ------------ ------------ ------------
Balance at end of period 13,193,208 12,919,478 13,193,208 12,919,478
Retained Earnings:
Balance at beginning of period 228,036,839 216,647,961 223,868,940 216,068,537
Net income 7,091,739 3,620,450 12,610,089 5,585,054
Cash dividends declared - Note B (1,337,286) (1,358,233) (2,687,737) (2,743,413)
------------ ------------ ------------ ------------
Balance at end of period 233,791,292 218,910,178 233,791,292 218,910,178
Treasury Stock:
Balance at beginning of period (24,424,861) (19,355,540) (23,161,169) (19,013,814)
Purchase of Common Stock for treasury (1,725,984) (2,562,403) (2,983,258) (2,904,129)
Issuance of Common Stock to
non-employee directors 13,037 8,437 13,037 8,437
Forfeitures of Common Stock under
Employee Stock Purchase Plan (6,713) (4,480) (13,131) (4,480)
------------ ------------ ------------ ------------
Balance at end of period (26,144,521) (21,913,986) (26,144,521) (21,913,986)
Receivable from Employee Stock Purchase Plan:
Balance at beginning of period (1,879,854) (1,769,530) (1,928,786) (1,803,910)
Payments 30,405 87,236 71,710 121,616
Forfeitures of common stock under
Employee Stock Purchase Plan 7,075 5,335 14,702 5,335
------------ ------------ ------------ ------------
Balance at end of period (1,842,374) (1,676,959) (1,842,374) (1,676,959)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $219,417,415 $208,658,521 $219,417,415 $208,658,521
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Six Months Ended
June 30
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,610,089 $ 5,585,054
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,566,978 2,669,410
Provision for doubtful accounts 11,316,607 14,405,909
Provision for deferred income taxes (589,000) 781,000
Changes in operating assets and
liabilities providing (using) cash:
Customer accounts receivable (726,764) 9,827,409
Inventories (2,870,658) 16,364,542
Prepaid federal and state taxes 1,250,185 9,050,347
Prepaid expenses (222,983) (51,319)
Trade accounts payable (10,269,270) (8,886,805)
Advance payments from customers 1,047,838 1,792,514
Accrued expenses 1,491,769 (983,781)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,604,791 50,554,280
INVESTING ACTIVITIES
Purchases of property, plant and equipment (652,195) (1,071,569)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (652,195) (1,071,569)
FINANCING ACTIVITIES
Net (repayments) from bank borrowings (6,425,000) (42,900,000)
Dividends paid (2,687,737) (2,743,413)
Purchase of Common Stock for treasury (2,983,258) (2,904,129)
Issuance of Common Stock to non-employee
directors 35,625 22,125
Forfeitures of Common Stock under
Employee Stock Purchase Plan (58,060) (21,615)
Payments on receivable from
Employee Stock Purchase Plan 71,710 121,616
------------ ------------
NET CASH (USED IN) FINANCING ACTIVITIES (12,046,720) (48,425,416)
------------ ------------
INCREASE IN CASH 2,905,876 1,057,295
Cash at beginning of year 3,468,483 4,115,533
------------ ------------
CASH AT END OF PERIOD $ 6,374,359 $ 5,172,828
============ ============
<FN>
See accompanying notes.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Blair
Corporation and its wholly-owned subsidiary have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information refer
to the financial statements and footnotes included in the company's annual
report on Form 10-K for the year ended December 31, 1997.
The consolidated financial statements include the accounts of Blair
Corporation and its wholly-owned subsidiary, Blair Holdings, Inc. All
significant intercompany accounts are eliminated upon consolidation.
The Company changed its interim closing procedures in the first quarter of
1998, to a 5 week, 4 week, 4 week quarter from a calendar quarter. The change
had a minor impact on the second quarter and first six months of 1998 as the
Company had one less shipping day in the 1998 periods as compared to the
second quarter and first six months of 1997. The year end closing will not be
affected by this change.
