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 March 31, 1996 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 May 10, 1996 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
March 31, 1996
CONSOLIDATED BALANCE SHEETS
BLAIR CORPORATION AND SUBSIDIARY
March 31 December 31
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,364,732 $ 3,667,363
Customer accounts receivable,
less allowances for doubtful accounts
and returns of $52,984,248 in 1996
and $47,184,071 in 1995 201,591,814 191,399,482
Inventories - Note F
Merchandise 65,019,730 64,597,476
Advertising and shipping supplies 19,381,346 15,795,329
------------ ------------
84,401,076 80,392,805
Deferred income taxes 19,820,000 18,669,000
Prepaid state income taxes 1,533,403 1,306,403
Prepaid expenses 754,184 528,291
------------ ------------
Total current assets 314,465,209 295,963,344
Property, plant and equipment:
Land 1,130,454 1,130,454
Buildings 61,674,403 61,620,547
Equipment 35,379,747 35,406,049
------------ ------------
98,184,604 98,157,050
Less allowances for depreciation 42,663,913 41,844,738
------------ ------------
55,520,691 56,312,312
Trademarks 1,039,961 1,057,892
------------ ------------
TOTAL ASSETS $371,025,861 $353,333,548
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 9,750,000 $ 4,300,000
Trade accounts payable 55,943,693 48,223,146
Advance payments from customers 1,301,719 1,155,159
Accrued expenses - Note D 9,487,087 11,396,086
Federal income taxes 3,728,142 666,142
------------ ------------
Total current liabilities 80,210,641 65,740,533
Deferred income taxes 2,007,000 2,027,000
Long-term debt 80,000,000 80,000,000
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 12,372,697
Retained earnings 214,748,258 211,588,111
------------ ------------
227,540,765 224,380,618
Less 801,958 shares of common stock in
treasury - at cost 16,927,008 16,927,008
Less receivable from Employee Stock
Purchase Plan 1,805,537 1,887,595
------------ ------------
208,808,220 205,566,015
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $371,025,861 $353,333,548
============ ============
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME
BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended
March 31
1996 1995
------------ ------------
Net sales $140,727,028 $127,640,505
Other income - Note G 11,093,086 7,116,153
------------ ------------
151,820,114 134,756,658
Costs and expenses:
Cost of goods sold 69,823,696 62,104,035
Advertising 34,710,085 29,130,962
General and administrative 25,675,947 24,400,296
Provision for doubtful accounts 9,929,165 6,486,067
Interest 1,294,327 615,626
------------ ------------
141,433,220 122,736,986
------------ ------------
INCOME BEFORE INCOME TAXES 10,386,894 12,019,672
Income taxes - Note E 3,964,000 4,916,000
------------ ------------
NET INCOME $ 6,422,894 $ 7,103,672
============ ============
Net income per share based on average
shares outstanding - Note C $.69 $.77
==== ====
See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended
March 31
1996 1995
------------ ------------
Common stock $ 419,810 $ 419,810
Additional paid-in capital 12,372,697 11,017,130
Retained earnings:
Balance at beginning of period 211,588,111 207,683,352
Net income 6,422,894 7,103,672
Cash dividend declared - Note B (3,262,747) (11,591,853)
------------ ------------
Balance at end of period 214,748,258 203,195,171
Treasury stock (16,927,008) (17,238,660)
Receivable from Employee
Stock Purchase Plan:
Balance at beginning of period (1,887,595) (1,864,952)
Payments 82,058 271,125
------------ ------------
Balance at end of period (1,805,537) (1,593,827)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $208,808,220 $195,799,624
============ ============
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended
March 31
1996 1995
------------ ------------
OPERATING ACTIVITIES
Net income $ 6,422,894 $ 7,103,672
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,341,539 1,168,392
Provision for doubtful accounts 9,929,165 6,486,067
Provision for deferred income taxes (1,171,000) 2,932,000
Changes in operating assets and
liabilities (using) providing cash:
Customer accounts receivable (20,121,497) (13,415,879)
Inventories (4,008,271) (11,215,953)
Prepaid expenses (225,893) (153,839)
Trade accounts payable 7,720,547 3,395,772
Advance payments from customers 146,560 1,490,157
Accrued expenses (1,908,999) (3,475,074)
Federal and state income taxes 2,835,000 (4,431,999)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 960,045 (10,116,684)
INVESTING ACTIVITIES
Purchases of property,
plant and equipment (531,987) (1,513,055)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (531,987) (1,513,055)
FINANCING ACTIVITIES
Net proceeds from lines of credit 5,450,000 22,700,000
Dividend paid (3,262,747) (11,591,853)
Payments on receivable from
Employee Stock Purchase Plan 82,058 271,125
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,269,311 11,379,272
------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,697,369 (250,467)
Cash and cash equivalents at
beginning of year 3,667,363 2,183,136
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,364,732 $ 1,932,669
============ ============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
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 three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. 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, 1995.
