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 September 30, 1998 Commission File Number 1-878
------------------- ------------
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 November 10, 1998 the registrant had outstanding 8,907,343 shares of its
common stock without nominal or par value.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
September 30 December 31
1998 1997
------------ ------------
ASSETS
Current assets:
Cash $ 7,477,532 $ 3,468,483
Customer accounts receivable,
less allowances for doubtful
accounts and returns of $37,318,798
in 1998 and $38,479,888 in 1997 144,783,814 157,636,096
Inventories - Note F
Merchandise 97,072,697 68,143,275
Advertising and shipping supplies 18,003,392 10,584,134
------------ ------------
115,076,089 78,727,409
Deferred income taxes 6,968,000 9,910,000
Prepaid federal and state taxes 17,674,536 6,499,412
Prepaid expenses 789,986 391,532
------------ ------------
Total current assets 292,769,957 256,632,932
Property, plant and equipment:
Land 1,142,144 1,142,144
Buildings 63,433,347 63,263,399
Equipment 39,764,702 38,859,725
------------ ------------
104,340,193 103,265,268
Less allowances for depreciation 54,891,360 51,322,255
------------ ------------
49,448,833 51,943,013
Trademarks 867,441 921,623
------------ ------------
TOTAL ASSETS $343,086,231 $309,497,568
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - Note H $ 37,500,000 $ 38,600,000
Trade accounts payable 66,799,157 46,358,297
Advance payments from customers 3,982,746 1,393,814
Accrued expenses - Note D 12,682,955 9,033,411
------------ ------------
Total current liabilities 120,964,858 95,385,522
Deferred income taxes 1,421,000 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 14,278,828 13,230,251
Retained earnings 235,043,646 223,868,940
------------ ------------
249,742,284 237,519,001
Less 1,168,097 shares in 1998 and
1,067,724 shares in 1997 of common stock
in treasury - at cost 26,756,067 23,161,169
Less receivable from Employee Stock
Purchase Plan 2,285,844 1,928,786
------------ ------------
220,700,373 212,429,046
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $343,086,231 $309,497,568
============ ============
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $111,872,529 $102,809,800 $354,486,140 $341,237,544
Other income - Note G 9,669,514 9,036,032 30,174,391 30,085,087
Insurance proceeds - Note N 2,800,000 -0- 2,800,000 -0-
------------ ------------ ------------ ------------
124,342,043 111,845,832 387,460,531 371,322,631
Costs and expenses:
Cost of goods sold 57,683,795 52,629,516 175,840,448 171,385,242
Advertising 31,882,655 22,628,018 92,564,529 88,243,489
General and administrative 26,966,308 24,678,613 78,577,979 73,978,148
Provision for doubtful accounts 5,055,849 7,572,550 16,372,456 21,978,459
Interest 448,981 791,478 1,508,575 3,370,582
------------ ------------ ------------ ------------
122,037,588 108,300,175 364,863,987 358,955,920
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,304,455 3,545,657 22,596,544 12,366,711
Income taxes - Note E (284,000) 1,290,000 7,398,000 4,526,000
------------ ------------ ------------ ------------
NET INCOME $ 2,588,455 $ 2,255,657 $ 15,198,544 $ 7,840,711
============ ============ ============ ============
Basic and diluted earnings per share based on
weighted average shares outstanding - Note C $ .29 $ .25 $1.70 $ .86
===== ===== ===== =====
<FN>
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 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 13,193,208 12,919,478 13,230,251 12,928,260