NOTE B - DIVIDENDS DECLARED
2-06-97 $.15 per share 2-05-98 $.15 per share
5-12-97 .15 4-21-98 .15
7-15-97 .15 7-21-98 .15
10-21-97 .15
NOTE C - BASIC AND DILUTED EARNINGS PER SHARE
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net income $ 7,091,739 $ 3,620,450 $12,610,089 $ 5,585,054
Weighted average shares
outstanding 8,924,666 9,135,472 8,957,298 9,175,255
Basic and diluted earnings
per share $ .80 $ .40 $1.41 $ .61
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
June 30 December 31
1998 1997
----------- -----------
Employee compensation $ 6,614,901 $ 5,674,054
Contribution to profit sharing
and retirement plan 1,345,988 1,407,745
Taxes, other than taxes on income 833,915 297,457
Other accrued items 1,730,376 1,654,155
----------- -----------
$10,525,180 $ 9,033,411
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
NOTE E - INCOME TAXES
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
The components of income tax expense are as follows:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Currently payable:
Federal $ 6,401,000 $ 4,401,000 $ 7,389,000 $ 2,431,000
State 912,000 552,000 882,000 24,000
----------- ----------- ----------- -----------
7,313,000 4,953,000 8,271,000 2,455,000
Deferred (credit) (2,975,000) (2,855,000) (589,000) 781,000
----------- ----------- ----------- -----------
$ 4,338,000 $ 2,098,000 $ 7,682,000 $ 3,236,000
=========== =========== =========== ===========
The differences between total tax expense and the amount computed by applying
the statutory federal income tax rate of 35% to income before income taxes are
as follows:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Statutory rate applied to
pre-tax income $ 4,000,408 $ 2,001,458 $ 7,102,231 $ 3,087,369
State income taxes, net
of federal tax benefit 304,200 81,900 515,450 91,650
Other items 33,392 14,642 64,319 56,981
----------- ----------- ----------- -----------
$ 4,338,000 $ 2,098,000 $ 7,682,000 $ 3,236,000
=========== =========== =========== ===========
Components of the provision for deferred income tax credit (expense) are as
follows:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Provision for estimated
returns $ 435,000 $ 8,000 $ 968,000 $ 157,000
Provision for doubtful
accounts (380,000) (1,225,000) (919,000) (1,793,000)
Advertising costs 2,667,000 4,161,000 359,000 796,000
Other items - net 253,000 (89,000) 181,000 59,000
----------- ----------- ----------- -----------
$ 2,975,000 $ 2,855,000 $ 589,000 $ (781,000)
=========== =========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
NOTE E - INCOME TAXES - Continued
Components of the deferred tax assets and liability under the liability
method as of June 30, 1998 and December 31, 1997 are as follows:
June 30 December 31
1998 1997
----------- -----------
Current net deferred tax assets:
Doubtful accounts $ 6,041,000 $ 6,960,000
Returns allowances 2,981,000 2,013,000
Inventory obsolescence 1,937,000 1,937,000
Vacation pay 1,321,000 1,321,000
Inventory costs 825,000 778,000
Advertising costs (3,754,000) (4,113,000)
Other items 946,000 1,014,000
----------- ----------
$10,297,000 $ 9,910,000
=========== ===========
Long-term deferred tax liability:
Property, plant and equipment $ 1,481,000 $ 1,683,000
=========== ===========
NOTE F - INVENTORIES
Inventories are valued at the lower of cost or market. Cost of merchandise
inventories is determined principally on the last-in, first-out (LIFO)
method. Cost of advertising and shipping supplies is determined on the
first-in, first-out (FIFO) method. Advertising and shipping supplies include
printed advertising material and related mailing supplies for promotional
mailings which are generally scheduled to occur within two months. These
costs are expensed when mailed. If the FIFO method had been used for all
inventories, the total amount would have increased by approximately
$8,658,000 at June 30, 1998 and $8,538,000 at December 31, 1997,
respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Finance charges on time
payment accounts $ 8,377,930 $ 9,621,302 $17,675,185 $20,010,279
Commissions earned 464,127 8,826 1,059,093 28,883
Other items 737,231 723,308 1,770,599 1,009,893
----------- ----------- ----------- -----------
$ 9,579,288 $10,353,436 $20,504,877 $21,049,055
=========== =========== =========== ===========
Finance charges on time payment accounts are recognized on an accrual basis of
accounting.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
NOTE H - FINANCING ARRANGEMENTS
In 1995, the company entered into a $125,000,000 Revolving Credit Facility,
which expires on November 17, 1998. The interest rate is, at the company's
option, based on a base rate option, federal funds rate option or euro-rate
option as defined in the agreement. The Revolving Credit Facility is
unsecured and requires the company to meet certain covenants as outlined in
the agreement. These covenants specifically relate to tangible net worth,
maintaining a defined leverage ratio and fixed charge coverage ratio, and
complying with certain indebtedness restrictions. As of June 30, 1998 and
December 31, 1997, the company was in compliance with all the agreement's
covenants. At June 30, 1998 and December 31, 1997, the company had borrowed
$32,175,000 and $38,600,000 under the agreement, all of which was classified
as current.
