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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-878
BLAIR CORPORATION
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<S> <C>
Incorporated in Delaware I.R.S. Employer Identification Number:
220 Hickory Street 25-0691670
Warren, Pennsylvania, 16366
(814) 723-3600
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
<S> <C>
Common Stock, without nominal or par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 24, 1995 was $204,681,016. There were 9,273,482 shares
of common stock outstanding as of February 24, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1995 Annual Meeting of Stockholders
and the Annual Report to Stockholders for the fiscal year ended December 31,
1994 are incorporated by reference into Parts II, III and IV of this Form 10-K.
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PART I
ITEM 1. BUSINESS
(A) GENERAL.
Blair Corporation (the "Company") was founded in 1910 by John L. Blair,
Sr., and was incorporated in 1924 under the laws of the state of Delaware. The
Company's business consists of the sale of fashion apparel for men and women,
plus a wide range of home products, primarily through direct mail merchandising.
The Company operates two retail stores, one in Pennsylvania and one in Delaware,
and two outlet stores in Pennsylvania. The Company employs over 2,200 people.
(B) INFORMATION REGARDING INDUSTRY SEGMENTS.
The Company's business consists of only one industry segment, which is the
retail and direct mail merchandising of men's and women's fashion apparel and
home products.
(C) DESCRIPTION OF BUSINESS.
The Company markets a wide range of merchandise, manufactured by a number
of independent suppliers, both domestic and foreign. Most of these suppliers
have been associated with the Company for many years and manufacture products
based upon the Company's specifications. Suppliers are chosen by the Company in
accordance with their ability to produce high quality products in a
cost-effective manner.
Historically, the Company has marketed its products by mailing letters and
color folders depicting the current styles of womenswear (such as coordinates,
dresses, tops, pants, skirts, lingerie, sportswear, suits, jackets, outerwear,
and shoes); menswear (such as suits, shirts, outerwear, active wear, slacks,
shoes, and accessories); and home products (such as bedspread ensembles,
draperies, furniture covers, area rugs, bath accessories, kitchenware, tools,
electronics, and exercise and personal care items) directly to existing and
prospective customers. Media and co-op prospect advertising programs are used
extensively and are essential components of the Company's customer acquisition
strategy. In 1993, the Company tested a catalog format to market its home
products and other non-apparel merchandise, which was well received by its
existing customer base. The success of the Company's pilot home products catalog
mailing prompted the Company to successfully expand its distribution in 1994.
All orders for merchandise are received and processed at the Company's
corporate offices in Warren, Pennsylvania. All mailings originate from the
Company's Mailing Center and orders are filled and mailed from the Company's
Distribution Center, both in nearby Irvine, Pennsylvania. The Company serves
customers throughout the fifty states.
The Company's outlet stores enable it to more efficiently promote and
liquidate discontinued, overstock and returned merchandise. The Delaware retail
store is the first Company facility to be located outside of its home state of
Pennsylvania, and represents the Company's growing market and expanding customer
base.
The Company considers its merchandise to be low/medium-priced and competes
for sales with other direct mail businesses, retail department stores, specialty
shops, and discount store chains. The Company competes based on its sales
expertise, customer service, pricing, customer credit privileges, and diverse
product mix.
During 1994, the Company continued its efforts to broaden its customer
information systems. Several database models were rewritten to enhance its
ability to market to both customer files and prospect files, including the use
of new data and analysis techniques.
(D) FOREIGN OPERATIONS AND EXPORT SALES.
The Company does not derive any revenue from sales of merchandise outside
of the United States.
ITEM 2. PROPERTIES
The Company owns the following properties:
2
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1. Blair Headquarters (220 Hickory Street, Warren, Pennsylvania)--a 284,000
square foot multi-story brick facility containing the Company's corporate
offices and Accounting, Advertising, Electronic Data Processing, Human
Resources, Merchandise, Order Handling and Planning departments.
2. Blair Distribution Center (Route 62, Irvine, Pennsylvania)--a 477,800 square
foot cement block and sheet metal warehouse and distribution facility.
3. Blair Mailing Center (Route 62, Irvine, Pennsylvania)--a 293,400 square foot
cement block and sheet metal mailing facility.
4. Blair Warehouse Outlet (Route 62, Starbrick, Pennsylvania)--a 53,250 square
foot metal warehouse outlet facility.
5. Blair Warehouse Outlet (Millcreek Mall, Erie, Pennsylvania)--a 36,000 square
foot block and brick warehouse outlet facility.
6. Bell Warehouse Building (Liberty Street, Warren, Pennsylvania)--a 9,000
square foot metal warehouse facility.
7. Starbrick Warehouse Building (Route 62, Starbrick, Pennsylvania)--a 12,000
square foot metal warehouse facility.
The Company leases a 13,000 square-foot retail store facility near
Wilmington, Delaware, and a 30,000 square-foot metal warehouse facility in
Starbrick, Pennsylvania. In addition, the Company's wholly-owned subsidiary,
Blair Holdings, Inc., leases approximately 600 square feet of office space in
Newark, Delaware, which it uses as its principal office. Management believes
that these properties are capable of meeting the Company's anticipated needs for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to page
14 of the Company's 1994 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to page
14 of the Company's 1994 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to page
15 and 16 of the Company's 1994 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
7 through 17 of the Company's 1994 Annual Report to Stockholders.
