United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
---------
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended September 30, 1995 Commission File Number 1-878
------------------ -----------
BLAIR CORPORATION
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 25-0691670
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(814) 723-3600
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
As of November 13, 1995 the registrant had outstanding 9,322,132 shares of its
common stock without nominal or par value.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
September 30 December 31
1995 1994
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,234,865 $ 2,183,136
Customer accounts receivable,
less allowances for doubtful
accounts and returns of $43,938,723
in 1995 and $39,827,161 in 1994 165,866,479 130,517,140
Inventories - Note F
Merchandise 67,999,480 70,562,969
Advertising and shipping supplies 19,787,279 13,394,493
------------ ------------
87,786,759 83,957,462
Deferred income taxes 16,752,000 18,386,000
Prepaid federal and state income taxes 6,290,637 -0-
Prepaid expenses 645,657 558,370
------------ ------------
TOTAL CURRENT ASSETS 278,576,397 235,602,108
PROPERTY, PLANT AND EQUIPMENT - at cost
Land 1,130,454 1,130,454
Buildings 61,543,472 57,422,042
Equipment 34,672,124 32,195,892
Construction in progress 30,044 335,122
------------ ------------
97,376,094 91,083,510
Less allowances for depreciation 40,537,970 38,025,818
------------ ------------
56,838,124 53,057,692
------------ ------------
TOTAL ASSETS $335,414,521 $288,659,800
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 73,500,000 $ 34,300,000
Trade accounts payable 45,278,977 34,832,191
Advance payments from customers 1,193,426 1,419,582
Accrued expenses - Note D 11,569,179 12,725,522
Federal and state income taxes -0- 3,426,825
------------ ------------
TOTAL CURRENT LIABILITIES 131,541,582 86,704,120
DEFERRED INCOME TAXES 1,916,000 1,939,000
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 12,372,697 11,017,130
Retained earnings 208,061,792 207,683,352
------------ ------------
220,854,299 219,120,292
Less 753,308 shares in 1995 and 801,958
shares in 1994 of Common Stock in
treasury - at cost 16,927,008 17,238,660
Less receivable from Employee Stock
Purchase Plan 1,970,352 1,864,952
------------ ------------
201,956,939 200,016,680
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $335,414,521 $288,659,800
============ ============
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $124,985,566 $115,000,342 $403,245,648 $376,158,111
Other income - Note G 8,535,341 6,069,715 23,297,650 17,420,241
------------ ------------ ------------ ------------
133,520,907 121,070,057 426,543,298 393,578,352
Costs and expenses:
Cost of goods sold 64,050,156 55,053,697 198,650,272 179,042,187
Advertising 29,833,707 27,523,841 98,218,425 85,137,485
General and administrative 26,550,300 24,193,569 77,148,268 68,338,212
Provision for doubtful accounts 6,727,954 5,618,153 21,398,487 17,526,265
------------ ------------ ------------ ------------
127,162,117 112,389,260 395,415,452 350,044,149
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 6,358,790 8,680,797 31,127,846 43,534,203
Income taxes - Note E 2,418,000 3,443,000 12,649,000 17,410,000
------------ ------------ ------------ ------------
NET INCOME $ 3,940,790 $ 5,237,797 $ 18,478,846 $ 26,124,203
============ ============ ============ ============
Net income per share based on average
shares outstanding - Note C $ .42 $ .56 $1.99 $2.82
===== ===== ===== =====
<FN>
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
BLAIR CORPORATION AND SUBSIDIARY
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810
Additional paid-in capital:
Balance at beginning of period 11,017,130 9,595,875 11,017,130 9,595,875
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 1,355,567 1,421,255 1,355,567 1,421,255
------------ ------------ ------------ ------------
Balance at end of period 12,372,697 11,017,130 12,372,697 11,017,130
Retained earnings:
Balance at beginning of period 207,383,836 197,382,484 207,683,352 188,957,972
Net income 3,940,790 5,237,797 18,478,846 26,124,203
Cash dividends declared - Note B (3,262,834) (3,245,718) (18,100,406) (15,707,612)
------------ ------------ ------------ ------------
Balance at end of period 208,061,792 199,374,563 208,061,792 199,374,563
Treasury Stock:
Balance at beginning of period (17,238,660) (17,526,017) (17,238,660) (16,056,017)
Purchase of Common Stock for treasury -0- -0- -0- (1,470,000)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 311,652 287,357 311,652 287,357
