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, 1994 Commission File Number 1-878
------------------ -----------
BLAIR CORPORATION
- - ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 25-0691670
- - ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001
- - ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(814) 723-3600
- - ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- - ----------------------------------------------------------------------------
(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, 1994 the registrant had outstanding 9,273,482 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, 1994
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
September 30 December 31
1994 1993
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,679,917 $ 2,937,432
Customer accounts receivable,
less allowances for doubtful
accounts and returns of
$36,388,849 in 1994 and
$34,255,648 in 1993 113,030,615 112,452,666
Inventories - Note F
Merchandise 67,500,549 47,419,661
Advertising and shipping supplies 17,603,340 14,652,580
------------ ------------
85,103,889 62,072,241
Deferred income taxes 15,693,000 15,807,000
Prepaid federal and state income taxes 6,841,374 -0-
Prepaid expenses 703,858 409,562
------------ ------------
TOTAL CURRENT ASSETS 223,052,653 193,678,901
PROPERTY, PLANT AND EQUIPMENT - at cost
Land 1,130,454 719,791
Buildings 55,905,495 54,816,920
Equipment 31,453,832 29,721,911
Construction in progress 937,506 522,692
------------ ------------
89,427,287 85,781,314
Less allowances for depreciation 37,088,639 33,855,151
------------ ------------
52,338,648 51,926,163
------------ ------------
TOTAL ASSETS $275,391,301 $245,605,064
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 33,500,000 $ 11,600,000
Trade accounts payable 35,671,382 34,579,040
Advance payments from customers 2,270,191 1,886,186
Accrued expenses - Note D 10,437,603 9,651,354
Federal and state income taxes -0- 4,758,684
------------ -----------
TOTAL CURRENT LIABILITIES 81,879,176 62,475,264
DEFERRED INCOME TAXES 1,891,000 1,926,000
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 11,017,130 9,595,875
Retained earnings 199,374,563 188,957,972
------------ ------------
210,811,503 198,973,657
Less 801,958 shares in 1994 and 809,408
shares in 1993 of Common Stock in
treasury - at cost 17,238,660 16,056,017
Less receivable from Employee Stock
Purchase Plan 1,951,718 1,713,840
------------ ------------
191,621,125 181,203,800
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $275,391,301 $245,605,064
============ ============
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $115,000,342 $111,492,801 $376,158,111 $368,276,024
Other income - Note G 6,346,377 5,119,373 18,288,274 15,532,828
------------ ------------ ------------ ------------
121,346,719 116,612,174 394,446,385 383,808,852
Costs and expenses:
Cost of goods sold 55,053,697 53,974,479 179,042,187 177,489,011
Selling 27,523,841 27,754,393 85,137,485 93,278,883
General and administrative 24,193,569 22,303,189 68,338,212 63,868,248
Provision for doubtful accounts 5,894,815 6,177,729 18,394,298 16,351,918
------------ ------------ ------------ ------------
112,665,922 110,209,790 350,912,182 350,988,060
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 8,680,797 6,402,384 43,534,203 32,820,792
Income taxes - Note E 3,443,000 2,639,000 17,410,000 13,671,000
------------ ------------ ------------ ------------
NET INCOME $ 5,237,797 $ 3,763,384 $ 26,124,203 $ 19,149,792
============ ============ ============ ============
Net income per share based on average
shares outstanding - Note C $ .56 $ .40 $2.82 $2.07
===== ===== ===== =====
<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
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810
Additional paid-in capital:
Balance at beginning of period 9,595,875 7,775,814 9,595,875 7,775,814
Issuance of Common Stock under
Employee Stock Purchase Plan 1,421,255 1,817,937 1,421,255 1,817,937
------------ ------------ ------------ ------------
Balance at end of period 11,017,130 9,593,751 11,017,130 9,593,751
Retained earnings:
Balance at beginning of period 197,382,484 179,977,549 188,957,972 182,111,957
Net income 5,237,797 3,763,384 26,124,203 19,149,792
Cash dividends declared - Note B (3,245,718) (3,243,111) (15,707,612) (20,763,927)
------------ ------------ ------------ ------------
Balance at end of period 199,374,563 180,497,822 199,374,563 180,497,822
Treasury Stock:
Balance at beginning of period (17,526,017) (16,418,906) (16,056,017) (16,418,906)
Purchase of Common Stock for treasury -0- -0- (1,470,000) -0-
Issuance of Common Stock under
Employee Stock Purchase Plan 287,357 365,013 287,357 365,013
------------ ------------ ------------ ------------
