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, 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
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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
- - ------------------------------------------------------------------------
(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 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
June 30, 1994
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
June 30 December 31
1994 1993
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,719,668 $ 2,937,432
Customer accounts receivable, less
allowances for doubtful accounts
and returns of $35,968,008 in 1994
and $34,255,648 in 1993 116,114,554 112,452,666
Inventories - Note F
Merchandise 48,934,162 47,419,661
Advertising and shipping supplies 11,016,003 14,652,580
------------ ------------
59,950,165 62,072,241
Deferred income taxes 18,080,000 15,807,000
Prepaid expenses 730,956 409,562
------------ ------------
TOTAL CURRENT ASSETS 196,595,343 193,678,901
PROPERTY, PLANT AND EQUIPMENT - at cost
Land 1,169,791 719,791
Buildings 56,153,400 54,816,920
Equipment 30,743,959 29,721,911
Construction in progress 447,959 522,692
------------ ------------
88,515,109 85,781,314
Less allowances for depreciation 36,115,860 33,855,151
------------ ------------
52,399,249 51,926,163
------------ ------------
TOTAL ASSETS $248,994,592 $245,605,064
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 10,500,000 $ 11,600,000
Trade accounts payable 32,591,250 34,579,040
Advance payments from customers 2,230,859 1,886,186
Accrued expenses - Note D 10,299,955 9,651,354
Federal and state income taxes 3,085,684 4,758,684
------------ ------------
TOTAL CURRENT LIABILITIES 58,707,748 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 9,595,875 9,595,875
Retained earnings 197,382,484 188,957,972
------------ ------------
207,398,169 198,973,657
Less 844,408 shares in 1994 and 809,408
shares in 1993 of Common Stock in
treasury - at cost 17,526,017 16,056,017
Less receivable from Employee Stock
Purchase Plan 1,476,308 1,713,840
------------ ------------
188,395,844 181,203,800
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,994,592 $245,605,064
============ ============
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales $142,717,471 $137,281,872 $261,157,769 $256,783,223
Other income - Note G 5,906,341 5,207,569 11,941,897 10,413,455
------------ ------------ ------------ -------------
148,623,812 142,489,441 273,099,666 267,196,678
Costs and expenses:
Cost of goods sold 67,438,296 65,451,325 123,988,490 123,514,532
Selling 30,112,279 33,813,163 57,613,644 65,524,490
General and administrative 22,901,698 21,454,499 44,144,643 41,565,059
Provision for doubtful accounts 6,960,674 5,497,330 12,499,483 10,174,189
------------ ------------ ------------ ------------
127,412,947 126,216,317 238,246,260 240,778,270
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 21,210,865 16,273,124 34,853,406 26,418,408
Income taxes - Note E 8,504,000 6,913,000 13,967,000 11,032,000
------------ ------------ ------------ ------------
NET INCOME $ 12,706,865 $ 9,360,124 $ 20,886,406 $ 15,386,408
============ ============ ============ ============
Net income per share based on average
shares outstanding - Note C $1.38 $1.02 $2.26 $1.67
===== ===== ===== =====
<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
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810
Additional paid-in capital 9,595,875 7,775,814 9,595,875 7,775,814
Retained Earnings:
Balance at beginning of period 187,906,481 173,844,944 188,957,972 182,111,957
Net income 12,706,865 9,360,124 20,886,406 15,386,408
Cash dividends declared - Note B (3,230,862) (3,227,519) (12,461,894) (17,520,816)
----------- ------------ ------------ ------------
Balance at end of period 197,382,484 179,977,549 197,382,484 179,977,549