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 1,085,620 310,773 1,025,989 288,303
Issuance of Common Stock to
non-employee directors -0- -0- 22,588 13,688
------------ ------------ ------------ ------------
Balance at end of period 14,278,828 13,230,251 14,278,828 13,230,251
Retained earnings:
Balance at beginning of period 233,791,292 218,910,178 223,868,940 216,068,537
Net income 2,588,455 2,255,657 15,198,544 7,840,711
Cash dividends declared - Note B (1,336,101) (1,358,116) (4,023,838) (4,101,529)
------------ ------------ ------------ ------------
Balance at end of period 235,043,646 219,807,719 235,043,646 219,807,719
Treasury Stock:
Balance at beginning of period (26,144,521) (21,913,986) (23,161,169) (19,013,814)
Purchase of treasury stock (1,018,213) (900,613) (4,001,471) (3,804,742)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 406,667 400,126 393,536 395,646
Issuance of Common Stock to
non-employee directors -0- -0- 13,037 8,437
------------ ------------ ------------ ------------
Balance at end of period (26,756,067) (22,414,473) (26,756,067) (22,414,473)
Receivable from Employee Stock Purchase Plan:
Balance at beginning of period (1,842,374) (1,676,959) (1,928,786) (1,803,910)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan (508,987) (368,100) (494,285) (362,765)
Repayments 65,517 76,388 137,227 198,004
------------ ------------ ------------ ------------
Balance at end of period (2,285,844) (1,968,671) (2,285,844) (1,968,671)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $220,700,373 $209,074,636 $220,700,373 $209,074,636
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
Nine Months Ended
September 30
1998 1997
------------ ------------
OPERATING ACTIVITIES
Net income $ 15,198,544 $ 7,840,711
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 3,772,375 4,010,407
Provision for doubtful accounts 16,372,456 21,978,459
Provision for deferred income taxes 2,680,000 4,065,000
Changes in operating assets and
liabilities providing (using) cash:
Customer accounts receivable (3,520,174) 16,622,660
Inventories (36,348,680) (5,966,119)
Prepaid federal and state taxes (11,175,124) 6,661,208
Prepaid expenses (398,454) 29,469
Trade accounts payable 20,440,860 11,070,981
Advance payments from customers 2,588,932 1,315,577
Accrued expenses 3,649,544 355,226
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,260,279 67,983,579
INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,224,013) (2,354,133)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (1,224,013) (2,354,133)
FINANCING ACTIVITIES
Net (repayments) from bank borrowings (1,100,000) (56,050,000)
Dividends paid (4,023,838) (4,101,529)
Purchase of Common Stock for treasury (4,001,471) (3,804,742)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 1,419,525 683,949
Increase in notes receivable from
Employee Stock Purchase Plan (357,058) (164,761)
Issuance of Common Stock to
non-employee directors 35,625 22,125
------------ ------------
NET CASH (USED IN) FINANCING ACTIVITIES (8,027,217) (63,414,958)
------------ ------------
NET INCREASE IN CASH 4,009,049 2,214,488
Cash at beginning of year 3,468,483 4,115,533
------------ ------------
CASH AT END OF PERIOD $ 7,477,532 $ 6,330,021
============ ============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
September 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 nine months ended
September 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 third quarter of 1998 as the Company had one more
shipping day in the third quarter of 1998 than in the third quarter of 1997.