Balance at end of period (17,238,660) (16,053,893) (17,238,660) (16,053,893)
Receivable from Employee Stock Purchase Plan:
Balance at beginning of period (1,476,308) (1,124,205) (1,713,840) (1,454,490)
Issuance of Common Stock under
Employee Stock Purchase Plan (551,850) (712,800) (551,850) (712,800)
Payments 76,440 61,582 313,972 391,867
------------ ------------ ------------ ------------
Balance at end of period (1,951,718) (1,775,423) (1,951,718) (1,775,423)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $191,621,125 $172,682,067 $191,621,125 $172,682,067
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
Nine Months Ended
September 30
1994 1993
------------ ------------
OPERATING ACTIVITIES
Net income $ 26,124,203 $ 19,149,792
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,419,139 3,333,954
Provision for doubtful accounts 18,394,298 16,351,918
Provision for deferred income taxes 79,000 (2,362,000)
Gain on disposition of equipment (259,877) -0-
Changes in operating assets and
liabilities (using) providing cash:
Customer accounts receivable (18,972,247) (23,842,557)
Inventories (23,031,648) (5,651,737)
Prepaid federal and state
income taxes (6,841,374) -0-
Prepaid expenses (294,296) (275,600)
Trade accounts payable 1,092,342 1,396,403
Advance payments from customers 384,005 (308,243)
Accrued expenses 786,249 (2,447,181)
Federal and state income taxes (4,758,684) (4,320,160)
------------ ------------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (3,878,890) 1,024,589
INVESTING ACTIVITIES
Purchases of property, plant and equipment (4,024,716) (7,748,744)
Proceeds from sale of short-term investments -0- 902,576
Proceeds from sale of property, plant
and equipment 452,969 -0-
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (3,571,747) (6,846,168)
FINANCING ACTIVITIES
Proceeds from lines of credit 117,500,000 84,400,000
Repayments on lines of credit (95,600,000) (67,700,000)
Dividends paid (15,707,612) (20,763,927)
Purchase of Common Stock for treasury (1,470,000) -0-
Issuance of Common Stock under
Employee Stock Purchase Plan 1,708,612 2,182,950
Increase in notes receivable from
Employee Stock Purchase Plan (237,878) (320,933)
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 6,193,122 (2,201,910)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,257,515) (8,023,489)
Cash and cash equivalents at beginning of year 2,937,432 9,118,850
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,679,917 $ 1,095,361
============ ============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
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, 1994 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1994. 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, 1993.
On September 2, 1993, Blair formed a new wholly-owned subsidiary, Blair
Holdings, Inc., a Delaware Corporation. The consolidated financial statements
include the accounts of Blair Corporation and its subsidiary. All significant
intercompany accounts and transactions are eliminated upon consolidation.
NOTE B - DIVIDENDS DECLARED
2-10-93 $1.55 per share 2-09-94 $1.00 per share
5-12-93 .35 4-19-94 .35
8-10-93 .35 7-20-94 .35
11-10-93 .35 10-19-94 .35
NOTE C - NET INCOME PER COMMON SHARE
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Net income $ 5,237,797 $ 3,763,384 $26,124,203 $19,149,792
Average shares outstanding 9,262,870 9,254,895 9,250,767 9,234,847
Net income per common share $ .56 $ .40 $2.82 $2.07
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
September 30 December 31
1994 1993
----------- -----------
Employee compensation $ 6,442,307 $ 5,081,753
Contribution to profit sharing
and retirement plan 2,794,620 3,294,397
Taxes, other than taxes on income -0- 199,687
Other accrued items 1,200,676 1,075,517
----------- -----------
$10,437,603 $ 9,651,354
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
NOTE E - INCOME TAXES
The components of income tax expense are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Currently payable:
Federal $ 1,088,000 $ 3,680,000 $14,345,000 $12,690,000
State (32,000) (339,000) 2,986,000 3,343,000
----------- ----------- ----------- -----------
1,056,000 3,341,000 17,331,000 16,033,000
Deferred (credit) 2,387,000 (702,000) 79,000 (2,362,000)
----------- ----------- ----------- -----------
$ 3,443,000 $ 2,639,000 $17,410,000 $13,671,000
=========== =========== =========== ===========
The deferred income tax provisions for 1993 include a credit of $312,000
relating to the increase in the statutory federal income tax rate from 34% to
35% enacted into law in August 1993, effective January 1, 1993. The currently
payable state income tax provisions for 1994 and 1993 include downward
adjustments of the company's effective state tax rate.