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
2-07-95 $1.25 per share 2-07-96 $ .35 per share
4-18-95 .35 5-10-96 .25
7-19-95 .35
10-18-95 .35
NOTE C - NET INCOME PER COMMON SHARE
Three Months Ended
March 31
1996 1995
----------- -----------
Net income $ 6,422,894 $ 7,103,672
Average shares outstanding 9,322,132 9,273,482
Net income per common share $.69 $.77
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
March 31 December 31
1996 1995
----------- -----------
Employee compensation $ 6,458,141 $ 6,162,097
Contribution to profit sharing
and retirement plan 688,714 2,799,706
Taxes, other than taxes on income 913,693 713,176
Other accrued items 1,426,539 1,721,107
----------- -----------
$ 9,487,087 $11,396,086
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
NOTE E - INCOME TAXES
The liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The components of income tax expense are as follows:
Three Months Ended
March 31
1996 1995
----------- -----------
Currently payable:
Federal $ 4,562,000 $ 1,813,000
State 573,000 171,000
----------- -----------
5,135,000 1,984,000
Deferred (credit) (1,171,000) 2,932,000
----------- -----------
$ 3,964,000 $ 4,916,000
=========== ===========
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
March 31
1996 1995
----------- -----------
Statutory rate applied to
pre-tax income $ 3,635,413 $ 4,206,885
State income taxes, net
of federal tax benefit 260,650 643,500
Other items 67,937 65,615
----------- -----------
$ 3,964,000 $ 4,916,000
=========== ===========
Components of the provision for deferred income tax (credit) expense are as
follows:
Three Months Ended
March 31
1996 1995
----------- -----------
Provision for estimated
returns $ (846,000) $ 73,000
Provision for doubtful accounts (1,887,000) (402,000)
Advertising costs 1,640,000 3,290,000
Other items - net (78,000) (29,000)
----------- -----------
$(1,171,000) $ 2,932,000
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
NOTE E - INCOME TAXES - Continued
Components of the deferred tax assets and liability under the liability method
as of March 31, 1996 and December 31, 1995 are as follows:
March 31 December 31
1996 1995
----------- -----------
Current net deferred tax assets:
Doubtful accounts $17,559,000 $15,672,000
Returns allowances 2,724,000 1,878,000
Inventory obsolescence 1,934,000 1,934,000
Inventory costs 1,479,000 1,456,000
Vacation pay 1,350,000 1,323,000
Advertising costs (5,678,000) (4,038,000)
Other items 452,000 444,000
----------- -----------
$19,820,000 $18,669,000
=========== ===========
Long-term deferred tax liability:
Property, plant and equipment $ 2,007,000 $ 2,027,000
=========== ===========
NOTE F - INVENTORIES
Inventories are valued at the lower of cost or market. Cost of merchandise
inventories is determined principally on the last-in, first-out (LIFO) method.
Cost of advertising and shipping supplies is determined on the first-in, first-
out (FIFO) method. Advertising and shipping supplies include printed
advertising material and related mailing supplies for promotional mailings
which are generally scheduled to occur within two months. These costs are
expensed when mailed. If the FIFO method had been used for all inventories,
the total amount would have increased by approximately $8,737,000 at March 31,
1996 and $8,662,000 at December 31, 1995, respectively.
NOTE G - OTHER INCOME
Other income consists of:
Three Months Ended
March 31
1996 1995
----------- -----------
Finance charges on time
payment accounts $10,816,787 $ 6,720,322
Other items 276,299 395,831
----------- -----------
$11,093,086 $ 7,116,153
=========== ===========
Finance charges on time payment accounts are recognized on an accrual basis of
accounting.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
NOTE H - FINANCING ARRANGEMENTS
In 1995, the company entered into a $125,000,000 Revolving Credit Facility,
which expires on November 17, 1998. The interest rate is, at the company's
option, based on a base rate option, federal funds rate option or euro-rate
option as defined in the agreement. The Revolving Credit Facility requires
the company to meet certain covenants as outlined in the agreement. These
covenants specifically relate to tangible net worth, maintaining a defined
leverage ratio and fixed charge coverage ratio and complying with certain
indebtedness restrictions. As of March 31, 1996, the company was in
compliance with all the agreement's covenants. As of March 31, 1996 and
December 31, 1995, respectively, the company had borrowed $89,750,000 and
$84,300,000, under the agreement of which $80,000,000 was classified as
long-term.