Shipping days for the first nine months of 1998 and 1997 were the same. 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 10-20-98 .15
NOTE C - BASIC AND DILUTED EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net income $ 2,588,455 $ 2,255,657 $15,198,544 $ 7,840,711
Weighted average shares
outstanding 8,911,043 9,063,214 8,945,447 9,142,530
Basic and diluted earnings
per share $ .29 $ .25 $1.70 $ .86
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
September 30 December 31
1998 1997
----------- -----------
Employee compensation $ 8,459,810 $ 5,674,054
Contribution to profit sharing
and retirement plan 1,622,608 1,407,745
Taxes, other than taxes on income 401,553 297,457
Other accrued items 2,198,984 1,654,155
----------- -----------
$12,682,955 $ 9,033,411
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 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 (credit) are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Currently payable:
Federal $(2,856,000) $(1,534,000) $ 4,533,000 $ 897,000
State (697,000) (460,000) 185,000 (436,000)
----------- ----------- ----------- -----------
(3,553,000) (1,994,000) 4,718,000 461,000
Deferred 3,269,000 3,284,000 2,680,000 4,065,000
----------- ----------- ----------- -----------
$ (284,000) $ 1,290,000 $ 7,398,000 $ 4,526,000
=========== =========== =========== ===========
The differences between total tax expense (credit) 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 Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Statutory rate applied to
pre-tax income $ 806,559 $ 1,240,980 $ 7,908,790 $ 4,328,349
State income taxes, net
of federal tax benefit (135,850) 19,500 379,600 111,150
Insurance proceeds (980,000) -0- (980,000) -0-
Other items 25,291 29,520 89,610 86,501
----------- ----------- ----------- -----------
$ (284,000) $ 1,290,000 $ 7,398,000 $ 4,526,000
=========== =========== =========== ===========
Components of the provision for deferred income tax expense are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Advertising costs $ 3,248,000 $ 4,960,000 $ 2,889,000 $ 4,164,000
Provision for doubtful
accounts 71,000 (1,642,000) 990,000 151,000
Provision for estimated
returns (262,000) 74,000 (1,230,000) (83,000)
Other items - net 212,000 (108,000) 31,000 (167,000)
----------- ----------- ----------- -----------
$ 3,269,000 $ 3,284,000 $ 2,680,000 $ 4,065,000
=========== =========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
NOTE E - INCOME TAXES - Continued
Components of the deferred tax asset and liability under the liability method
as of September 30, 1998 and December 31, 1997 are as follows:
September 30 December 31
1998 1997
----------- -----------
Current net deferred tax asset:
Doubtful accounts $ 5,970,000 $ 6,960,000
Returns allowance 3,243,000 2,013,000
Inventory obsolescence 1,937,000 1,937,000
Vacation pay 1,321,000 1,321,000
Inventory costs 849,000 778,000
Advertising costs (7,002,000) (4,113,000)
Other items 650,000 1,014,000
----------- -----------
$ 6,968,000 $ 9,910,000
=========== ===========
Long-term deferred tax liability:
Property, plant and equipment $ 1,421,000 $ 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 $8,718,000 at September 30, 1998 and $8,538,000 at December
31, 1997, respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Finance charges on time
payment accounts $ 7,950,997 $ 8,401,016 $25,626,182 $28,411,295
Commissions earned 631,116 17,180 1,690,209 46,063
Other items 1,087,401 617,836 2,858,000 1,627,729
----------- ----------- ----------- -----------
$ 9,669,514 $ 9,036,032 $30,174,391 $30,085,087
=========== =========== =========== ===========
Finance charges on time payment accounts are recognized on an accrual basis of
accounting.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 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 September 30, 1998
and December 31, 1997, the Company was in compliance with all the
agreement's covenants. At September 30, 1998 and December 31, 1997, the
Company had borrowed $37,500,000 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
September 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.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS
In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments," was issued. SFAS 133
provides new guidelines for accounting for derivative instruments. SFAS 133
is effective for financial periods beginning after June 15, 1999.
Management is currently analyzing the impact of this statement on 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.
NOTE N - INSURANCE PROCEEDS
The $2,800,000 in insurance proceeds resulted from the death of John L.
Blair, former President and Chairman of the Company. The Company was the
owner and beneficiary of a life insurance policy on Mr. Blair who died on
August 29, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
Results of Operations
- ---------------------
Comparison of Third Quarter 1998 and Third Quarter 1997
Net income for the third quarter of 1998 increased 15% as compared to the
third quarter of 1997. However, the third quarter of 1998 included non-
recurring insurance proceeds of $2,800,000. A net operating loss of
$211,545 resulted primarily from difficulties at the Distribution Center
that prevented the timely fulfillment of orders. The resulting order
backlog should be worked off in the fourth quarter. Inventory levels
associated with the Company's increased catalog efforts and a declining
labor pool caused the fulfillment difficulties at the Distribution Center.