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 Nine Months Ended
September 30 September 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Statutory rate applied to
pre-tax income $ 3,038,279 $ 2,505,018 $15,236,971 $11,487,277
State income taxes, net
of federal tax benefit 342,550 (247,760) 1,958,750 1,904,500
Other items 62,171 381,742 214,279 279,223
----------- ----------- ----------- -----------
$ 3,443,000 $ 2,639,000 $17,410,000 $13,671,000
=========== =========== =========== ===========
Components of the provision for deferred income tax expense (credit) are as
follows:
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
----------- ---------- ----------- -----------
Provision for estimated
returns $ (32,000) $ 168,000 $ (908,000) $ (118,000)
Provision for doubtful
accounts (255,000) (813,000) (738,000) (1,703,000)
Cumulative effect
adjustment as of January
1, 1993 of change in
method of accounting for
income taxes -0- -0- -0- (207,000)
Advertising costs 2,788,000 -0- 1,941,000 -0-
Other items - net (114,000) (57,000) (216,000) (334,000)
----------- ----------- ----------- -----------
$ 2,387,000 $ (702,000) $ 79,000 $(2,362,000)
=========== =========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
NOTE E - INCOME TAXES - Continued
In the first quarter of 1993, the company adopted Financial Accounting Standards
Board Statement No. 109 on accounting for income taxes. Prior to the adoption
of Statement No. 109, income tax expense was determined using the deferred
method. This accounting change did not have a material impact on the company -
financial position increased by $207,000, $.02 per share.
Significant components of the company's deferred tax assets and liability as of
September 30, 1994 and December 31, 1993 are as follows:
September 30 December 31
1994 1993
----------- -----------
Current deferred tax assets - net:
Allowance for doubtful accounts $12,243,000 $11,505,000
Allowance for returns 2,641,000 1,733,000
Allowance for inventory obsolescence 1,792,000 1,705,000
Accrued vacation pay 1,085,000 1,061,000
Inventory costs 1,089,000 1,019,000
Advertising costs (3,551,000) (1,610,000)
Other items 394,000 394,000
----------- -----------
$15,693,000 $15,807,000
=========== ===========
Long-term deferred tax liability:
Tax over book depreciation $ 1,891,000 $ 1,926,000
=========== ===========
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. If the FIFO method had been used for all merchandise
inventories, the total amount would have increased by approximately $8,583,000
at September 30, 1994 and $8,358,000 at December 31, 1993, respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
----------- ----------- ---------- -----------
Finance charges on time
payment accounts $ 5,451,049 $ 4,468,942 $16,195,767 $13,487,622
Other items 895,328 650,431 2,092,507 2,045,206
----------- ----------- ----------- -----------
$ 6,346,377 $ 5,119,373 $18,288,274 $15,532,828
=========== =========== =========== ===========
Finance charges on time payment accounts are recognized on an accrual basis of
accounting based upon principal balances outstanding.
NOTE H - 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
42,450 shares on July 7, 1994 and 44,550 shares on July 6, 1993.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
Results of Operations
- - ---------------------
Net sales for the third quarter and nine months of 1994 were record highs. Net
income increased 39.2% in the third quarter and 36.4% in the first nine months
of 1994 as compared to the same periods of 1993. Net income for the first nine
months of 1994 was the second highest in company history - 1.3% less than the
record first nine months of 1990. The improved earnings were primarily
attributable to increased response rates to the company's 1994 advertising
programs. The increased response rates enabled the company to achieve record
sales levels despite reductions in total advertising dollars spent.