Effective March 9, 1995, the company had $60,000,000 available in lines of
credit, $10,000,000 with no specified expiration date and $50,000,000
expiring May 31, 1995. $57,000,000 was outstanding at March 31, 1995,all
short-term.
NOTE I - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
The company adopted FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", in the first
quarter of 1996. Currently, adoption of the statement has no effect on the
company.
NOTE J - RECLASSIFICATIONS
Certain amounts previously reported in the 1995 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
March 31, 1996
Results of Operations
- ---------------------
Comparison of First Quarter 1996 and First Quarter 1995
Net income for the first quarter of 1996 decreased 9.6% as compared to the
first quarter of 1995. Record first quarter revenue (net sales and finance
charges) was more than offset by increases in cost of goods sold (incentive
pricing), advertising expense (more catalogs and higher paper cost), the
provision for doubtful accounts (higher prospect sales) and interest expense.
The record first quarter net sales of 1996 were 10.3% higher than the first
quarter net sales of 1995. Expanded pre-approved credit offers to prospects
and higher advertising programs volume were primarily responsible for the
record sales in 1996. Gross Easy Payment Plan credit sales increased 13.1% in
the first quarter 1996 from the first quarter 1995. Response rates in 1996
have been mixed - down 11.8% for customer multi-product mailings, up 177.5% for
prospect multi-product mailings, down 16.3% for co-op and media, up 8.0% for
customer catalogs and up 159.5% for prospect catalogs - as compared to the
first quarter of 1995. Gross sales revenue generated per advertising dollar
decreased 6.1% primarily due to increased advertising cost (paper and catalog
prospecting). In the first quarter of 1996, the total number of orders shipped
increased 3.1% and the average order size increased 8.4% as compared to the
first quarter of 1995. Returns as a percentage of adjusted gross sales slipped
to 15.6% in the 1996 quarter from 14.9% in the 1995 quarter. Changes in sales
mix (more prospects) and sales type (more credit and charge card) in 1996
contributed to the returns slippage.
Other income increased 55.9% in the first quarter of 1996 as compared to the
first quarter of 1995. The increase was due to finance charges assessed on
increased Easy Payment Plan accounts receivable. By comparison, finance
charges increased 61.0% and average Easy Payment Plan accounts receivable
increased 46.2% (approximately $75,000,000).
Cost of goods sold as a percentage of net sales increased to 49.6% in 1996 from
48.7% in 1995. Incentive pricing (reduced price offers on excess inventory and
promotional offers of free shipping and handling) and increased returns were
primarily responsible for the higher cost of goods.
Advertising expenses in the first quarter of 1996 increased 19.2% from the
first quarter of 1995. Increased circular mailings, catalog mailings and paper
costs were the prime contributors to the higher advertising costs.
The total number of circular mailings released in the first quarter of 1996 was
10.6% more than in the first quarter of 1995 (48.4 million in 1996, 43.7
million in 1995). A 24.7% increase in multi-product customer mailings (38.8
million in 1996, 31.1 million in 1995), a 29.8% decrease in multi-product
prospect mailings (7.5 million in 1996, 10.7 million in 1995), an 8.6% increase
in single-product mailings (2.0 million in 1996, 1.9 million in 1995) and an
8.0% increase in average production cost (primarily paper) resulted in a net
circular mailings cost increase of approximately $2,471,000 over the first
quarter of 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
Results of Operations - Continued
- ---------------------
Comparison of First Quarter 1996 and First Quarter 1995 - Continued
Total volume of the co-op and media advertising programs increased 3.1% in the
1996 quarter as compared to the 1995 first quarter (594.4 million in 1996,
576.7 million in 1995). A 24.7% decrease in co-op advertising and a 15.2%
increase in media advertising resulted in a net co-op and media cost decrease
of approximately $453,000 from the first quarter of 1995. The unit cost of
co-op advertising is approximately twice that of media advertising.