NOTE I - NEW ACCOUNTING PRONOUNCEMENTS
EARNINGS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share," was issued. SFAS 128 establishes standards for
computing and presenting earnings per share (EPS) and simplifies the existing
standards. This statement replaces the presentation of primary EPS with a
presentation of basic and diluted EPS. SFAS 128 was adopted in the financial
statements for the year ended December 31, 1997. The adoption of this
statement had no impact on the Company's earnings per share amounts.
COMPREHENSIVE INCOME
In June 1997, Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Comprehensive Income," was issued. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. SFAS 130 was adopted in the
financial statements for the quarter ended March 31, 1998. The adoption of
this statement had no impact on the financial statements of the Company.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS 131 establishes standards for the way that a public enterprise
reports information about operating segments in annual financial statements
and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. SFAS
131 is effective for fiscal years beginning after December 15, 1997, and
requires restatement of earlier periods presented _ but not for interim
periods in the initial year of adoption. Management believes adoption of
this statement will not have a significant impact on the financial statements
of the Company.
EMPLOYERS' DISCLOSURES ABOUT PENSION AND OTHER POSTRETIREMENT BENEFITS
In February 1998, Statement of Financial Accounting Standards No. 132 (SFAS
132), "Employers' Disclosures about Pension and Other Postretirement
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
NOTE I - NEW ACCOUNTING PRONOUNCEMENTS - Continued
Benefits", was issued. SFAS 132 revises employers' disclosures of pensions
and other postretirement benefits, requires additional information on changes
in benefit obligations and fair value of plan assets and eliminates certain
disclosures. SFAS 132 is effective for the year ending December 31, 1998,
and requires restatement of disclosures for earlier periods. Management
believes adoption of this statement will not have a significant impact on the
financial statements of the Company.
NOTE J - CONTINGENCIES
The Company is involved in certain items of litigation, arising in the normal
course of business. While it cannot be predicted with certainty, management
believes that the outcome will not have a material effect on the Company's
financial condition or results of operations.
NOTE K - RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified
to conform with the current year presentation.
NOTE L - USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
NOTE M - EMPLOYEE STOCK PURCHASE PLAN
The company has an Employee Stock Purchase Plan wherein shares of treasury
stock may be issued to certain employees at a price established at the
discretion of the Employee Stock Purchase Plan Committee. The stock issued
under the Plan was 50,400 shares on July 27, 1998 and 49,600 shares on July
23, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Results of Operations
- ---------------------
Comparison of Second Quarter 1998 and Second Quarter 1997
Net income for the second quarter of 1998 increased 96% as compared to the
second quarter of 1997. The second quarter of 1998 was favorably impacted by
improved customer and prospect response and reduced costs and expenses,
primarily advertising, cost of goods sold, provision for doubtful accounts
and interest.
Net sales for the second quarter of 1998 were .64% lower than second quarter
1997 net sales. A change in interim closing procedures in 1998 resulted in
one less shipping day in the second quarter of 1998 than in the second
quarter of 1997. Decreased advertising volume in 1998 was offset by
increased response. Gross sales revenue generated per advertising dollar
increased 10.7%. The total number of orders shipped and the average order
size ($60 - $65) were approximately the same in both second quarters.
Returns as a percentage of adjusted gross sales improved to 16.6% in the
second quarter of 1998 from 17.0% in the second quarter of 1997.
Other income decreased 7.5% in the second quarter of 1998 as compared to the
second quarter of 1997 due to a 12.9% drop in finance charges assessed on
Easy Payment Plan accounts receivable. Average second quarter Easy Payment
Plan accounts receivable decreased 13.4% (approximately $28.6 million).
Cost of goods sold as a percentage of net sales decreased to 48.3% in the
second quarter of 1998 from 49.9% in the second quarter of 1997. The 1997
second quarter was negatively impacted by the liquidation of high-dollar,
high-credit risk electronics items in the Home Products merchandise line.
The lower return rate in 1998 also helped the favorable cost of goods
comparison.
Advertising expense in the second quarter of 1998 decreased 9.8% from the
second quarter of 1997. Improved forecasting, file segmentation and mail
stream management techniques have allowed for more efficient target marketing
to active customers and prospects and increased reactivation of lapsed
buyers. Increased catalog mailings, co-op and media volume and paper costs
were more than offset by the reduction in circular letter mailings.