------------ ------------ ------------ ------------
Balance at end of period (16,927,008) (17,238,660) (16,927,008) (17,238,660)
Receivable from Employee Stock Purchase Plan:
Balance at beginning of period (1,519,135) (1,476,308) (1,864,952) (1,713,840)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan (533,400) (551,850) (533,400) (551,850)
Payments 82,183 76,440 428,000 313,972
------------ ------------ ------------ ------------
Balance at end of period (1,970,352) (1,951,718) (1,970,352) (1,951,718)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $201,956,939 $191,621,125 $201,956,939 $191,621,125
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
Nine Months Ended
September 30
1995 1994
------------ ------------
OPERATING ACTIVITIES
Net income $ 18,478,846 $ 26,124,203
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,473,100 3,419,139
Provision for doubtful accounts 21,398,487 17,526,265
Provision for deferred income taxes 1,611,000 79,000
Gain on disposition of property,
plant and equipment -0- (259,877)
Changes in operating assets and
liabilities (using) providing cash:
Customer accounts receivable (56,747,826) (18,104,214)
Inventories (3,829,297) (23,031,648)
Prepaid expenses (87,287) (294,296)
Trade accounts payable 10,446,786 1,092,342
Advance payments from customers (226,156) 384,005
Accrued expenses (1,156,343) 786,249
Federal and state income taxes (9,717,462) (11,600,058)
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (16,356,152) (3,878,890)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (7,253,532) (4,024,716)
Proceeds from sale of property, plant
and equipment -0- 452,969
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (7,253,532) (3,571,747)
FINANCING ACTIVITIES
Net proceeds from lines of credit 39,200,000 21,900,000
Dividends paid (18,100,406) (15,707,612)
Purchase of Common Stock for treasury -0- (1,470,000)
Issuance (net of forfeitures) of
Common Stock under Employee Stock
Purchase Plan 1,667,219 1,708,612
Increase in notes receivable from
Employee Stock Purchase Plan (105,400) (237,878)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,661,413 6,193,122
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (948,271) (1,257,515)
Cash and cash equivalents at beginning of year 2,183,136 2,937,432
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,234,865 $ 1,679,917
============ ============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Blair
Corporation and its wholly-owned subsidiary have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. 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, 1994.
The consolidated financial statements include the accounts of Blair Corporation
and its wholly-owned subsidiary, Blair Holdings Inc. All significant
intercompany accounts are eliminated upon consolidation.
NOTE B - DIVIDENDS DECLARED
2-09-94 $1.00 per share 2-07-95 $1.25 per share
4-19-94 .35 4-18-95 .35
7-20-94 .35 7-19-95 .35
10-19-94 .35 10-18-95 .35
NOTE C - NET INCOME PER COMMON SHARE
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
----------- ----------- ----------- -----------
Net income $ 3,940,790 $ 5,237,797 $18,478,846 $26,124,203
Average shares outstanding 9,310,095 9,262,870 9,288,127 9,250,767
Net income per common share $ .42 $ .56 $1.99 $2.82
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
September 30 December 31
1995 1994
----------- -----------
Employee compensation $ 7,220,847 $ 6,426,098
Contribution to profit sharing
and retirement plan 2,061,731 4,023,519
Taxes, other than taxes on income 994,760 699,387
Other accrued items 1,291,841 1,576,518
----------- -----------
$11,569,179 $12,725,522
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
NOTE E - INCOME TAXES
The components of income tax expense are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
------------ ----------- ----------- -----------
Currently payable:
Federal $ (103,000) $ 1,088,000 $ 9,932,000 $14,345,000
State (204,000) (32,000) 1,106,000 2,986,000
----------- ----------- ----------- -----------
(307,000) 1,056,000 11,038,000 17,331,000
Deferred 2,725,000 2,387,000 1,611,000 79,000
----------- ----------- ----------- -----------
$ 2,418,000 $ 3,443,000 $12,649,000 $17,410,000
============ =========== =========== ===========
The differences between total tax expense and the amount computed by applying
the statutory federal income tax rate of 35% to income before income taxes are
as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
----------- ----------- ----------- -----------
Statutory rate applied