3
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information regarding directors and executive officers of the Company
appearing under the caption "Election of Directors" in the Company's Proxy
Statement for the 1995 Annual Meeting of Stockholders (the "1995 Proxy
Statement") is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the caption "Executive Compensation" in the
1995 Proxy Statement is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information setting forth the security ownership of certain beneficial
owners and management appearing under the captions "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" in the 1995
Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 10-K
(A) EXHIBITS AND FINANCIAL STATEMENTS AND SCHEDULES.
(1) Financial Statements. The Company's consolidated financial statements
to be included in Part II, Item 8 are incorporated herein by reference
to the Company's 1994 Annual Report to Stockholders, a copy of which
accompanies this report on Form 10-K.
(2) Financial Statement Schedules. SCHEDULE II--VALUATION AND QUALIFYING
ACCOUNTS is being filed as part of this report on Form 10-K, and should
be read in conjunction with the consolidated financial statements of
the Company described in Item 14(a)(1) above.
(3) List of Exhibits.
3(i) Certificate of Incorporation of the Company
3(ii) Bylaws of the Company
11 Computation of Earnings per Share (incorporated by reference to
page 7 of the 1994 Annual Report to Stockholders)
*13 1994 Annual Report to Shareholders
21 Subsidiaries of Registrant
*23 Consents of Experts and Counsel
*27 Financial Data Schedule
(B) REPORTS ON FORM 8-K.
The registrant has filed no forms 8-K during the quarter ended December 31,
1994.
(C) EXHIBITS.
All exhibits listed above were previously filed with the Commission, except
for those marked with an asterisk, which are being filed with this Form
10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
BLAIR CORPORATION
(Registrant)
Date: March 17, 1995 By: /s/ GILES W. SCHUTTE
.............................................
Giles W. Schutte
Executive Vice President
and Treasurer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C>
Date: March 17, 1995 By: /s/ MURRAY K. MCCOMAS
.............................................
Murray K. McComas
President and Director
(Principal Executive Officer
and Director)
Date: March 17, 1995 By: /s/ BLAIR T. SMOULDER
.............................................
Blair T. Smoulder
Executive Vice President
and Director
Date: March 17, 1995 By: /s/ MICHAEL J. SAMARGYA
.............................................
Michael J. Samargya
Vice President, Data
Processing, and Director
Date: March 17, 1995 By: /s/ STEVEN M. BLAIR
.............................................
Steven M. Blair
Vice President, Order
Handling, and Director
Date: March 17, 1995 By: /s/ JOHN E. ZAWACKI
.............................................
John E. Zawacki
Vice President, Women's
Merchandise and Director
Date: March 17, 1995 By: /s/ DAVID A. BLAIR
.............................................
David A. Blair
Secretary and Director
Date: March 17, 1995 By: /s/ GILES W. SCHUTTE
.............................................
Giles W. Schutte
Executive Vice President,
Treasurer, and Director
(Principal Financial and
Accounting Officer)
</TABLE>
5
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Annual Report on Form 10-K
Item 14(a) (1) and (2), and (d)
List of Financial Statements and Financial Statement Schedules
Blair Corporation and Subsidiary
Warren, Pennsylvania
Year ended December 31, 1994
6
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Blair Corporation and Subsidiary
List of Financial Statements and Financial Statement Schedules
Form 10-K--Item 14(a) (1) and (2), and (d)
The following consolidated financial statements of Blair Corporation, included
in the annual report of the registrant to its stockholders for the year ended
December 31, 1994, are incorporated by reference in Item 8:
-- Consolidated Balance Sheets--December 31, 1994 and 1993
-- Consolidated Statements of Income--Years ended December 31, 1994, 1993 and
1992
-- Consolidated Statements of Stockholders' Equity--Years ended December 31,
1994, 1993 and 1992
-- Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1993
and 1992
-- Notes to Consolidated Financial Statements--December 31, 1994
The following financial statement schedule of Blair Corporation is included in
Item 14(d):
-- Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
7
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Blair Corporation and Subsidiary
Schedule II
Valuation and Qualifying Accounts
December 31, 1994
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COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
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<CAPTION>
ADDITIONS-
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS- AT END
OF PERIOD EXPENSES DESCRIBE OF PERIOD
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
DESCRIPTION
Year ended December 31, 1994:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts.... $28,324,648 $ 28,164,415(A) $ 24,232,902(B) $32,256,161
For estimated loss on
returns................ 5,931,000 91,464,304 89,824,304(B) 7,571,000
----------- ------------ ------------ -----------
Totals............................. $34,255,648 $119,628,719 $114,507,206 $39,827,161
=========== ============ ============ ===========
Year ended December 31, 1993:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts.... $17,756,739 $ 27,224,948(A) $ 16,657,039(B) $28,324,648
For estimated loss on
returns................ 5,795,000 90,891,470 90,755,470(C) 5,931,000
----------- ------------ ------------ -----------
Totals............................. $23,551,739 $118,116,418 $107,412,509 $34,255,648
=========== ============ ============ ===========
Year ended December 31, 1992:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts.... $17,585,636 $ 15,674,128(A) $ 15,503,025(B) $17,756,739
For estimated loss on
returns................ 5,877,000 87,894,339 87,976,339(C) 5,795,000
----------- ------------ ------------ -----------
Totals............................. $23,462,636 $103,568,467 $103,479,364 $23,551,739
=========== ============ ============ ===========
</TABLE>
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Note (A)--Current year provision for doubtful accounts, charged against income.