Net sales for the third quarter of 1998 were 8.8% higher than third quarter
1997 net sales. Increased advertising volume was more than offset by lower
than expected response in the second half of September 1998, the previously
discussed increased order backlog and an increased level of prospecting in
the advertising mix. Response rates overall were better in the third
quarter of 1998 than in the third quarter of 1997 but didn't meet
expectations in the third quarter of 1998. Gross sales revenue generated
per advertising dollar decreased 24%. The total number of orders shipped
increased and the average order size increased slightly in 1998 in comparing
the third quarters. Returns as a percentage of adjusted gross sales
improved to 14.3% in the third quarter of 1998 from 15.9% in the third
quarter of 1997. A change in return policy was primarily responsible for
the improvement in the returns percentage.
Other income increased 7% in the third quarter of 1998 as compared to the
third quarter of 1997. Primarily, commissions earned more than offset the
drop in finance charges assessed on Easy Payment Plan accounts receivable.
Insurance proceeds were the result of the Company owned term life policy on
John L. Blair, former President and Chairman of the Company. John died on
August 29, 1998.
Cost of goods sold as a percentage of net sales increased to 51.6% in the
third quarter of 1998 from 51.2% in the third quarter of 1997. Increases in
prospect sales (promotional offers) and Home Products sales (lower margins)
more than offset the improvement in returns in the third quarter of 1998.
Advertising expense in the third quarter of 1998 increased 41% from the
third quarter of 1997. The increase in catalog mailings was responsible for
the higher advertising expense.
The total number of catalog mailings released in the third quarter of 1998
was 82% higher than in the third quarter of 1997 (34.2 million vs. 18.9
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
September 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Third Quarter 1998 and Third Quarter 1997 - Continued
The total number of circular letter mailings in the third quarter of 1998
was 18% less than in the third quarter of 1997 (16.8 million vs. 20.5
million). Circular letter mailings have decreased due to the expansion of
catalog advertising.
Total volume of the co-op and media advertising programs decreased 24% in
the third quarter of 1998 as compared to the third quarter of 1997 (211
million vs. 278 million).
General and administrative expense increased 9% in the third quarter of 1998
as compared to the third quarter of 1997. The higher general and
administrative expense was primarily the result of an 8% increase in wages
and benefits and the costs associated with implementing and maintaining
expanded database capabilities in marketing, credit management and
advertising. 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 39%
lower in the third quarter of 1998 as compared to the third quarter of 1997.
The third quarter of 1998 provision was lower primarily due to an additional
provision required in the third quarter of 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, the estimated bad debt rate for
1998 credit sales and finance charges has been lowered and no additional
provision has been required. The third quarter of 1997 included an
additional provision of $3,159,000. At September 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 and
June 30, 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 43% in the third quarter of 1998 as compared to
the third quarter of 1997. Interest expense results primarily from the
Company's borrowings necessary to finance customer accounts receivable.
Average borrowings outstanding have decreased in 1998 as compared to 1997.
The increase in credit card sales and improved credit policies are greatly
responsible for lowering the levels of customer accounts receivable and
borrowings outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Third Quarter 1998 and Third Quarter 1997 - Continued
Income taxes as a percentage of income before income taxes were a negative
12.3% in the third quarter of 1998 and a positive 36.4% in the third quarter
of 1997. The federal income tax rate was 35% in both years. The reduction
in the total income tax rate in the third quarter of 1998 was due to the non-
taxable insurance proceeds ($2,800,000) and a decrease 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 has had little or no impact as the Company had one more shipping day
in the third quarter of 1998 than it had in the third quarter of 1997.
Comparison of Nine Month Periods Ended September 30, 1998 and September 30,
1997
Net income for the first nine months of 1998 increased 94% as compared to
the first nine months of 1997. The first nine months of 1998 have been
favorably impacted by improved response to all advertising and by reductions
in the provision for doubtful accounts and in interest expense. 1998 net
income also included non-recurring insurance proceeds of $2,800,000.
Net sales for the first nine months of 1998 were 3.9% higher than net sales
for the first nine months of 1997. Net sales improved in 1998 due to
increased response to all the Company's advertising formats and would have
improved more had there not been fulfillment difficulties at the
Distribution Center. Gross sales revenue generated per advertising dollar
decreased 1.5%. The total number of orders shipped increased and the
average order size increased slightly in 1998 as compared to 1997. Returns
as a percentage of adjusted gross sales improved to 15.9% in the nine months
of 1998 from 16.6% in the first nine months of 1997.