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-
----------- ------------ ------------ ------------
Balance at end of period (17,526,017) (16,418,906) (17,526,017) (16,418,906)
Receivable from Employee Stock Purchase Plan:
Balance at beginning of period (1,537,890) (1,170,195) (1,713,840) (1,454,490)
Payments 61,582 45,990 237,532 330,285
----------- ------------ ------------ ------------
Balance at end of period (1,476,308) (1,124,205) (1,476,308) (1,124,205)
----------- ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $188,395,844 $170,630,062 $188,395,844 $170,630,062
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
Six Months Ended
June 30
1994 1993
------------ ------------
OPERATING ACTIVITIES
Net income $ 20,886,406 $ 15,386,408
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 2,261,542 2,238,343
Provision for doubtful accounts 12,499,483 10,174,189
Provision for deferred income taxes (2,308,000) (1,660,000)
Changes in operating assets and
liabilities (using) providing cash:
Customer accounts receivable (16,161,371) (18,377,416)
Inventories 2,122,076 11,350,704
Prepaid expenses (321,394) (162,319)
Trade accounts payable (1,987,790) (5,065,583)
Advance payments from customers 344,673 257,350
Accrued expenses 648,601 (2,023,300)
Federal and state income taxes (1,673,000) 62,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,311,226 12,180,376
INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,734,628) (6,220,216)
Proceeds from sale of short-term investments -0- 902,576
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (2,734,628) (5,317,640)
FINANCING ACTIVITIES
Proceeds from line of credit 68,400,000 51,350,000
Repayments on line of credit (69,500,000) (49,650,000)
Dividends paid (12,461,894) (17,520,816)
Purchase of common stock for treasury (1,470,000) -0-
Payments on receivable from
Employee Stock Purchase Plan 237,532 330,285
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES (14,794,362) (15,490,531)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,217,764) (8,627,795)
Cash and cash equivalents at beginning of year 2,937,432 9,118,850
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,719,668 $ 491,055
============ ============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
June 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 six months ended June 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
NOTE C - NET INCOME PER COMMON SHARE
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Net income $12,706,865 $ 9,360,124 $20,886,406 $15,386,408
Average shares outstanding 9,231,032 9,221,482 9,241,032 9,221,482
Net income per common share $1.38 $1.02 $2.26 $1.67
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
June 30 December 31
1994 1993
----------- -----------
Employee compensation $ 6,321,446 $ 5,081,753
Contribution to profit sharing
and retirement plan 2,229,110 3,294,397
Taxes, other than taxes on income 237,048 199,687
Other accrued items 1,512,351 1,075,517
----------- -----------
$10,299,955 $ 9,651,354
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1994
NOTE E - INCOME TAXES
The components of income tax expense are as follows:
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Currently payable:
Federal $ 8,150,000 $ 5,203,000 $13,257,000 $ 9,010,000
State 1,893,000 2,130,000 3,018,000 3,682,000
----------- ----------- ----------- -----------
10,043,000 7,333,000 16,275,000 12,692,000
Deferred (credit) (1,539,000) (420,000) (2,308,000) (1,660,000)
----------- ----------- ----------- -----------
$ 8,504,000 $ 6,913,000 $13,967,000 $11,032,000
=========== =========== =========== ===========
The currently payable state income tax provisions for the second quarter and
first six months of 1994 reflect a reduction in the company's effective state
tax rate as compared to the second quarter and first six months of 1993.