to pre-tax income $ 2,225,576 $ 3,038,279 $10,894,746 $15,236,971
State income taxes, net
of federal tax benefit 126,100 342,550 1,555,450 1,958,750
Other items 66,324 62,171 198,804 214,279
----------- ----------- ----------- -----------
$ 2,418,000 $ 3,443,000 $12,649,000 $17,410,000
=========== =========== =========== ===========
Components of the provision for deferred income tax expense are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
----------- ----------- ----------- -----------
Provision for estimated
returns $ (48,000) $ (32,000) $ (115,000) $ (908,000)
Provision for doubtful
accounts (842,000) (255,000) (1,460,000) (738,000)
Advertising costs 3,682,000 2,788,000 3,221,000 1,941,000
Other items - net (67,000) (114,000) (35,000) (216,000)
----------- ----------- ----------- -----------
$ 2,725,000 $ 2,387,000 $ 1,611,000 $ 79,000
=========== =========== =========== ===========
Significant components of the company's deferred tax assets and liability as of
September 30, 1995 and December 31, 1994 are as follows:
September 30 December 31
1995 1994
----------- -----------
Current deferred tax assets - net:
Doubtful accounts $14,526,000 $13,066,000
Returns allowances 2,558,000 2,443,000
Inventory obsolescence 1,898,000 1,883,000
Vacation pay 1,259,000 1,264,000
Inventory costs 1,481,000 1,479,000
Advertising costs (5,383,000) (2,162,000)
Other items 413,000 413,000
----------- -----------
$16,752,000 $18,386,000
========== ===========
Long-term deferred tax liability:
Tax over book depreciation $ 1,916,000 $ 1,939,000
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
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 $9,050,000
at September 30, 1995 and $8,690,000 at December 31, 1994, respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
----------- ---------- ----------- -----------
Finance charges on time
payment accounts $ 8,170,531 $ 5,451,049 $22,182,650 $16,195,767
Other items 364,810 618,666 1,115,000 1,224,474
----------- ---------- ----------- -----------
$ 8,535,341 $ 6,069,715 $23,297,650 $17,420,241
=========== =========== =========== ===========
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
49,150 shares on July 10, 1995 and 42,450 shares on July 7, 1994.
NOTE I - RECLASSIFICATIONS
Certain amounts previously reported in the 1994 financial statements have been
reclassified to conform with current year classifications.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Results of Operations
- ---------------------
Net sales for the third quarter and nine months of 1995 were record highs.
Despite the record sales, net income decreased 24.8% and 29.3% in the third
quarter and nine months of 1995 as compared to 1994. The reductions in
earnings were primarily attributable to increased postage, paper and payroll
costs.
Net sales for 1995 increased 8.7% and 7.2% over the prior record sales of the
third quarter and first nine months of 1994. The company's extension of higher
credit limits to our better customers and reduction of the minimum payment on
our revolving Easy Payment Plan contributed to the record sales levels. Gross
Easy Payment Plan credit sales have increased 15.8% and 16.2% in the 1995
periods. Response rates have been mixed - down 2.8% third quarter and up 5.9%
year-to-date for customer multi-product mailings, down 8.4% and 14.9% for
prospect multi-product mailings, down 1.6% and 3.1% for co-op and media, up
16.7% and 2.8% for customer catalogs and up 34% third quarter and down 8.2%
year-to-date for prospect catalogs. Sales revenue generated per advertising
dollar decreased .6% and 7.8% in the 1995 periods primarily due to increased
advertising cost (postage and paper). The number of orders shipped decreased
2.7% and .2% but the average order size increased 11.2% and 7.1%. Returns as a
percentage of adjusted gross sales have improved slightly - 14.8% and 14.9% in
1995, 15.1% and 15.0% in 1994.
Other income increased 40.6% and 33.7% in the third quarter and nine months of
1995 as compared to 1994. The increases were due to finance charges earned on
increased Easy Payment Plan accounts receivable. Prospect multi-product
circular mailings and prospect catalogs offer revolving credit to first-time
buyers. These programs along with the extension of higher credit limits to our
better customers and the reduction in our minimum payment schedule (effective
January 1, 1995 - from 10% to 5% on average) have been greatly responsible for
an increase in average Easy Payment Plan accounts receivable of 31.9%
(approximately $43,200,000) in the first nine months of 1995 as compared to
1994.