The total number of catalog mailings released in the second quarter of 1998
was .6% higher than in the second quarter of 1997 (32.0 million vs. 31.8
million). Catalogs have been the primary advertising format for Home
Products for over three years. The Company began full release, to both
customers and prospects, of Menswear catalogs in September 1996 and
Womenswear catalogs in March 1997. Catalog mailings from all three product
lines, including combined product line offerings, are continually tested as
to mailing frequency, page density, product content, number of pages and
size.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Second Quarter 1998 and Second Quarter 1997 - Continued
The total number of circular letter mailings in the second quarter of 1998
was 23% less than in the second quarter of 1997 (24.8 million vs. 32.3
million). Circular letter mailings have decreased due to the expansion of
catalog advertising.
Total volume of the co-op and media advertising programs increased
approximately 11% in the second quarter of 1998 as compared to the second
quarter of 1997 (307 million vs. 277 million).
General and administrative expense increased 4.7% in the second quarter of
1998 as compared to the second quarter of 1997. The higher general and
administrative expense was primarily the result of an 8.0% increase in wages
and benefits. The higher wages and benefits resulted from normal pay
increases, an increase in the number of employees and increases in net income
related benefits.
The provision for doubtful accounts as a percentage of credit sales was 29.3%
lower in the second quarter of 1998 as compared to the second quarter of
1997. The 1998 provision was lower due to a 12.9% decrease in finance
charges in 1998, a reduction in the estimated bad debt rate in 1998 and an
additional provision for prior years in 1997. The estimated provision for
doubtful accounts is based on current expectations, sales mix
(prospect/customer) and prior years' experience. Due to improvement in the
delinquency and charge-off rates in 1998, as stated above, the estimated bad
debt rate for 1998 credit sales and finance charges was lowered and no
additional provision was needed for prior years. The second quarter of 1997
included an additional provision of $1,740,000. At June 30, 1998, the
allowance for doubtful accounts as a percentage of delinquencies was higher
than at any time in 1997 and was approximately the same as at March 31, 1998.
Recoveries of bad debts previously charged off have been credited back
against the allowance for doubtful accounts. The Company, having previously
completed a study of its credit policies, continues to implement improved
credit procedures. Revised credit granting and collection policies already
implemented have resulted in turning down more bad credit risks and in
shortening and strengthening the collection cycle. Credit granting models
addressing prospects (first-time buyers) were implemented in mid-September
and early-October 1997. Behavior and collection models were implemented in
the first quarter of 1998. The full impact of the credit models is not
likely to be realized until later in 1998.
Interest expense decreased 55.8% in the second quarter of 1998 as compared to
the second quarter of 1997. Interest expense has resulted primarily from the
Company's borrowings necessary to finance customer accounts receivable.
Average borrowings outstanding have decreased to $32,161,000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Second Quarter 1998 and Second Quarter 1997 - Continued
during the second quarter of 1998 from $75,764,000 during the second quarter
of 1997. The increase in credit card sales and improved credit policies are
greatly responsible for lowering the levels of customer accounts receivable
and related borrowings.
Income taxes as a percentage of income before income taxes were 38.0% in the
second quarter of 1998 and 36.7% in the second quarter of 1997. The federal
income tax rate was 35% in both years. The change in the total income tax
rate was caused by an increase in the Company's effective state income tax
rate.
The Company changed its interim closing procedures in the first quarter of
1998 to a 5 week, 4 week, 4 week quarter from a calendar quarter. The change
had a minor impact as the Company had one less shipping day in the second
quarter of 1998 than it had in the second quarter of 1997.
Comparison of Six Month Periods Ended June 30, 1998 and June 30, 1997
Net income for the first six months of 1998 increased 126% as compared to the
first six months of 1997. The six months of 1998 were favorably impacted by
improved customer and prospect response and reduced costs and expenses,
primarily advertising, provision for doubtful accounts, interest and cost of
goods sold.
Net sales for the first half of 1998 were 1.8% higher than first half 1997
net sales. Net sales improved in 1998 due to increased response to all the
Company's advertising formats. Gross sales revenue generated per advertising
dollar increased 9.9%. The total number of orders shipped and the average
order size ($60 - $65) were approximately the same in both years. Returns as
a percentage of adjusted gross sales improved to 16.6% in the first half of
1998 from 16.9% in the first half of 1997.