The differences between total tax expense and the amount computed by applying
the statutory federal income tax rate, 35% in 1994 and 34% in 1993, to income
before income taxes are as follows:
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Statutory rate applied to
pre-tax income $ 7,423,803 $ 5,532,862 $12,198,692 $ 8,982,259
State income taxes, net
of federal tax benefit 1,017,900 1,325,940 1,643,200 2,152,260
Other items 62,297 54,198 125,108 (102,519)
----------- ----------- ----------- -----------
$ 8,504,000 $ 6,913,000 $13,967,000 $11,032,000
=========== =========== =========== ===========
The increase in the statutory federal income tax rate from 34% to 35% was
enacted into law in August 1993, effective January 1, 1993
Components of the provision for deferred income tax credit are as follows:
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Provision for estimated
returns $ (133,000) $ (149,000) $ 876,000 $ 286,000
Provision for doubtful
accounts 153,000 420,000 483,000 890,000
Cumulative effect
adjustment as of January
1, 1993 of change in
method of accounting for
income taxes -0- -0- -0- 207,000
Advertising costs 1,466,000 -0- 847,000 -0-
Other items - net 53,000 149,000 102,000 277,000
---------- ----------- ----------- -----------
$ 1,539,000 $ 420,000 $ 2,308,000 $ 1,660,000
=========== =========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 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
June 30, 1994 and December 31, 1993 are as follows:
June 30 December 31
1994 1993
----------- -----------
Current deferred tax assets - net:
Allowance for doubtful accounts $11,988,000 $11,505,000
Allowance for returns 2,609,000 1,733,000
Allowance for inventory obsolescence 1,705,000 1,705,000
Accrued vacation pay 1,079,000 1,061,000
Inventory costs 1,068,000 1,019,000
Advertising costs (763,000) (1,610,000)
Other items 394,000 394,000
----------- -----------
$18,080,000 $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 $8,508,000
at June 30, 1994 and $8,358,000 at December 31, 1993, respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
----------- ----------- ----------- -----------
Finance charges on time
payment accounts $ 5,288,174 $ 4,601,764 $10,744,718 $ 9,018,680
Other items 618,167 605,805 1,197,179 1,394,775
----------- ----------- ----------- -----------
$ 5,906,341 $ 5,207,569 $11,941,897 $10,413,455
=========== =========== =========== ===========
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
June 30, 1994
RESULTS OF OPERATIONS
- - ---------------------
New records for second quarter and six month net sales were set in 1994. Net
income reached record levels in the second quarter and first six months of
1994, increasing 35.8% and 35.7% from the same periods of 1993. The record
earnings were primarily attributable to increased response rates. In 1994,
increased response to the multi-product customer mailings, the home furnishings
catalogs and the co-op and media programs achieved comparable sales volumes
despite reductions in the total advertising program. Customer and prospect
advertising mailings and the co-op and media programs were decreased resulting
in lower selling expenses in 1994.
Net sales for 1994 increased 4.0% and 1.7% over the prior record sales of the
second quarter and first six months of 1993. The response to customer
advertising mailings increased 9.2% and 10.9% in 1994. Response to the home
furnishings catalogs during the six months of 1994 was running better than 40%
over the 1993 response rate to home furnishings multi-product customer
mailings. Response to the co-op and media programs increased 29.8% and 3.7% in
1994. Advertising dollars spent in 1994 returned more in gross sales than in
1993 - 16.3% more in the second quarter, 15.2% more in the first six months.
The number of orders filled in 1994 decreased 5.1% and 7.4% from 1993 but the
average order size increased 8.4% and 9.0%. Returns as a percentage of
adjusted gross sales improved in 1994, decreasing to 14.8% and 15.0% from 15.3%
and 15.5% in 1993. Returns improved due to changes in product mix (more higher
quality products) and sales mix (fewer prospects) in 1994.
Other income increased 13.4% and 14.7% in the second quarter and six months of
1994 as compared to 1993. The increases were due to finance charges assessed
on increased Easy Payment Plan accounts receivable. The direct mail multi-
product prospect advertising program offers the Easy Payment Plan to first-time
buyers. The program has been greatly responsible for an average 19.8% increase
(approximately $22,250,000) in Easy Payment Plan accounts receivable in 1994 as
compared to 1993. Gross Easy Payment Plan sales were 11.0% and 8.2% higher in
the second quarter and six months of 1994 as compared to 1993.
Cost of goods sold as a percentage of net sales decreased to 47.3% and 47.5% in
1994 from 47.7% and 48.1% in 1993. Fewer prospect (first-time buyers) orders
at incentive pricing and lower returns (14.8% and 15.0% in 1994, 15.3% and
15.5% in 1993) were primarily responsible for the improved margins in the 1994
periods.
Selling expenses in the second quarter and first six months of 1994 decreased
10.9% and 12.1% from 1993. The decrease selling expenses were attributable to
reductions in advertising mailings and the co-op and media programs.