Net sales for 1994 increased 3.1% and 2.1% over the sales of the third quarter
and first nine months of 1993. Response to customer multi-product circular
advertising mailings increased 12.9% and 11.5% in 1994. Response to the home
furnishings customer catalogs - not up to expectations for the third quarter -
was 2.0% and 30.5% better than the response to home furnishings customer multi-
product circular mailings in 1993. Response to the co-op and media programs
increased 4.1% and 8.3% in 1994. In 1994, the company generated more gross
sales per advertising dollar than in 1993 - 3.5% more in the third quarter,
11.4% more in the first nine months. The number of orders filled in 1994
decreased 2.9% and 6.1% from 1993 but the average order size increased 5.0% and
7.8%. Returns as a percentage of adjusted gross sales were comparable in the
two years - 15.1% and 15.0% in 1994, 14.8% and 15.3% in 1993.
Other income increased 24.0% and 17.7% in the third quarter and nine months of
1994 as compared to 1993. The increases were primarily due to finance charges
assessed on increased Easy Payment Plan accounts receivable. Prospect multi-
product circular mailings (since 1992) and prospect catalogs (since 4th quarter
1993) offer revolving credit to first-time buyers via the Easy Payment Plan.
These programs have been greatly responsible for an average 18.6% increase
(approximately $21,300,000) in Easy Payment Plan accounts receivable in 1994 as
compared to 1993. Easy Payment Plan gross sales were 7.8% and 8.1% higher in
the third quarter and nine months of 1994 as compared to 1993.
Cost of goods sold as a percentage of net sales decreased to 47.9% and 47.6% in
1994 from 48.4% and 48.2% in 1993. Fewer prospect (first-time buyers) orders
at incentive pricing were primarily responsible for the improved margins in the
1994 periods.
Selling expenses in the third quarter and first nine months of 1994 decreased
.8% and 8.7% from 1993. The decreased selling expenses were primarily
attributable to reductions in circular advertising mailings.
The total number of circular advertising mailings released in the third quarter
of 1994 was 28.7% less than in 1993 (1994 - 44,070,000, 1993 - 61,772,000). A
14.5% decrease in multi-product customer mailings (1994 - 34,564,000, 1993 -
40,435,000), a 58.9% decrease in multi-product prospect mailings (1994 -
7,811,000, 1993 - 18,987,000) and a 27.9% decrease in single-product mailings
(1994 - 1,695,000, 1993 - 2,350,000) resulted in a cost reduction of
approximately $4,970,000. The total number of circular advertising mailings
released in the nine months of 1994 was 22.0% less than in the first nine
months of 1993 (1994 - 156,835,000, 1993 - 201,092,000). A 13.8% decrease in
multi-product customer mailings (1994 - 117,878,000, 1993 - 136,747,000), a
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
Results of Operations - Continued
- - ---------------------
43.9% decrease in multi-product prospect mailings (1994 - 31,895,000, 1993 -
56,810,000) and a 6.3% decrease in single-product mailings (1994 - 7,062,000,
1993 - 7,535,000) resulted in a cost reduction of approximately $14,490,000.
Customer circular mailings have decreased in 1994 primarily due to the better
targeting of mailings, the removal of non-responding names from the customer
file and full customer list mailings of the home furnishings catalogs.
Prospect circular mailings have decreased in 1994 due to the elimination of
poorly performing acquired mailings lists, tightened credit policies and
prospect home furnishings catalog mailings.
Total volume of the co-op and media advertising programs in 1994 increased 9.6%
in the third quarter (1994 - 312 million, 1993 - 284 million) and decreased
8.3% in the first nine months (1994 - 1,344 million, 1993 - 1,466 millions) as
compared to 1993. The increased volume and a 7.7% reduction in average
production and placement costs resulted in a net cost increase of approximately
$40,000 in the third quarter of 1994. The decreased volume and a 5.3%
reduction in average production and placement costs resulted in a cost decrease
of approximately $1,840,000 in the first nine months of 1994.