Other income decreased 2.6% in the six months of 1998 as compared to the
first six months of 1997 due to an 11.7% drop in finance charges assessed on
Easy Payment Plan accounts receivable. Average Easy Payment Plan accounts
receivable decreased 15.4% (approximately $34,000,000).
Costs of goods sold as a percentage of net sales decreased to 48.7% in the
first half of 1998 from 49.8% in the first half of 1997. Lower returns in
1998 and the liquidation of electronics merchandise in 1997 resulted in the
favorable cost of goods comparison.
Advertising expense in the six months of 1998 decreased 7.5% from the first
six months of 1997. Improved forecasting, file segmentation and mail stream
management techniques have allowed for more efficient target
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Six Month Periods Ended June 30, 1998 and June 30, 1997 -
Continued
marketing to active customers and prospects and increased reactivation of
lapsed buyers. Increased catalog mailings, co-op and media volume and paper
costs were more than offset by the reduction in circular letter mailings.
The total number of catalog mailings released in the first half of 1998 was
16.9% higher than in the first half of 1997 (56.7 million vs. 48.5 million).
The total number of circular letter mailings released in the first half of
1998 was 30.5% less than in the first half of 1997 (47.7 million vs. 68.6
million). Total volume of the co-op and media advertising programs increased
approximately 4% in the first half of 1998 as compared to the first half of
1997 (714 million vs. 687 million).
General and administrative expense increased 4.7% in the six months of 1998
as compared to the first six months of 1997. The higher general and
administrative expense was primarily the result of an 8.3% increase in wages
and benefits. The higher wages and benefits resulted from normal pay
increases, an increase in the number of employees and increases in net income
related benefits.
The provision for doubtful accounts as a percentage of credit sales was 22.8%
lower in the first half of 1998 as compared to the first half of 1997. The
1998 provision was lower due to an 11.7% decrease in finance charges in 1998,
a reduction in the estimated bad debt rate in 1998 and an additional
provision for prior years in 1997. The estimated provision for doubtful
accounts is based on current expectations, sales mix (prospect/customers) and
prior years' experience. Improved delinquency and charge-off rates in 1998
allowed the estimated bad debt rate for 1998 credit sales and finance charges
to be lowered and eliminated the need of an additional provision for prior
years. The first half of 1997 included an additional provision of
$2,035,000. At June 30, 1998, the allowance for doubtful accounts as a
percentage of delinquencies was higher than at any time in 1997. Recoveries
of bad debts previously charged off have been credited back against the
allowance for doubtful accounts.
Interest expense decreased 58.9% in the first half of 1998 as compared to the
first half of 1997. Interest expense has resulted primarily from the
Company's borrowings necessary to finance customer accounts receivable.
Average borrowings outstanding have decreased to $35,044,000 during the first
half of 1998 from $87,265,000 during the first half of 1997. The increase in
credit card sales and improved credit policies are greatly responsible for
lowering the levels of customer accounts receivable and related borrowings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Six Month Periods Ended June 30, 1998 and June 30, 1997 -
Continued
Income taxes as a percentage of income before income taxes were 37.9% in the
first half of 1998 and 36.7% in the first half of 1997. The federal income
tax rate was 35% in both years. The change in the total income tax rate was
caused by an increase in the company's effective state income tax rate.
The Company changed its interim closing procedures in the first quarter of
1998 to a 5 week, 4 week, 4 week quarter from a calendar quarter. The change
had a minor impact as the Company had one less shipping day in the first half
of 1998 than it had in the first half of 1997.
Liquidity and Sources of Capital
- --------------------------------
All working capital and cash requirements were met. In November 1995, the
Company entered into a $125,000,000 Revolving Credit Facility, which expires
on November 17, 1998. The unsecured Revolving Credit Facility requires the
Company to meet certain covenants, as of June 30, 1998, the Company was in
compliance with all the covenants. Borrowings outstanding at June 30, 1998
were $32,175,000, all classified as current. Borrowings outstanding at
December 31, 1997 were $38,600,000, all classified as current. Borrowings
outstanding at June 30, 1997 were $64,100,000 of which $50,000,000 was
classified as long-term. As of August 12, 1998, the Company's borrowings
outstanding totaled $28,025,000. The Company intends to renew the existing
or a similar type credit facility.