Cost of goods sold as a percentage of net sales increased to 51.2% and 49.3% in
1995 from 47.9% and 47.6% in 1994. The higher cost of goods primarily resulted
from larger than usual inventory writedowns and increased delivery costs. The
larger writedowns were primarily attributable to a special sale of excess
inventory held in Wilmington, Delaware during the first three weeks of
September 1995. Increased postal rates and the higher cost to ship larger and
heavier merchandise in the expanded line of home products drove delivery costs
up.
Advertising expenses in the third quarter and first nine months of 1995
increased 8.3% and 15.4% from 1994. Increases in postage and paper costs, the
co-op and media programs, customer multi-product mailings (third quarter) and
catalog mailings (nine months) were primarily responsible for the increased
advertising expense.
The total number of circular mailings released in the third quarter of 1995 was
.9% less than in 1994 (1995 - 43.7 million, 1994 - 44.0 million). A 4.1%
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Results of Operations - Continued
- ---------------------
increase in multi-product customer mailings (1995 - 36.0 million, 1994 - 34.6
million), an 18.0% decrease in multi-product prospect mailings (1995 - 6.4
million, 1994 - 7.8 million), a 24.3% decrease in single-product mailings (1995
- - 1.3 million, 1994 - 1.7 million), a 10.1% increase in average mailings cost
(postage) and a 15.4% increase in average production cost (primarily paper)
resulted in a net circular mailings cost increase of approximately $2,031,000.
The total number of circular mailings released in the nine months of 1995 was
6.4% less than in 1994 (1995 - 146.9 million, 1994 - 156.8 million). A 4.3%
decrease in multi-product customer mailings (1995 - 112.8 million, 1994 - 117.9
million), a 10.4% decrease in multi-product prospect mailings (1995 - 28.6
million, 1994 - 31.9 million), a 22.9% decrease in single-product mailings
(1995 - 5.4% million, 1994 - 7.1 million), a 11.4% increase in average mailing
cost (postage) and 13.0% increase in average production cost (primarily paper)
resulted in a net circular mailings cost increase of approximately $4,856,000.
Total volume of the co-op and media programs in 1995 increased 4.1% in the
third quarter (1995 - 324 million, 1994 - 311 million) and 5.1% in the nine
months (1995 - 1.41 billion, 1994 - 1.34 billion) as compared to 1994. The
increased volumes and 25.8% and 14.0% increases in average production and
placement costs (primarily paper and postage) resulted in co-op and media cost
increases of approximately $1,375,000 (third quarter) and $2,006,000 (nine
months).
Third quarter catalog mailings numbered 6.8 million in 1995 (1.6 million to
prospects) and 9.6 million in 1994 (5.5 million to prospects). Nine month
catalog mailings totaled 26.0 million (10.9 million prospect) and 15.6 million
(5.7 million prospect). All the catalogs mailed were home products catalogs
except for 805,000 men's test catalogs in the 1995 periods. The volume changes
and increased mailing costs resulted in a net catalog cost decrease of
$1,034,000 third quarter and a net increase of $6,197,000 year-to-date. The
catalog format is the primary advertising format for home products and is
currently being tested for men's apparel (since July 1995) and will be tested
for women's apparel in Spring 1996.