Other income increased .3% in the nine months of 1998 as compared to the
first nine months of 1997. The drop in finance charges assessed on Easy
Payment Plan accounts receivable was more than offset by increased
commissions earned and miscellaneous charges to vendors and customers.
Insurance proceeds were the result of the Company owned term life policy on
John L. Blair, former President and Chairman of the Company. John died on
August 29, 1998.
Cost of goods sold as a percentage of net sales decreased to 49.6% in the
nine months of 1998 from 50.2% in the first nine months of 1997. Lower
returns in 1998 and the liquidation of electronics merchandise in 1997 were
primarily responsible for the favorable cost of goods comparison.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Nine Month Periods Ended September 30, 1998 and September 30,
1997 - Continued
Advertising expense in the nine months of 1998 increased 4.9% from the first
nine months of 1997. The increase in catalog mailings was responsible for
the higher advertising expense.
The total number of catalog mailings released in the nine months of 1998 was
35% higher than in the first nine months of 1997 (91.0 million vs. 67.4
million). The total number of circular letter mailings released in the nine
months of 1998 was 28% less than in the first nine months of 1997 (64.5
million vs. 89.2 million). Total volume of the co-op and media advertising
programs decreased approximately 4% in the nine months of 1998 as compared
to the first nine months of 1997 (925 million vs. 965 million).
General and administrative expense increased 6.2% in the nine months of 1998
as compared to the first nine 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 29%
lower in the nine months of 1998 as compared to the first nine months of
1997. The 1998 provision was lower primarily due to an additional provision
required in 1997. The estimated provision for doubtful accounts is based on
current expectations, sales mix (prospect/customer) 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. The first nine
months of 1997 included an additional provision of $5,194,000. At September
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 55% in the nine months of 1998 as compared to the
first nine months of 1997. Interest expense results primarily from the
Company's borrowings necessary to finance customer accounts receivable.
Average borrowings outstanding have decreased in 1998 as compared to 1997.
The increase in credit card sales and improved credit policies are greatly
responsible for lowering the levels of customer accounts receivable and
borrowings outstanding.
Income taxes as a percentage of income before income taxes were 32.7% in the
nine months of 1998 and 36.6% in the first nine months of 1997. The federal
income tax rate was 35% in both years. The reduction in the total income
tax rate in 1998 was primarily due to the non-taxable insurance proceeds
($2,800,000).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
Results of Operations - Continued
- ---------------------
Comparison of Nine Month Periods Ended September 30, 1998 and September 30,
1997 - Continued
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 has had little or no impact as the Company had the same number of
shipping days in the nine months of 1998 as it had in the first nine months
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, and as of September 30, 1998 the Company
was in compliance with all the covenants. Borrowings outstanding at
September 30, 1998 were $37,500,000, all classified as current. Borrowings
outstanding at December 31, 1997 were $38,600,000, all classified as
current. Borrowings outstanding at September 30, 1997 were $50,950,000 of
which $35,000,000 was classified as long-term. The Company will be entering
into a $95,000,000 Revolving Credit Facility before November 17, 1998.
The ratio of current assets to current liabilities was 2.42 at September 30,
1998, 2.69 at December 31, 1997 and 3.41 at September 30, 1997. The ratio
has decreased at September 30, 1998 primarily due to the increase in trade
accounts payable resulting from higher inventories. Working capital
increased $10,557,689 in the first nine months of 1998 primarily due to
higher net income. The 1998 increase was primarily reflected in increased
inventories and prepaid federal and state taxes more than offsetting
decreased customer accounts receivable and increased notes payable.
Merchandise inventory turnover was 2.5 at September 30, 1998, 2.6 at
December 31, 1997 and 2.6 at September 30, 1997. Merchandise inventory as
of September 30, 1998 increased 42% from December 31, 1997 and 37.0% from
September 30, 1997. Inventory levels have been impacted by the continuing
effort to increase order fulfillment rates, by transition to a larger
catalog operation and by fulfillment problems in the third quarter of 1998.