Home furnishings catalogs, offering 350 to 400 products, mailed in 1994
numbered 9,622,000 (5,453,000 prospect) in the third quarter and 15,593,000
(5,715,000 prospect) in the first nine months. In 1993, 696,000 (all customer)
catalogs were mailed in the third quarter. Response continues to be favorable
but fell short of expectations in the third quarter 1994. Customer home
furnishings catalog mailings have been scheduled for the fourth quarter 1994
and test mailings of men's and women's apparel catalogs have been scheduled for
fall 1995 and spring 1996. Catalog mailings increased selling expenses in the
third quarter and nine months of 1994 by approximately $4,540,000 and
$7,830,000.
General and administrative expenses increased 8.5% in the third quarter and
7.0% in the nine months of 1994 as compared to 1993. The higher expenses for
1994 primarily resulted from increased wages and profit sharing. Wages
increased 5.3% and 5.8% due to normal pay increases and a larger work force.
The number of employees increased, on average, 8.6% in the third quarter and
4.5% year-to-date. Profit sharing increased 25.6% and 35.1% due to the
improved earnings in 1994.
The provision for doubtful accounts as a percentage of credit sales decreased
8.6% in the third quarter and increased 7.8% in the nine months of 1994 as
compared to 1993. Credit sales increased 4.5% in the third quarter and 4.4%
year-to-date. Prospect (first-time buyer) credit sales as a percentage of
total credit sales were approximately 9.1% in the 1994 periods as compared to
approximately 10.7% and 12.3% in 1993. The 1994 provisions included favorable
adjustments of prior period provisions of approximately $140,000 and $210,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
Results of Operations - Continued
- - ---------------------
The 1993 provisions included unfavorable adjustments of prior period provisions
of approximately $930,000 and $1,340,000. In 1994, bad debts have been
provided for using rates based on current expectations and 1993 experience.
Had similar rates been applied to the third quarter and first nine
months of 1993, the 1993 provisions for doubtful accounts would have been
approximately $400,000 lower (third quarter) and $3,200,000 higher (nine
months). As a percentage of credit sales, the revised 1993 provisions would
have been 2.4% and 10.9% higher than the 1994 provisions.
Income taxes as a percentage of income before income taxes were 39.7% and 40.0%
in the third quarter and nine months of 1994 as compared to 41.2% and 41.7% in
1993. An increase in the federal income tax rate from 34% to 35% was enacted
into law in August 1993, retroactive to January 1, 1993. The federal increase
was more than offset by the downward adjustments of the company's effective
state income tax rate. The state effective rate declined further in the third
quarter of 1994 when the Pennsylvania statutory rate fell from 12.25% to
11.99%, effective January 1, 1994. The company adopted Financial Accounting
Standards Board Statement No. 109 on accounting for income taxes in the first
quarter of 1993. Due to the relative insignificance of the adoption of this
change in accounting, it was reported as a reduction in the company's first
quarter 1993 income tax expense in the amount of $207,000.
On August 30, 1993, the company opened a new retail store in Wilmington,
Delaware. The Delaware site was chosen due to the population density of
Delaware and the surrounding states and the favorable business climate. In
addition, on September 2, 1993, Blair formed a new wholly-owned subsidiary,
Blair Holdings, Inc., a Delaware corporation.
Liquidity and Sources of Capital
- - --------------------------------
All working capital needs were met and suppliers' invoices were timely paid in
order to maximize discounts. The company has $40,000,000 available in lines of
credit, $10,000,000 with no specified expiration date and $30,000,000 expiring
May 31, 1995. Management anticipates renewing the lines upon their expiration.
The company incurred a total of $117,500,000 in short-term borrowings during
the first nine months of 1994, $33,500,000 of which was outstanding at
September 30, 1994. There were no long-term borrowings and excess funds when
available were invested in federal government obligations, commercial paper and
tax free securities.