The ratio of current assets to current liabilities was 3.09 at June 30, 1998,
2.69 at December 31 1997 and 4.62 at June 30, 1997. The ratio has increased
at June 30, 1998 primarily due to reductions in notes payable and trade
accounts payable. Working capital increased $8,701,152 in the first six
months of 1998 primarily due to higher net income. The 1998 increase was
primarily reflected in increased cash and inventories and decreased notes
payable and trade accounts payable more than offsetting decreased customer
accounts receivable.
Merchandise inventory turnover was 2.6 at June 30, 1998, at December 31, 1997
and at June 30, 1997. Merchandise inventory as of June 30, 1998 increased
5.6% from December 31, 1997 and 18.0% from June 30, 1997. Inventory levels
have been impacted by the continuing effort to increase order fulfillment
rates and by the transition to a larger catalog operation. The Company is
currently installing a new catalog inventory management system.
Net sales and inventory levels for the Company's three product lines were as
follows. Home Products net sales as a percentage of total net sales were
13.4% ($32.5 million) in the six months of 1998 as compared to 13.0%
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Liquidity and Sources of Capital - Continued
- --------------------------------
($30.9 million) in the first six months of 1997. Menswear net sales were
23.3% ($56.5 million) compared to 24.4% ($58.2 million). Womenswear net
sales were 63.3% ($153.6 million) compared to 62.6% ($149.3 million). Home
Products inventory totaled $12.1 million at June 30, 1998, $6.8 million at
December 31, 1997 and $10.0 million at June 30, 1997. Menswear inventory was
$16.9 million at June 30, 1998, $17.6 million at December 31, 1997 and $20.3
million at June 30, 1997. Womenswear inventory was $42.9 million at June 30,
1998, $43.7 million at December 31, 1997 and $30.8 million at June 30, 1997.
The Company has added new facilities, modernized its existing facilities and
acquired new cost saving equipment during the last several years. Capital
expenditures for property, plant and equipment totaled $652,195 during the
first half of 1998 and $1,071,569 during the first half of 1997. Capital
expenditures for 1998, 1999 and 2000 are projected to be approximately
$7,000,000 a year in order to support the Company's marketing strategy. The
increased capital expenditures will result primarily from expanding database
capabilities in target marketing, credit management and mail stream
optimization.
In August 1995, the Company's second call center was opened in Erie,
Pennsylvania. A 75% expansion of the Erie Call Center was completed in
September 1996. A third call center, located in Franklin, Pennsylvania, was
added in January 1997. Further expansion and refinement of all three cal
centers - Warren, Erie, and Franklin - was completed by September 1997. See
"Future Considerations."
The Company recently declared a quarterly dividend of $.15 per share payable
on September 15, 1998. It is the Company's intent to continue paying
dividends; however, the Company will evaluate its dividend practice on an on-
going basis. See "Future Considerations."
The Company bought back 276,866 shares of its common stock at a total price
of $4,551,438 ($16.44 per share) in 1997. The Company bought back 116,473
shares at a total price of $2,983,258 ($25.61 per share) in the first six
months of 1998. As of August 12, 1998, the Company bought 31,100 shares at a
total cost of $1,018,213 ($32.74 per share) in the third quarter of 1998.
The Company intends to continue buying back stock; however, the Company will
assess future buy-back opportunities on an on-going basis.
Future cash needs will be financed by cash flow from operations, the current
borrowing arrangement and, if needed, other financing arrangements that may
be available to the Company. The Company's current projection of future cash
requirements, however, may be affected in the future by numerous factors,
including changes in customer payments on accounts receivable, consumer
industry credit trends, sales volume, operating cost fluctuations and
unplanned capital spending.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Impact of Inflation and Changing Prices
- ---------------------------------------
Although inflation has moderated in our economy, the company is continually
seeking ways to cope with its impact. To the extent permitted by
competition, increased costs are passed on to customers by selectively
increasing selling prices over a period of time. During the past several
years, selling prices have been raised sufficiently to offset increased
merchandise costs, thereby realizing profit margins that continue to build
fiscal strength. Profit margins have been pressured by paper cost and postal
rate increases. Paper prices have fluctuated since 1994 _ reached their high
point at 1995 year-end, retreated below 1995 levels during the third quarter
of 1996, reached their low point during the first quarter of 1997, and
increased quarterly throughout the rest of 1997 and the first quarter of
1998. Overall, paper prices were lower in 1997 than in 1996 and have been
higher in 1998 than they were in 1997. Postal rates increased in 1995,
increased again in 1996 (slight increase due to the USPS Classification
Reform) and will increase again in January 1999.