The Company's new catalog inventory management system is nearing full
operation.
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
13.7% ($48.6 million) in the nine months of 1998 as compared to 13.1% ($44.8
million) in the first nine months of 1997. Menswear net sales were 22.5%
($79.9 million) compared to 23.1% ($78.9 million). Womenswear net sales
were 63.8% ($226.0 million) compared to 63.8% ($217.5 million). Home
Products inventory
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
Liquidity and Sources of Capital - Continued
- --------------------------------
totaled $18.0 million at September 30, 1998, $6.8 million at December 31,
1997 and $9.2 million at September 30, 1997. Menswear inventory was $25.0
million at September 30, 1998, $17.6 million at December 31, 1997 and $22.5
million at September 30, 1997. Womenswear inventory was $54.1 million at
September 30, 1998, $43.7 million at December 31, 1997 and $39.0 million at
September 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 $1,224,013 during the
first nine months of 1998 and $2,354,133 during the first nine months of
1997. Capital expenditures for 1998, 1999 and 2000 had been 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. A delay in the start-up of the database project
will likely keep capital expenditures below $5,000,000 in 1998.
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 call
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 December 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 147,573
shares at a total price of $4,001,471 ($27.12 per share) in the first nine
months 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
September 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, increased quarterly throughout the rest of 1997 and the first quarter
of 1998, will decrease in late 1998 and are expected to decrease further in
early 1999. 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 on January 10, 1999. The
Company's early estimate is that the January 10, 1999 increase will be
approximately 4%.
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
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 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.
In June 1998, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued.
Statement No. 133 provides new guidelines for accounting for derivative
instruments. The Statement is effective for financial periods beginning
after June 15, 1999. The Company is currently analyzing the impact of
Statement No. 133.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
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, high
levels of consumer debt, a softening in consumer response rates and a
declining labor pool.
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
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
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 of its IT systems 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 $600,000 to $800,000 all of
which will be expensed as incurred. To date, the Company has incurred and
expensed approximately $450,000.
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 modification to existing software and conversions
to new software, the Year 2000 Issue will not post significant operational
problems for its computer systems. At this time, all software has been
modified and/or converted but has not been fully tested - testing is
approximately 55% complete. However, if the software installations are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company. Operations could be disrupted or stopped for
some period of time. Should this occur, the Company would direct all
available resources at the situation in order to resolve it in as short a
time as possible.
The Company has initiated formal communications with all of its significant
suppliers (includes suppliers of non - IT systems) 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. The Company has
received favorable response from most of these suppliers, however, there is
no guarantee that the systems of suppliers on which the Company relies will
be timely converted and would not have an adverse effect on the Company's
systems. Non-responding and/or non-compliant suppliers are being further
assessed by the Company.
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
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1998
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
September 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
September 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 November 10, 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 9/30/98 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH THIRD QUARTER, 1998 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,477,532
<SECURITIES> 0
<RECEIVABLES> 144,783,814<F1>
<ALLOWANCES> 37,318,798
<INVENTORY> 115,076,089
<CURRENT-ASSETS> 292,769,957
<PP&E> 104,340,193
<DEPRECIATION> 54,891,360
<TOTAL-ASSETS> 343,086,231
<CURRENT-LIABILITIES> 120,964,858
<BONDS> 0
0
0
<COMMON> 419,810
<OTHER-SE> 220,280,563<F2>
<TOTAL-LIABILITY-AND-EQUITY> 343,086,231
<SALES> 354,486,140
<TOTAL-REVENUES> 387,460,531
<CGS> 175,840,448
<TOTAL-COSTS> 364,863,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16,372,456
<INTEREST-EXPENSE> 1,508,575
<INCOME-PRETAX> 22,596,544
<INCOME-TAX> 7,398,000
<INCOME-CONTINUING> 15,198,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,198,544
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
<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>