Note (B)--Accounts charged off.
Note (C)--Sales value of merchandise returned.
9
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EXHIBIT 13
INCORPORATED BY REFERENCE, PAGE 7 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
Blair Corporation
We have audited the accompanying consolidated balance sheets of Blair
Corporation and Subsidiary as of December 31, 1994 and 1993 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of Blair Corporation management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Blair
Corporation and Subsidiary at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Erie, Pennsylvania
February 2, 1995
10
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INCORPORATED BY REFERENCE, PAGE 8 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
BLAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,183,136 $ 2,937,432
Customer accounts receivable, less allowances for doubtful
accounts and returns of $39,827,161 in 1994 and
$34,255,648 in 1993..................................... 130,517,140 112,452,666
Inventories:
Merchandise.......................................... 70,562,969 47,419,661
Advertising and shipping supplies.................... 13,394,493 14,652,580
------------ ------------
83,957,462 62,072,241
Deferred income taxes..................................... 18,386,000 15,807,000
Prepaid expenses.......................................... 558,370 409,562
------------ ------------
Total current assets........................................... 235,602,108 193,678,901
Property, plant and equipment
Land...................................................... 1,130,454 719,791
Buildings................................................. 57,422,042 54,816,920
Equipment................................................. 32,195,892 29,721,911
Construction in progress.................................. 335,122 522,692
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91,083,510 85,781,314
Less allowances for depreciation.......................... 38,025,818 33,855,151
------------ ------------
53,057,692 51,926,163
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Total assets................................................... $288,659,800 $245,605,064
============ ============
</TABLE>
11
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INCORPORATED BY REFERENCE, PAGE 9 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1994 1993
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 2).................................... $ 34,300,000 $ 11,600,000
Trade accounts payable.................................... 34,832,191 34,579,040
Advance payments from customers........................... 1,419,582 1,886,186
Accrued expenses (Note 3)................................. 12,725,522 9,651,354
Federal and state income taxes............................ 3,426,825 4,758,684
------------ ------------
Total current liabilities...................................... 86,704,120 62,475,264
Deferred income taxes.......................................... 1,939,000 1,926,000
Stockholders' equity (Note 4)
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......................................... 207,683,352 188,957,972
------------ ------------
219,120,292 198,973,657
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....................... 1,864,952 1,713,840
------------ ------------
Purchase Plan........................................ 200,016,680 181,203,800
------------ ------------
Total liabilities and stockholders' equity..................... $288,659,800 $245,605,064
============ ============
</TABLE>
See accompanying notes.
12
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INCORPORATED BY REFERENCE, PAGE 7 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
BLAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales....................................... $535,792,222 $519,174,324 $500,168,164
Other income (Note 5)........................... 24,511,959 20,474,086 18,617,435
------------ ------------ ------------
560,304,181 539,648,410 518,785,599
Costs and expenses:
Cost of goods sold............................ 257,921,482 251,136,064 242,132,747
Advertising................................... 117,654,135 122,861,345 117,579,472
General and administrative.................... 93,951,439 86,875,000 82,565,608
Provision for doubtful accounts............... 28,164,415 27,224,948 15,674,128
------------ ------------ ------------
497,691,471 488,097,357 457,951,955
------------ ------------ ------------
Income before income taxes...................... 62,612,710 51,551,053 60,833,644
Income taxes (Note 6)........................... 24,934,000 20,698,000 25,638,000
------------ ------------ ------------
Net income...................................... $ 37,678,710 $ 30,853,053 $ 35,195,644
------------ ------------ ------------
Net income per share based on
average shares outstanding.................... $ 4.07 $ 3.34 $ 3.82
============ ============ ============
</TABLE>
See accompanying notes.
13
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INCORPORATED BY REFERENCE, PAGE 10 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
BLAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK.................................... $ 419,810 $ 419,810 $ 419,810
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year.................... 9,595,875 7,775,814 6,457,293
Issuance (net of forfeitures) of common stock
under Employee Stock Purchase Plan (Note 4)... 1,421,255 1,820,061 1,318,521
------------ ------------ ------------
Balance at end of year.......................... 11,017,130 9,595,875 7,775,814
RETAINED EARNINGS
Balance at beginning of year.................... 188,957,972 182,111,957 153,823,262
Net income...................................... 37,678,710 30,853,053 35,195,644
Cash dividends declared per share--$2.05 in
1994; $2.60 in 1993; $.75 in 1992............. (18,953,330) (24,007,038) (6,906,949)
------------ ------------ ------------
Balance at end of year.......................... 207,683,352 188,957,972 182,111,957
TREASURY STOCK
Balance at beginning of year.................... (16,056,017) (16,418,906) (16,672,760)
Purchase of 35,000 shares of common stock for
treasury...................................... (1,470,000) -- --
Issuance (net of forfeitures) of common stock
under Employee Stock Purchase Plan (Note 4)... 287,357 362,889 253,854
------------ ------------ ------------
Balance at end of year.......................... (17,238,660) (16,056,017) (16,418,906)
RECEIVABLE FROM EMPLOYEE STOCK PURCHASE PLAN
Balance at beginning of year.................... (1,713,840) (1,454,490) (1,219,600)
Issuance (net of forfeitures) of common stock
under Employee Stock Purchase Plan (Note 4)... (551,850) (712,800) (549,340)
Repayments...................................... 400,738 453,450 314,450
------------ ------------ ------------
Balance at end of year.......................... (1,864,952) (1,713,840) (1,454,490)
------------ ------------ ------------
Total stockholders' equity...................... $200,016,680 $181,203,800 $172,434,185
============ ============ ============
</TABLE>
See accompanying notes.