The company principally uses the LIFO method of accounting for its
merchandise inventories. Under this method, the cost of products sold
reported in the financial statements approximates current costs and thus
reduces distortion in reported income due to increasing costs. The charges
to operations for depreciation represent the allocation of historical costs
incurred over past years and are significantly less than if they were based
on the current cost of productive capacity being used.
Property, plant and equipment are continuously being expanded and updated.
Recent major projects are discussed under Liquidity and Sources of Capital.
Assets acquired in prior years will, of course, be replaced at higher costs
but this will take place over many years. New assets, when acquired, will
result in higher depreciation charges, but in many cases, due to
technological improvements, savings in operating costs should result. The
company considers these matters in setting pricing policies.
Accounting Pronouncements
- -------------------------
The Financial Accounting Standards Board issued four new statements that the
Company needed to consider.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," was issued. Statement No. 128 establishes standards
for computing and presenting earnings per share and simplifies the existing
standards. Statement No. 128 replaces the presentation of primary earnings
per share with a presentation of basic and diluted earnings per share. The
Company adopted Statement No. 128 in the December 31, 1997 financial
statements, and the adoption had no impact on the Company's earnings per
share amounts.
In June 1997, Statement of Financial Accounting Standards No. 130,
"Comprehensive Income," was issued. Statement No. 130 establishes
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Accounting Pronouncements - Continued
- -------------------------
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The
Company adopted Statement No. 130 in the March 31, 1998 financial statements,
and the adoption had no impact on the Company's financial statements.
In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. Statement No. 131 establishes standards for the way that a public
enterprise reports information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders,
but not for interim periods in the initial year of adoption. Statement No.
131 is effective for fiscal years beginning after December 15, 1997. The
Company believes that it operates as one segment, which includes three
product lines (Home Products, Menswear and Womenswear) and that adoption of
Statement No. 131 will not have a significant impact on its financial
statements.
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pension and Other Postretirement Benefits," was
issued. Statement No. 132 revises employers' disclosure of pensions and
other postretirement benefits, requires additional information on changes in
benefit obligations and fair value of plan assets and eliminates certain
disclosures. Statement No. 132 is effective for the year ending December 31,
1998, and requires restatement of disclosures for earlier periods. The
Company believes that adoption of Statement No. 132 will not have a
significant impact on its financial statements.
Future Considerations
- ---------------------
The Company is faced with the ever-present challenge of maintaining and
expanding the customer file. This involves the acquisition of new customers
(prospects), the conversion of new customers to established customers (active
repeat buyers) and the retention of established customers. These actions are
vital in growing the business but are being impacted by increased operating
costs, increased competition in the retail sector and record levels of consumer
debt.
The company underwent a strategic planning study in 1995 in which our marketing
programs, operating systems and competitive position were thoroughly assessed.
The continuing strategic planning process has resulted in a marketing strategy
that requires utilizing our existing strengths, changing business processes and
organizational structure and improving information systems.
A prime aspect of the marketing strategy involves targeting customers in the
"over 40, low-to-moderate income" market. This redefinition of our target
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Future Considerations - Continued
- ---------------------
customer from "over 50" to "over 40" has been made possible by the ability of
our catalog advertising to reach younger buyers within our traditional list
sources. This market, though younger in age than our traditional customer
file, is the fastest growing segment of the population. Success of the
marketing strategy requires investment in database management, operating
systems, prospecting programs, catalog marketing, telephone call centers and,
possibly, a second distribution center. Management believes that these
investments should improve Blair Corporation's position in new and existing
markets and provide opportunities for future earnings growth.
Impact of Year 2000
- -------------------
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is estimated at $500,000 to $750,000 most of which will be
expensed as incurred. To date, the Company has incurred and expensed
approximately $300,000.
The project is estimated to be completed not later than September 30, 1999
which is prior to any anticipated impact on its operating systems. The
Company believes that with modifications to existing software and conversions
to new software, the Year 2000 Issue will not post significant operational
problems for its computer systems. However, if such modifications and
conversions are not made, or are not completed timely, the Year 2000 Issue
could have a material impact on the operations of the Company.