The total number of advertising mailings released in the second quarter of 1994
was 16.8% less than in 1993 (1994 - 59,458,000, 1993 - 71,493,000). A 14.1%
decrease in multi-product customer mailings (1994 - 43,102,000, 1993 -
50,187,000), a 27.6% decrease in multi-product prospect mailings (1994 -
13,456,000, 1993 - 18,590,000) and a 6.8% increase in single-product mailings
(1994 - 2,900,000, 1993 - 2,716,000) resulted in a net direct mail advertising
cost reduction of approximately $4,550,000. The total number of advertising
mailings released in the six months of 1994 was 19.1% less than in the first
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1994
RESULTS OF OPERATIONS - CONTINUED
- - ---------------------
six months of 1993 (1994 - 112,765,000, 1993 - 139,320,000). A 13.5% decrease
in multi-product customer mailings (1994 - 83,314,000, 1993 - 96,312,000) a
36.3% decrease in multi-product prospect mailings (1994 - 24,084,000, 1993 -
37,823,000) and a 3.5% increase in single-product mailings (1994 - 5,367,000,
1993 - 5,185,000) resulted in a net direct mail advertising cost reduction of
approximately $9,520,000. Customer mailings have decreased in 1994 primarily
due to the better targeting of mailings, the removal of non-responding names
from the customer file and the full list offerings of home furnishings
catalogs. Prospect mailings have decreased in 1994 due to the elimination of
poorly performing acquired mailing lists and tightened credit policies.
Total volume of the co-op and media advertising programs decreased 35.1% and
12.6% in the second quarter (1994 - 393 million, 1993 - 605 million) and six
months (1994 - 1,032 million, 1993 - 1,182 million) of 1994 as compared to 1993.
The decreased volume and 3.5% and a 5.0% reductions in average production and
placement costs resulted in net cost decreases of approximately $2,010,000
(second quarter) and $1,880,000 (six months).
Home furnishings catalogs, offering 350 to 400 products, mailed in 1994 numbered
4,887,000 in the second quarter and 5,971,000 in the first six months. Results
continue to be favorable and more full customer list releases and a 6 million
catalog prospect program have been scheduled for the second half of 1994. Test
mailings of men's and women's apparel catalogs have been scheduled for fall 95
and spring 96. Catalog mailings increased selling expenses in the second
quarter and six months of 1994 by approximately $2,700,000 and $3,290,000.
General and administrative expenses increased 6.7% in the second quarter and
6.2% in the six months of 1994 as compared to 1993. The higher expenses for
1994 primarily resulted from 6.8% and 7.8% increases in wage and benefit costs.
Wages and benefits were higher due to normal pay increases, increased profit
sharing and a larger work force. The number of employees increased, on average,
5.3% in the second quarter and 3.0% year-to-date.
The provision for doubtful accounts as a percentage of credit sales increased
18.2% and 17.7% in the 1994 periods as compared to 1993. Credit sales increased
7.1% in the second quarter and 4.4% year-to-date. Prospect (first-time buyer)
credit sales as a percentage of total credit sales were approximately 9.5% and
9.0% in the second quarter and six months of 1994 as compared to approximately
13.6% and 13.0% in 1993. In 1994, bad debts have been provided for using rates
based on current 1993 experience. Had similar rates been applied to the second
quarter and first six months of 1993, the 1993 provisions for doubtful accounts
would have been approximately $2,000,000 and $3,000,000 higher. As a percentage
of credit sales, the revised 1993 provisions would have been 16.3% and 11.0%
higher than the 1994 provisions.
Income taxes as a percentage of income before income taxes were 40.1% in the
second quarter and six months of 1994 as compared to 42.5% and 41.8% 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
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1994
RESULTS OF OPERATIONS - CONTINUED
- - ---------------------
than offset by a downward adjustment of the company's effective state income tax
rate. Income taxes for the first and second quarter of 1993 do not reflect
the federal and state changes as they did not come into effect until the third
quarter of 1993. 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
- - --------------------------------
The company continued to be in a positive cash position during 1994. 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 $68,400,000 in short-term borrowing during the
first half of 1994, $10,500,000 of which was outstanding at June 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 3.35 at June 30, 1994,
3.10 at December 31, 1993 and 3.55 at June 30, 1993. Working capital increased
$6,683,958 during the six months of 1994. The increase was primarily reflected
in increased customer accounts receivable and deferred income taxes and
decreased note payable to bank, trade accounts payable and federal and state
income taxes offsetting decreased cash and cash equivalents and inventories.