General and administrative expense increased 9.7% in the third quarter and
12.9% in the nine months of 1995 as compared to 1994. Increases in wages and
benefits, interest expense and telephone expense were primarily responsible for
the increased general and administrative expenses. Wages and benefits
increased 6.5% and 10.1% due to normal pay increases, a larger work force and
an increase in the normal work week from 37 1/4 hours to 40 hours. On average,
the number of employees has increased 1.5% in the third quarter and 3.7% year-
to-date. The work week was extended to hours at the beginning of the fourth
quarter of 1994. Interest expense was higher (third quarter - $981,196 in
1995, $157,363 in 1994; nine months - $2,510,130 in 1995, $324,436 in 1994) due
to increased borrowings needed to finance higher customer accounts receivable
balances. Telephone expense has increased because the company has improved and
expanded it's 800 - number capabilities (ordering and customer service). As of
September 1, 1995, all catalogs (home products and men's) have been offering an
800 ordering number. The company opened a call center, located in Erie, PA.,
in August 1995 to handle the telephone order volume.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Results of Operations - Continued
- ---------------------
The provision for doubtful accounts as a percentage of credit sales increased
7.2% and 9.6% in the 1995 periods as compared to 1994. Total credit sales
increased 11.7% and 11.5% and total finance charges increased 49.9% and 37.0%
in 1995. Prospect (first-time buyer) credit sales and finance charges carry a
higher credit risk. Prospect credit sales decreased 15.6% in the third quarter
and increased 1.8% year-to-date. Prospect finance charges increased 36.3% and
24.0%. The estimated bad debt rate used in providing for doubtful accounts is
based on current expectations, sales mix (prospect vs. established customer)
and prior years' experience (higher charge offs in 1994). The rates used in
providing for bad debts have remained relatively constant since mid-1994.
There have been no adjustments made to the 1995 provisions but the 1994
provisions include favorable adjustments of prior period provisions of
approximately $140,000 and $210,000. Recoveries of bad debts previously
charged off have been credited back against the allowance for doubtful
accounts.
Income taxes as a percentage of income before income taxes were 38.0% and 40.6%
in the third quarter and nine months of 1995 as compared to 39.7% and 40.0% in
1994. The federal income tax rate was 35% in both years. The company's
effective state income tax rate was lower in 1995 as the Pennsylvania statutory
rate fell from 12.25% to 11.99% in the third quarter of 1994, retroactive to
January 1, 1994 and to 10.99% effective January 1, 1995. In June 1995,
retroactive to January 1, 1995, the Pennsylvania statutory rate was reduced to
9.99%. In addition, the effective state rate was further reduced by the
provision enacted by Pennsylvania regarding the apportionment of business
income - allows double weighting the sales factor. The reductions in the
effective state income tax rate caused reductions in the company's net deferred
tax asset and increases in income tax expense of approximately $185,000 in the
first quarter of 1995 and $638,000 in the second quarter of 1995.
Liquidity and Sources of Capital
- --------------------------------
All working capital and cash requirements were met and suppliers' invoices were
timely paid in order to maximize discounts. The company has $82,500,000
available in lines of credit, $10,000,000 with no specified expiration date,
$7,500,000 expiring November 17, 1995 and $65,000,000 expiring November 30,
1995. Management is currently negotiating a new line of credit arrangement
scheduled to go into effect November 17, 1995. Short-term borrowings
outstanding were $33,500,000 at September 30, 1994, $34,300,000 at December 31,
1994, $57,000,000 at March 31, 1995, $56,750,000 at June 30, 1995, $73,500,000
at September 30, 1995 and $73,350,000 at November 13, 1995.
The ratio of current assets to current liabilities was 2.12 at September 30,
1995, 2.72 at December 31, 1994 and 2.72 at September 30, 1994. Working
capital decreased $1,863,173 in the nine months of 1995. The decrease was
primarily reflected in increased notes payable and trade accounts payable more
than offsetting increased customer accounts receivable, prepaid federal and
state income taxes and advertising and shipping supplies inventory. Dividends
paid ($18,100,406) and capital expenditures ($7,253,532) were primarily
responsible for the reduction in working capital. Working capital increased
$9,969,840 during the first nine months of 1994. The increase was primarily
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Liquidity and Resources - Continued
- -----------------------
reflected in increased merchandise inventory and prepaid federal and state
income taxes
offsetting increased notes payable. The 1994 nine month increase in working
capital was primarily the result of near-record net income ($26,124,203)
exceeding dividends paid ($15,707,612) and capital expenditures ($4,024,716).