The Company has initiated formal communications with all of its significant
suppliers to determine the extent to which the Company's interface systems
are vulnerable to those third parties' failure to remediate their own Year
2000 Issues. There is no guarantee that the systems of other companies of
which the Company's systems rely will be timely converted and would not have
an adverse effect on the Company's systems.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Impact of Year 2000 - Continued
- -------------------
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
- ---------------------------------------------------------------------------
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that such forward-looking statements involve
risks and uncertainties including without limitation the following: (i) the
Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of the Company, (ii) the
Company's plans and results of operations will be affected by the Company's
ability to manage its growth, accounts receivable and inventory; and (iii)
other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The Company's Annual Meeting of Stockholders was held April 21, 1998.
(b) At the Annual Meeting of Stockholders, all of the Company's directors
were elected at said meeting, as follows:
David A. Blair 8,211,215 Votes For, 59,158 Votes Withheld
Robert W. Blair 8,211,390 Votes For, 58,983 Votes Withheld
Steven M. Blair 8,211,340 Votes For, 59,033 Votes Withheld
Robert D. Crowley 8,211,715 Votes For, 58,658 Votes Withheld
John O. Hanna 8,212,270 Votes For, 58,103 Votes Withheld
Gerald A. Huber 8,210,970 Votes For, 59,403 Votes Withheld
Craig N. Johnson 8,207,411 Votes For, 62,962 Votes Withheld
Murray K. McComas 8,211,227 Votes For, 59,146 Votes Withheld
Thomas P. McKeever 8,204,407 Votes For, 65,966 Votes Withheld
Michael J. Samargya 8,212,140 Votes For, 58,233 Votes Withheld
Kent R. Sivillo 8,212,390 Votes For, 57,983 Votes Withheld
Blair T. Smoulder 8,212,090 Votes For, 58,283 Votes Withheld
John E. Zawacki 8,212,315 Votes For, 58,058 Votes Withheld
Since all of the directors of the Company were elected at the Annual
Meeting of Stockholders, there are no directors whose term of
office as a director continued after the meeting.
(c) The following other matters were voted upon at the meeting, and the
following number of affirmative votes and negative votes were
cast with respect to such matters:
The adoption by the Company's Board of Directors of the Company's
Stock Accumulation and Deferred Compensation Plan for non-
employee directors of the Company was approved, adopted and
ratified. This matter received 7,871,988 affirmative votes,
339,399 negative votes and 58,986 votes withheld.
The reappointment by the Company's Board of Directors of
the firm of Ernst & Young LLP. as independent certified public
accountants to examine the financial statements and perform
the annual audit of the Company for the year ending December 31,
1998 was ratified. This matter received 8,257,062 affirmative
votes, 4,928 negative votesand 8,383 votes withheld.
PART II. OTHER INFORMATION - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1998
Item 5. Other Information
-----------------
The company filed a Registration Statement on Form S-8 on July 22,
1998 registering 50,400 shares of the Company's Common Stock which was
offered for purchase on July 27, 1998 to selected employees of the
Company under and in accordance with the Company's Employee Stock
Purchase Plan.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended
June 30, 1998.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLAIR CORPORATION
--------------------------------
(Registrant)
Date August 12, 1998 By Kent R. Sivillo
- --------------------------- ---------------------------------
Kent R. Sivillo
Vice President and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR
CORPORATION'S 6/30/98 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH SECOND QUARTER, 1998 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,374,359
<SECURITIES> 0
<RECEIVABLES> 147,046,253<F1>
<ALLOWANCES> 37,179,593
<INVENTORY> 81,598,067
<CURRENT-ASSETS> 251,179,421
<PP&E> 103,777,511
<DEPRECIATION> 53,713,160
<TOTAL-ASSETS> 302,129,274
<CURRENT-LIABILITIES> 81,230,859
<BONDS> 0
0
0
<COMMON> 419,810
<OTHER-SE> 218,997,605<F2>
<TOTAL-LIABILITY-AND-EQUITY> 302,129,274
<SALES> 242,613,611
<TOTAL-REVENUES> 263,118,488
<CGS> 118,156,653
<TOTAL-COSTS> 242,826,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 11,316,607
<INTEREST-EXPENSE> 1,059,594
<INCOME-PRETAX> 20,292,089
<INCOME-TAX> 7,682,000
<INCOME-CONTINUING> 12,610,089
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,610,089
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<FN>
<F1>AMOUNT REPRESENTS NET ACCOUNTS RECEIVABLE.
<F2>AMOUNT INCLUDES ADDITIONAL PAID-IN CAPITAL, RETAINED EARNINGS, TREASURY
STOCK, AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
</FN>
</TABLE>