14
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INCORPORATED BY REFERENCE, PAGE 11 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
BLAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 37,678,710 $ 30,853,053 $ 35,195,644
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................... 4,606,470 4,506,177 4,311,502
Provision for doubtful accounts............ 28,164,415 27,224,948 15,674,128
Provision for deferred income taxes........ (2,566,000) (2,400,000) (189,000)
(Gain) loss on disposition of equipment.... (238,024) 511,404 (7,333)
Changes in operating assets and liabilities
(using) providing cash:
Customer accounts receivable.......... (46,228,889) (43,831,305) (21,761,665)
Inventories........................... (21,885,221) 598,753 (2,310,002)
Prepaid expenses...................... (148,808) (69,991) (74,659)
Trade accounts payable................ 253,151 (327,388) 46,459
Advance payments from customers....... (466,604) (422,234) (369,073)
Accrued expenses...................... 3,074,168 (1,591,804) 780,059
Federal and state income taxes........ (1,331,859) (116,905) 691,484
------------ ------------ ------------
Net cash provided by operating activities....... 911,509 14,934,708 31,987,544
INVESTING ACTIVITIES
Purchases of property, plant and equipment...... (5,974,779) (11,547,441) (11,252,105)
Purchase of short-term investments.............. -- -- (902,576)
Proceeds from maturity or sale of
short-term investments........................ -- 902,576 --
Proceeds from sale of equipment................. 474,804 12,177 15,484
------------ ------------ ------------
Net cash used in investing activities........... (5,499,975) (10,632,688) (12,139,197)
FINANCING ACTIVITIES
Net proceeds from lines of credit............... 22,700,000 11,600,000 --
Dividends paid.................................. (18,953,330) (24,007,038) (21,143,827)
Purchase of Common Stock for treasury........... (1,470,000) -- --
Issuance (net of forfeitures) of Common Stock
under Employee Stock Purchase Plan............ 1,708,612 2,182,950 1,572,375
Increase in notes receivable from Employee Stock
Purchase Plan................................. (151,112) (259,350) (234,890)
------------ ------------ ------------
Net cash provided by (used in) financing
activities.................................... 3,834,170 (10,483,438) (19,806,342)
------------ ------------ ------------
Net (decrease) increase in cash and cash
equivalents................................... (754,296) (6,181,418) 42,005
------------ ------------ ------------
Cash and cash equivalents at beginning of
year.......................................... 2,937,432 9,118,850 9,076,845
------------ ------------ ------------
Cash and cash equivalents at end of year........ $ 2,183,136 $ 2,937,432 $ 9,118,850
============ ============ ============
</TABLE>
See accompanying notes.
15
<PAGE> 7
INCORPORATED BY REFERENCE, PAGE 12 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
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 are eliminated upon consolidation.
REVENUE RECOGNITION
Sales, cash or credit, are recorded when the merchandise is shipped to the
customer. Credit sales are made under Easy Payment Plan and Seven Day Credit
sales arrangements. Monthly, a provision for potentially doubtful accounts is
charged against income based on management's estimate of realization. Any
recoveries of bad debts previously written-off are credited to other income in
the period received. The carrying amount for customer accounts receivable on
credit sales as reported in the balance sheet, net of allowances for doubtful
accounts and returns, approximates fair value.
Finance charges on time payment accounts are recognized on an accrual basis
of accounting.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates fair
value.
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, inventories would have increased
by approximately $8,690,000 and $8,358,000 at December 31, 1994 and 1993,
respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated on the basis of cost. Depreciation
has been provided principally by the straight-line method using rates which are
estimated to be sufficient to amortize the cost of the assets over their period
of usefulness.
RETURNS
A provision for anticipated returns is recorded monthly as a percentage of
gross sales based upon historical experience. This provision is charged directly
against gross sales to arrive at net sales as reported in the consolidated
statements of income. Actual returns are charged against the allowance for
returns which is netted against accounts receivable in the balance sheet. The
provision for returns charged against income in 1994, 1993 and 1992 amounted to
$91,464,304, $90,891,470 and $87,894,339, respectively.
EMPLOYEE BENEFITS
The Company's employee benefits include a profit sharing and retirement
feature available to all eligible employees. Contributions are dependent on net
income of the Company and recognized on an accrual basis of
16
<PAGE> 8
accounting. The contributions to the plan charged against income in 1994, 1993
and 1992 amounted to $4,023,519, $3,294,397 and $3,740,091, respectively.