Merchandise inventory turnover was 3.0 at September 30, 1995. 3.3 at December
31, 1994 and 3.5 at September 30, 1994. Merchandise inventory as of September
30, 1995 decreased 3.6% from December 31, 1994 and increased .7% from September
30, 1994. Net sales for the nine months of 1995 increased 7.2% over the first
three quarters of 1994. Inventory levels have been impacted by the continuing
effort to increase order fulfillment rates, lower than anticipated customer
response in the fourth quarter of 1994 and the expansion of home products and
men's product lines due to the catalogs. Home products net sales as a
percentage of total net sales increased to 15.5% ($62.3 million) in 1995 as
compared to 13.8% ($51.8 million) in 1994. Men's net sales decreased to 22.5%
($90.8 million) from 25.2% ($94.9 million) and women's increased to 62.0%
($250.2 million) from 61.0% ($229.5 million). Home products inventory totaled
$11.6 million at September 30, 1995 as compared to $13.3 million at December 31,
1994 and $15.8 million at September 30, 1994. Men's inventory was $19.4 million
at September 30, 1995, $18.9 million at December 31, 1994 and $17.9 million at
September 30, 1994. Women's inventory was $37.0 million at September 30, 1995,
$38.4 million at December 31, 1994 and $33.8 million at September 30, 1994. As
previously mentioned in the Results of Operations, the company held a special
sale during September to improve its excess inventory position.
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 $7,253,532 during the
nine months of 1995 and $4,024,716 during the first nine months of 1994.
The company has completed the renovation of its headquarters facility in Warren.
The lower two levels were completed in February 1993 and the upper two levels
were mostly completed near the end of 1994. Total cost of the renovation was
$13,600,000.
The company completed its new Erie, Pennsylvania outlet store. Total cost of
the new store, which opened May 23, 1994, was $2.1 million. The old Erie store
building was sold in August 1994.
The company has undertaken a study of the distribution center, focused on
operational and customer service improvements. On October 19, 1994, the Board
of Directors approved a 64,000 square-foot warehouse addition to the
distribution center. Construction begin in January 1995 and was completed in
September 1995 at a cost of $6.9 million. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Impact of Inflation and Changing Prices
- ---------------------------------------
Although inflation has moderated in our economy, the company is continually
seeking ways to cope with its impact. To the extent permitted by competition,
increased costs are passed on to customers by selectively increasing selling
prices over a period of time. During the past several years, selling prices
have been raised sufficiently to offset increased merchandise costs, thereby
realizing profit margins that continue to build fiscal strength. Profit
margins will be pressured by postal rate and paper cost increases in 1995. The
company estimates the increased cost of postage and paper will exceed
$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.
PART II. OTHER INFORMATION
BLAIR CORPORATION AND SUBSIDIARY
September 30, 1995
Item 5. Other Information
-----------------
The company filed a Registration Statement on Form S-8 on July 7, 1995
registering 49,150 shares of the company's Common Stock which was offered
for purchase on July 10, 1995 to selected employees of the company under
and in accordance with the company's Employee Stock Purchase Plan.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
None
(b) Reports on Form 8-K
------------------
No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLAIR CORPORATION
-----------------------------------
(Registrant)
Date November 13, 1995 By Giles W. Schutte
- ---------------------------- ----------------------------------------
Giles W. Schutte
Executive Vice President and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR
CORPORATIONS' 9/30/95 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH THIRD QUARTER, 1995 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,234,865
<SECURITIES> 0
<RECEIVABLES> 165,866,479
<ALLOWANCES> 43,938,723
<INVENTORY> 87,786,759
<CURRENT-ASSETS> 278,576,397
<PP&E> 97,376,094
<DEPRECIATION> 40,537,970
<TOTAL-ASSETS> 335,414,521
<CURRENT-LIABILITIES> 131,541,582
<BONDS> 0
<COMMON> 419,810
0
0
<OTHER-SE> 201,537,129<F1>
<TOTAL-LIABILITY-AND-EQUITY> 335,414,521
<SALES> 403,245,648
<TOTAL-REVENUES> 426,543,298
<CGS> 198,650,272
<TOTAL-COSTS> 395,415,452
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,398,487
<INTEREST-EXPENSE> 2,510,130
<INCOME-PRETAX> 31,127,846
<INCOME-TAX> 12,649,000
<INCOME-CONTINUING> 18,478,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,478,846
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
<FN>
<F1>AMOUNT INCLUDES ADDITIONAL PAID-IN CAPITAL, RETAINED EARNINGS, TREASURY
STOCK, AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
</FN>
</TABLE>