The 1994 six month increase in working capital was the result of the record net
income and reductions in capital expenditures and dividends.
Merchandise inventory turnover was 3.69 at June 30, 1994 3.82 December 31, 1993
and 3.64 at June 30, 1993. Merchandise inventory has increased 22.6% from June
30, 1993 to June 30, 1994 primarily due to the expansion of the home furnishings
product line. The turnover rate has been relatively constant as sales have
increased 3.9% over the last twelve months and the average FIFO merchandise
inventory has increased 2.7%.
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 $2,734,628 during the six
months of 1994 and $6,220,216 during the first six months of 1993.
The company has completed over 95% of the renovation of its headquarters
facility in Warren. Renovation of the first two levels was completed in
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
June 30, 1994
LIQUIDITY AND RESOURCES - CONTINUED
- - -----------------------
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 June 30, 1994 was approximately
$13,200,000.
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 company has undertaken a study of the distribution center. The study will
focus on operational and customer service improvements. The project enlists
consultants who have worked with the company on previous projects. Future
capital expenditures for the distribution center will depend on the results of
the study, which aren't anticipated until Fall 1994.
It is anticipated that planned capital expenditures for the years ahead will be
financed by cash flow from operations and short-term borrowings.
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
June 30, 1994
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
(a) The company's Annual Meeting of Stockholders was held April 19, 1994.
(b) At the Annual Meeting of Stockholders, all of the company's directors
were elected at said meeting, as follows:
David A. Blair John O. Hanna Giles W. Schutte
John L. Blair * Gerald A. Huber Blair T. Smoulder
Robert W. Blair Murray K. McComas John E. Zawacki
Steven M. Blair Michael J. Samargya
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 matter was voted upon at the meeting, and the
following number of affirmative votes and negative votes were
cast with respect to such matter:
The reappointment by the company's Board of Directors of
the firm of Ernst & Young as independent certified public
accountants to examine the financial statements and perform
the annual audit of the company for the year ending December 31,
1994 was ratified. This ratification received 8,533,497
affirmative votes and 24,408 negative votes.
* John L. Blair has resigned from the Board of Directors,
effective July 20, 1994, and has been named Chairman Emeritus.
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
June 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 August 10, 1994 By Giles W. Schutte
------------------------ ---------------------------------
Giles W. Schutte
Executive Vice President and Treasurer
(Principal Financial Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR
CORPORATION'S 6/30/94 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH SECOND QUARTER, 1994 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 1,719,668
<SECURITIES> 0
<RECEIVABLES> 152,082,562
<ALLOWANCES> 35,968,008
<INVENTORY> 59,950,165
<CURRENT-ASSETS> 196,595,343
<PP&E> 88,515,109
<DEPRECIATION> 36,115,860
<TOTAL-ASSETS> 248,994,592
<CURRENT-LIABILITIES> 58,707,748
<BONDS> 0
<COMMON> 419,810
0
0
<OTHER-SE> 187,976,034<F1>
<TOTAL-LIABILITY-AND-EQUITY> 248,994,592
<SALES> 261,157,769
<TOTAL-REVENUES> 273,099,666
<CGS> 123,988,490
<TOTAL-COSTS> 238,246,260
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,499,483
<INTEREST-EXPENSE> 167,073
<INCOME-PRETAX> 34,853,406
<INCOME-TAX> 13,967,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,886,406
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
<FN>
<F1>THIS AMOUNT IS MADE UP OF ADD'L PD IN CAPITAL, RETAINED EARNINGS, TREASURY
STOCK AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE. CONSULT THE 6/30/94
FINANCIAL STATEMENTS INCLUDED IN THE SECOND QUARTER, 1994 10-Q FOR THE DETAILED
AMOUNTS OF EACH OF THESE ITEMS.
</FN>
</TABLE>