As part of the same benefit plan, the Company has a contributory savings
feature whereby all eligible employees may contribute up to 10% of their annual
base salaries. The Company's matching contribution to the plan is based upon a
percentage formula as set forth in the plan agreement. The Company's matching
contributions to the plan charged against income in 1994, 1993 and 1992 amounted
to $1,527,508, $1,224,570 and $1,116,541, respectively.
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.
FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," as
amended, requires disclosure of fair value information for financial
instruments. SFAS No. 107 defines fair values as the estimated amount at which
the financial instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. The carrying
amounts reported in the consolidated balance sheets for these financial
instruments subject to the requirements of SFAS No. 107 (principally customer
accounts receivable) approximates those assets' and liabilities' fair values
primarily due to their short-term nature.
2. FINANCING ARRANGEMENTS
The Company has $40,000,000 available in revolving lines of credit,
$10,000,000 which has no expiration date and $30,000,000 which expires on May
31, 1995. Borrowings aggregated $34,300,000 and $11,600,000 under these lines of
credit at December 31, 1994 and 1993, respectively. Interest paid and expensed
during 1994, 1993 and 1992 amounted to $676,380, $153,626 and $106,354,
respectively, related primarily to the lines of credit. The weighted average
interest rate on average short-term debt outstanding was 5.34%, 4.06% and 4.88%
for the years ended December 31, 1994, 1993 and 1992, respectively.
The Company has outstanding letters of credit amounting to approximately
$10,800,000 at December 31, 1994 related to inventory purchases.
3. ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Employee compensation..................................... $ 6,426,098 $5,081,753
Contribution to profit sharing and retirement plan........ 4,023,519 3,294,397
Taxes, other than taxes on income......................... 699,387 199,687
Other accrued items....................................... 1,576,518 1,075,517
----------- ----------
$12,725,522 $9,651,354
=========== ==========
</TABLE>
17
<PAGE> 9
INCORPORATED BY REFERENCE, PAGE 13 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
4. EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan (amended in 1992) which
provides for 400,000 shares of the Company's treasury stock to be reserved for
sale and issuance to employees at a price to be established by the Stock
Purchase Plan Committee. At December 31, 1994 and 1993, 276,600 and 319,050
shares, respectively were available to be issued under the Plan. Compensation
expense equals the difference between the exercise price and the market price of
the options at the date of grant. Compensation expense related to these options
amounted to $1,156,762, $1,470,150 and $1,037,812 for the years ended December
31, 1994, 1993 and 1992, respectively. A summary of the activity under the Plan
is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Shares issued................................. 42,450 44,550 36,900
Issue price per share......................... $13.00 $16.00 $15.00
Market value per share at date of issue....... $40.250 $49.000 $43.125
Shares forfeited.............................. -- -- 500
Original price per share...................... -- -- $10.00 to $15.00
</TABLE>
5. OTHER INCOME
Other income consists of:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Finance charges on time payment accounts... $21,721,018 $18,300,280 $15,945,038
Recoveries on customers' accounts
receivable previously charged off........ 1,141,855 1,006,648 1,090,842
Miscellaneous.............................. 1,649,086 1,167,158 1,581,555
----------- ----------- -----------
$24,511,959 $20,474,086 $18,617,435
=========== =========== ===========
</TABLE>
6. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal.................................. $22,632,000 $18,585,000 $18,293,000
State.................................... 4,868,000 4,513,000 7,534,000
----------- ----------- -----------
27,500,000 23,098,000 25,827,000
Deferred (credit).......................... (2,566,000) (2,400,000) (189,000)
----------- ----------- -----------
$24,934,000 $20,698,000 $25,638,000
=========== =========== ===========
</TABLE>
The deferred income tax provision for 1993 includes 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 differences between total tax expense and the amount computed by
applying the statutory federal income tax rate, 35% in 1994 and 1993, 34% in
1992, to income before income taxes are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory rate applied to pretax income.... $21,914,449 $18,042,869 $20,683,439
State income taxes, net of federal
benefit.................................. 2,848,300 2,659,150 4,920,960
Other items................................ 171,251 (4,019) 33,601
----------- ----------- -----------
$24,934,000 $20,698,000 $25,638,000
=========== =========== ===========
</TABLE>
18
<PAGE> 10
Components of the deferred tax asset and liability under the liability
method as of December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Current deferred tax asset:
Doubtful accounts...................................... $13,066,000 $11,505,000
Returns allowance...................................... 2,443,000 1,733,000
Inventory obsolescence................................. 1,883,000 1,705,000
Inventory costs........................................ 1,479,000 1,019,000
Vacation pay........................................... 1,264,000 1,061,000
Advertising costs...................................... (2,162,000) (1,610,000)
Other items............................................ 413,000 394,000
----------- -----------
$18,386,000 $15,807,000
=========== ===========
Long-term deferred tax liability:
Property, plant and equipment.......................... $ 1,939,000 $ 1,926,000
=========== ===========
</TABLE>
Income taxes paid during 1994, 1993 and 1992 amounted to $28,831,859,
$23,215,000 and $25,136,000, respectively.