The ratio of current assets to current liabilities was 2.72 at September 30,
1994, 3.10 at December 31, 1993 and 2.94 at September 30, 1993. Working capital
increased $9,969,840 during the nine months of 1994. The increase was primarily
reflected in increased merchandise inventories and prepaid federal and state
income taxes offsetting increased notes payable to banks. The 1994 nine month
increase in working capital was the result of the increase in net income and the
reductions in capital expenditures and dividends.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
Liquidity and Resources - Continued
- - -----------------------
Merchandise inventory turnover was 3.45 at September 30, 1994, 3.82 at December
31, 1993 and 3.70 at September 30, 1993. Merchandise inventory as of September
30, 1994 has increased approximately 30% from September 30, 1993, 43% from
December 31, 1993, 32% from March 31, 1994 and 38% from June 30, 1994.
Merchandise inventory is normally at it's highest level at September 30, in
anticipation of fourth quarter sales. However, the majority of the growth was
due to the expansion of home furnishings inventory in order to service
the 350-400 product catalogs. Home furnishings net sales as a percentage of
total net sales have increased to 16.8% ($19.3 million) in the third quarter and
13.8% ($51.8 million) in the first nine months of 1994 as compared to 12.1%
($13.5 million) and 11.1% ($40.8 million) in 1993. Home furnishing inventory
has increased to $15.8 million at September 30, 1994 from $4.1 million at
September 30, 1993. The reduction in inventory turns has resulted primarily
from the increased home furnishings inventory.
The company had 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 $4,024,716 during the
nine months of 1994 and $7,748,744 during the first nine months of 1993.
The company has completed over 98% of the renovation of its headquarters
facility in Warren. Renovation of the first two levels was completed in
February 1993. The remaining two levels should be completed by the end of 1994.
Total cost of the renovation is estimated at $13,600,000 (including
office furniture). Total cost incurred as of September 30, 1994 was
approximately $13,400,000.
The new Delaware retail store which opened August 30, 1993 and the new wholly-
owned subsidiary, Blair Holdings, Inc., formed September 2, 1993, are both in
leased facilities and required little in the way of capital expenditure.
The company completed its new Erie, Pennsylvania outlet store. Total cost of
the new store, which opened May 23, 1994, was $2.1 million. The old Erie store
building was sold in August 1994.
The company has undertaken a study of the distribution center, focused on
operational and customer service improvements. On October 19, 1994, the Board
of Directors approved a 65,000 square-foot warehouse addition to the
distribution center. Estimated cost of the project is $5.7 million.
Construction is expected to begin in December 1994 with completion anticipated
by June 1995. Further developments from the study may result in 1995.
It is anticipated that planned capital expenditures for the years ahead will be
financed by cash flow from operations and short-term borrowings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
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.
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.
Present tax laws do not allow deductions for the impact of inflation. Thus,
taxes are levied on the company at rates which, in real terms, exceed
established statutory rates. In general, during periods of inflation, this tax
policy results in a tax on stockholders' investment in the company.
PART II. OTHER INFORMATION
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1994
Item 5. Other Information
-----------------
The company filed a Registration Statement on Form S-8 on July 6, 1994
registering 42,450 shares of the company's Common Stock which was
offered for purchase on July 7, 1994 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, 1994.
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, 1994 By Giles W. Schutte
- - ----------------------------- --------------------------------
Giles W. Schutte
Executive Vice President and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR
CORPORATION 9/30/94 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH THIRD QUARTER, 1994 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,679,917
<SECURITIES> 0
<RECEIVABLES> 149,419,464
<ALLOWANCES> 36,388,849
<INVENTORY> 85,103,889
<CURRENT-ASSETS> 223,052,653
<PP&E> 89,427,287
<DEPRECIATION> 37,088,639
<TOTAL-ASSETS> 275,391,301
<CURRENT-LIABILITIES> 81,879,176
<BONDS> 0
<COMMON> 419,810
0
0
<OTHER-SE> 191,201,315<F1>
<TOTAL-LIABILITY-AND-EQUITY> 275,391,301
<SALES> 376,158,111
<TOTAL-REVENUES> 394,446,385
<CGS> 179,042,187
<TOTAL-COSTS> 350,912,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,394,298
<INTEREST-EXPENSE> 324,436
<INCOME-PRETAX> 43,534,203
<INCOME-TAX> 17,410,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,124,203
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.82
<FN>
<F1> THIS AMT INCLUDES ADD'L PD. IN CAPITAL, RETAINED EARNINGS, TREASURY STOCK
AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
</FN>
</TABLE>