7. DOMINANT BUSINESS SEGMENT
The Company is primarily in the business of selling men's and women's
fashion wearing apparel and accessories and home furnishing items to individuals
throughout the United States, comprising a customer base that is diverse, in
both geographic and demographic terms. Selling is done mainly by means of direct
mail letters and catalogs with individual order forms which offer the Company's
items.
Sales of the men's and women's fashion wearing apparel and accessories
merchandise line accounted for 87%, 90% and 89% of total 1994, 1993 and 1992
sales, respectively. The home furnishings merchandise line accounted for the
remaining sales volumes.
19
<PAGE> 11
INCORPORATED BY REFERENCE TO PAGE 14 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
QUARTER ENDED QUARTER ENDED
------------------------------------------------ ------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ ----------- -------- ------- ------------ -----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......... $118,440 $142,718 $ 115,000 $159,634 $119,501 $137,282 $ 111,493 $150,898
Cost of goods
sold............. 56,550 67,438 55,054 78,879 58,063 65,452 53,974 73,647
Net income......... 8,180 12,706 5,238 11,555 6,026 9,360 3,764 11,703
Net income per
share............ .88 1.38 .56 1.25 .65 1.02 .40 1.27
</TABLE>
The fourth quarter of 1993 includes an adjustment to the provision for
doubtful accounts of $3,300,000. This increased expense, to a great extent,
corrects estimates made during the first three quarters of 1993 and represents
approximately a $.20 per share earnings reduction in the fourth quarter.
COMMON STOCK MARKET PRICES AND DIVIDENDS DECLARED PER SHARE
The company's Common Stock is traded on the American Stock Exchange (symbol
BL). The number of record holders of the company's Common Stock at December 31,
1994 was 3,082.
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
SALES PRICE SALES PRICE
------------- DIVIDENDS ------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter...................................... $46 1/8 $36 1/2 $ 1.00 $59 1/2 $50 1/4 $ 1.55
Second Quarter..................................... 45 5/8 39 3/4 .35 55 47 7/8 .35
Third Quarter...................................... 46 7/8 40 3/4 .35 49 1/2 45 1/2 .35
Fourth Quarter..................................... 43 1/4 39 .35 47 41 1/4 .35
</TABLE>
The payment of dividends is not subject to any restrictions. Although the
payment of dividends is dependent of future earnings, capital requirements and
financial condition, the company expects to continue its policy of paying
regular cash dividends.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales....................... $535,792,222 $519,174,324 $500,168,164 $493,121,796 $478,341,180
Net income...................... 37,678,710 30,853,053 35,195,644 30,857,403 37,730,862
Total assets.................... 288,659,800 245,605,064 227,787,780 210,952,549 195,089,958
Per share:
Net income.................... 4.07 3.34 3.82 3.37 4.13
Cash dividends declared....... 2.05 2.60 .75 2.00 2.20
</TABLE>
20
<PAGE> 12
INCORPORATED BY REFERENCE TO PAGES 15 AND 16 OF THE COMPANY'S
1994 ANNUAL REPORT TO STOCKHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for 1994 set a new company record, having now increased for
seventeen years in a row. Net income for 1994 was the second highest in the
company's history--22.1% higher than 1993 and just .14% lower than the record
earnings of 1990. Pre-tax income for 1994 was the highest in company history.
The increased 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 despite a reduction in total advertising
dollars spent. Response rates benefited from expansion of the credit limits of
our better customers.
Net sales for 1994 increased 3.2% over 1993, 1993 increased 3.8% over 1992.
The record 1994 sales resulted from increased response rates. Response to
customer multi-product circular mailings increased 8.3% in 1994. Response to the
home products customer catalogs--not quite up to expectations--was 23.9% better
than the response to home products customer multi-product mailings in 1993.
Response to the co-op and media programs increased 3.1% in 1994. The company
generated 7.2% more gross sales per advertising dollar in 1994. The number of
orders filled in 1994 decreased 4.3% but the average order size increased 7.0%.
Returns as a percentage of adjusted gross sales improved to 14.7% in 1994 from
15.0% in 1993. 1993 sales were primarily a result of an increased multi-product
prospect advertising program and an increased response to multi-product customer
mailings which more than offset a lower response to multi-product prospect
mailings and a decreased multi-product customer advertising program. Advertising
dollars spent in 1993 returned .6% less in gross sales than in 1992. The number
of orders filled in 1993 decreased 3.3% from 1992 but the average order size
increased 7.5%. Returns as a percentage of adjusted gross sales improved
slightly to 15.0% in 1993 from 15.1% in 1992.
Other income increased 19.7% in 1994 as compared to 1993 and 10.0% in 1993
as compared to 1992. The increases were primarily due to finance charges earned
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 along with expansion of the credit limits of our better customers
(since 1993) have been greatly responsible for increases in average Easy Payment
Plan accounts receivable of 17.6% (approximately $20,900,000) in 1994 as
compared to 1993 and 17.0% (approximately $17,300,000) in 1993 as compared to
1992. Easy Payment Plan gross sales increased 10.3% in 1994 and 15.5% in 1993.
Cost of goods sold as a percentage of net sales decreased to 48.1% in 1994
from 48.4% in both 1993 and 1992. Fewer prospect (first-time buyers) orders at
incentive pricing were primarily responsible for the improved margin in 1994.
Gross prospect sales were approximately 20% lower in 1994 as compared to 1993.
Advertising expense decreased 4.2% in 1994 as compared to 1993. Advertising
expense increased 4.5% in 1993 as compared to 1992.
The total number of circular mailings released in 1994 was 18.1% less than
in 1993 (1994--212,548,000, 1993--259,562,000). A 12.5% decrease in
multi-product customer mailings (1994--157,606,000, 1993--180,167,000), a 35.9%
decrease in multi-product prospect mailings (1994--44,915,000,
1993--70,094,000), a 7.8% increase in single-product mailings (1994--10,027,000,
1993--9,301,000) and a 1.8% average increase in production costs resulted in a
net cost reduction of approximately $14,788,000. 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 products catalogs. Prospect circular mailings have decreased in 1994
due to the elimination of poorly performing acquired mailing lists, tightened
credit policies and prospect home products catalog mailings. The total number of
circular mailings released in 1993 was 10.8% more than in 1992
(1993--259,562,000,
21
<PAGE> 13
1992--234,286,000). A 6.9% decrease in multi-product customer mailings
(1993--180,167,000, 1992--193,611,000), a 177.5% increase in multi-product
prospect mailings (1993--70,094,000, 1992--25,256,000), a 39.7% decrease in
single-product mailings (1993--9,301,000, 1992--15,419,000) and a 1.9% average
decrease in production costs resulted in a net cost increase of approximately
$7,960,000.
Total volume of the co-op and media advertising programs increased 2.2% in
1994 as compared to 1993 (1994--2.123 billion, 1993--2.077 billion). The
increased volume and a 7.4% reduction in average production and placement costs
resulted in a net cost decrease of approximately $1,040,000. Total volume
decreased 11.1% in 1993 as compared to 1992 (1993--2.077 billion, 1992--2.337
billion). The decreased volume and a 7.4% reduction in average production and
placement costs resulted in a cost decrease of approximately $4,100,000.
Home products catalogs, offering 350 to 400 products, mailed in 1994
totaled 20,335,000 (6,555,000 to prospects). The first home products catalogs
were mailed in 1993 and totaled 1,551,000 (625,000 to prospects). Response
continues to be favorable even though it fell short of expectations in the
second half of 1994. The catalog is the primary advertising format being used to
promote home products and will be tested for men's and women's apparel in fall
1995 and spring 1996. The cost of catalog mailings increased advertising expense
approximately $10,090,000 in 1994 as compared to 1993 and $1,280,000 in 1993 as
compared to 1992.
General and administrative expenses increased 8.1% in 1994 over 1993 and
5.2% in 1993 over 1992. In 1994, a 6.6% increase in wages and benefits and
increased professional services and interest expense were primarily responsible
for the increased general and administrative expenses. Wages and benefits were
higher due to normal pay increases and a larger work force. On average, the
number of employees increased 5% in 1994. Professional services were higher
primarily due to consulting fees related to the study of the existing
distribution center and a possible second distribution center. Interest expense
was higher due to the increased borrowing needed to finance higher merchandise
inventory and customer accounts receivable balances. In 1993, wages and benefits
increased 7.2% and were primarily responsible for the increased general and
administrative expenses. Normal pay increases, increased Workers Compensation
insurance premiums and a larger Employee Stock Purchase Plan stock offer pushed
wages and benefits higher in 1993.
The provision for doubtful accounts as a percentage of credit sales
decreased 2.5% in 1994 as compared to 1993. Total credit sales increased 6.1% in
1994. Prospect (first-time buyer) credit sales carry a higher credit risk and as
a percentage of total credit sales were approximately 9.4% in 1994 and 12.5% in
1993. The estimated bad debt rate used in providing for doubtful accounts in
1994 was based on current expectations, sales mix (prospect vs. established
customer) and prior year's experience. The provision for doubtful accounts as a
percentage of credit sales increased 58.6% in 1993 as compared to 1992. Credit
sales increased 9.6% in 1993 with first-time buyers (prospects) making up
approximately 60% of the credit sales increase. Anticipated higher bad debts on
the increased prospect credit sales resulted in an increase in the estimated bad
debt rate used in providing for doubtful accounts in 1993.
Income taxes as a percentage of income before income taxes decreased to
39.8% in 1994 from 40.2% in 1993 and 42.1% in 1992. The federal income tax rate
was increased from 34% to 35% in 1993 but this increase was more than offset by
federal tax credits and downward adjustments of the company's effective state
income tax rates in 1994 and 1993. The Pennsylvania statutory rate fell from
12.25% to 11.99% in the third quarter of 1994, effective January 1, 1994.
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 and cash requirements were met and suppliers' invoices
were timely paid in order to maximize discounts. Effective February 9, 1995, the
company has $50,000,000 available in lines of credit, $10,000,000 with no
specified expiration date and $40,000,000 expiring May 31, 1995. Management
22
<PAGE> 14
anticipates renewing the lines upon their expiration. The average short-term
borrowings outstanding during 1994 were $12,505,000 as compared to $3,038,000
during 1993. 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 December 31,
1994, 3.10 at December 31, 1993 and 3.42 at December 31, 1992. Working capital
increased $17,694,351, $2,157,932 and $22,990,728 during 1994, 1993 and 1992.
These increases resulted primarily from working capital provided by operations
exceeding the internal financing of capital expenditures and payment of
dividends. The 1994 increase was primarily reflected in increased inventories,
customer accounts receivable and deferred income taxes offsetting increased
notes payable and accrued expenses. The 1993 increase was primarily reflected in
increased customer accounts receivable and deferred income taxes and decreased
accrued expenses offsetting increased notes payable and decreased cash and cash
equivalents. The 1992 increase was primarily reflected in decreased dividend
payable and increased customer accounts receivable. Although working capital has
increased, net cash provided by operating activities has decreased $14,023,199
in 1994 and $17,052,836 in 1993. These reductions in cash flow from operations
resulted primarily from increasing merchandise inventory and customer accounts
receivable.
Merchandise inventory turnover was 3.3 in 1994, as compared to 3.8 in 1993
and 3.5 in 1992. Merchandise inventory as of December 31, 1994 increased 48.8%
from December 31, 1993 and 56.2% from December 31, 1992. Net sales for 1994
increased 3.2% from 1993 and 7.1% from 1992. A large portion of the growth in
merchandise inventory was due to the expansion of home products inventory in
order to service the 350-400 product catalogs. Home products net sales as a
percentage of total net sales increased to 13.6% ($73.0 million) in 1994 as
compared to 10.8% ($56.3 million) in 1993 and 11.0% ($55.2 million) in 1992.
Home products inventory increased to $13.3 million at December 31, 1994 from
$3.5 million at December 31, 1993 and $40 million at December 31, 1992.
Inventory levels (women's, men's and home products) at December 31, 1994
increased due to lower than anticipated customer response in the fourth quarter
1994 and the continuing effort to increase order fulfillment rates.
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 $5,974,779, $11,547,441
and $11,252,105 during 1994, 1993 and 1992, respectively.
The company has nearly completed the renovation of its headquarters
facility in Warren. Renovation of the first two levels was completed in February
1993. The remaining two levels, minus a few thousand square feet, were completed
near the end of 1994. Total cost of the renovation is estimated at $13,600,000
(including office furniture). Total cost incurred as of December 31, 1994 was
approximately $13,500,000.
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 its distribution center, focused on
operational and customer service improvements. On October 19, 1994, the Board of
Directors approved a 64,000 square-foot warehouse addition to the distribution
center. Estimated cost of the project is $6.85 million. Construction began in
January 1995 with completion anticipated in early September 1995. The continuing
study includes examining the merits of a variety of service-enhancing options,
including a possible second distribution center located outside of the Warren,
Pennsylvania area.
It is anticipated that planned capital expenditures for the years ahead
will be financed by cash flow from operations and borrowings.
23
<PAGE> 15
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 1995 profit
margin will be pressured by postal rate and paper cost increases. The company's
early estimate of the increased cost of postage and paper approximates
$12,000,000.
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.
24
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders'
Blair Corporation
We consent to the incorporation by reference in this Form 10-K of Blair
Corporation and Subsidiary of our report dated February 2, 1995, included in the
1994 Annual Report to Stockholders of Blair Corporation.
Our audits also include the financial statement schedule of Blair Corporation
and Subsidiary listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 dated July 6, 1994, Form S-8 dated July 2, 1993, and Form S-8 dated
June 23, 1992, pertaining to the Blair Corporation Employee Stock Purchase Plan,
of our report dated February 2, 1995, with respect to the consolidated financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule included in
this Form 10-K of Blair Corporation.
/s/ ERNST & YOUNG LLP
Erie, Pennsylvania
March 17, 1995
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993 DEC-31-1992
<PERIOD-END> DEC-31-1994 DEC-31-1993 DEC-31-1992
<CASH> 2,183,136 2,937,432 0
<SECURITIES> 0 0 0
<RECEIVABLES> 170,344,301 146,708,314 0
<ALLOWANCES> 39,827,161 34,255,648 0
<INVENTORY> 83,957,462 62,072,241 0
<CURRENT-ASSETS> 235,602,108 193,678,901 0
<PP&E> 91,083,510 85,781,314 0
<DEPRECIATION> 38,025,818 33,855,151 0
<TOTAL-ASSETS> 288,659,800 245,605,064 0
<CURRENT-LIABILITIES> 86,704,120 62,475,264 0
<BONDS> 0 0 0
<COMMON> 419,810 419,810 0
0 0 0
0 0 0
<OTHER-SE> 199,596,870 180,783,990 0
<TOTAL-LIABILITY-AND-EQUITY> 288,659,800 245,605,064 0
<SALES> 535,792,222 519,174,324 500,168,164
<TOTAL-REVENUES> 535,792,222 519,174,324 500,168,164
<CGS> 257,921,482 251,136,064 242,132,747
<TOTAL-COSTS> 468,850,676 460,718,783 441,214,473
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 28,164,415 27,224,948 15,674,128
<INTEREST-EXPENSE> 676,380 153,626 106,354
<INCOME-PRETAX> 62,612,710 51,551,053 60,833,644
<INCOME-TAX> 24,934,000 20,698,000 25,638,000
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 37,678,710 30,853,053 35,195,644
<EPS-PRIMARY> 4.07 3.34 3.82
<EPS-DILUTED> 0 0 0
</TABLE>