The total number of catalog mailings released in the first quarter of 1996 was
81.1% more than in the first quarter of 1995 (9.2 million in 1996, 5.1 million
in 1995). The catalog is the primary advertising format for home products and
is currently being tested for men's (started July 1995) and women's (started
January 1996) apparel. A 38.7% increase in customer catalogs (5.7 million in
1996, 4.1 million in 1995), a 263.6% increase in prospect catalogs (3.5 million
in 1996, 1.0 million in 1995) and increased printing cost (primarily paper)
resulted in a catalogs mailing cost increase of approximately $3,465,000 over
the first quarter of 1995. In 1996, 6.5 million home products, 1.3 million
men's and 1.4 million women's catalogs were mailed. In 1995, only home
products catalogs were mailed.
General and administrative expense increased 5.2% in the 1996 quarter as
compared to the first quarter of 1995. The higher general and administrative
expense was centered primarily in wages and benefits (up 4.2%) and telephone
expense (up 160%). The increased costs were primarily the result of the
company improving and expanding its 800-number capabilities for both order
taking and customer service. As of September 1, 1995, all catalog mailings
have been offering an 800 ordering number. The company opened a second call
center, located in Erie, Pennsylvania, in August 1995 to help handle the
increasing telephone order volume.
The provision for doubtful accounts as a percentage of credit sales increased
35.3% in the first quarter comparison. Total credit sales increased 13.1% and
total finance charges increased 61.0%. Prospect credit sales increased 119%
and prospect finance charges increased 87.0%. Prospect (first-time buyer)
credit sales and finance charges carry a higher credit risk. The estimated bad
debt rate used in providing for doubtful accounts is based on current
expectations, sales mix (prospect vs. customer) and prior years' experience.
The rate used in providing for bad debts in 1996 was raised due to increased
prospect activity. Recoveries of bad debts previously charged off have been
credited back against the allowance for doubtful accounts.
Interest expense more than doubled in the first quarter of 1996 as compared to
the first quarter of 1995. Interest expense has resulted primarily from the
company's borrowings necessary to finance the increasing level of customer
accounts receivable . Borrowings outstanding averaged approximately
$87,000,000 in the first quarter of 1996 as compared to $41,000,000 in the
first quarter of 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
Results of Operations - Continued
- ---------------------
Comparison of First Quarter 1996 and First Quarter 1995 - Continued
Income taxes as a percentage of income before income taxes were 38.2% in the
first quarter 1996 and 40.9% in the first quarter 1995. The federal income tax
rate was 35% in both years. The change in the total income tax rate was caused
by a reduction in the company's effective state income tax rate.
Liquidity and Sources of Capital
- --------------------------------
All working capital and cash requirements were met. In November 1995, the
company entered into a $125,000,000 Revolving Credit Facility which expires on
November 17, 1998. The unsecured Revolving Credit Facility requires the
company to meet certain covenants and as of March 31, 1996 the company was in
compliance with all the covenants. Borrowings outstanding at March 31, 1996
were $89,750,000 of which $80,000,000 was classified as long-term. As of March
31, 1995, the company had $60,000,000 available in lines of credit, $10,000,000
with no specified expiration date and $50,000,000 expiring May 31, 1995. Short-
term borrowings outstanding at March 31, 1995 were $57,000,000.
The ratio of current assets to current liabilities was 3.92 at March 31, 1996,
4.50 at December 31, 1995 and 2.34 at March 31, 1995. Working capital
increased $4,031,757 in the first quarter of 1996. The increase was primarily
reflected in increased customer accounts receivable, inventories and cash more
than offsetting increased trade accounts payable, notes payable and federal
income taxes. Primarily, the 1996 increase in working capital was attributable
to the smaller dividend declared and paid in the first quarter.
Merchandise inventory turnover was 3.2 at March 31, 1996, 3.0 at December 31,
1995 and 3.1 at March 31, 1995. Merchandise inventory as of March 31, 1996
increased .7% from December 31, 1995 and decreased 12.4% from March 31, 1995.
Net sales for the first quarter of 1996 increased 10.3% over the first quarter
of 1995. Over the last few years, inventory levels have been impacted by the
continuing effort to increase order fulfillment rates, lower than anticipated
response in the fourth quarter of 1994 and the expansion of product lines due
to the catalogs. Currently, better inventory management techniques are being
investigated. Home products net sales as a percentage of total net sales
increased to 16.1% ($22.6 million) in 1996 as compared to 13.5% ($17.2 million)
in the first quarter of 1995. Men's net sales increased to 25.7% ($36.1
million) from 23.1% ($29.5 million). Women's decreased to 58.2% ($81.9
million) from 63.4% ($80.9 million). Home products inventory totaled $13.1
million at March 31,1996 as compared to $10.0 million at December 31, 1995 and
$12.7 million at March 31, 1995. Men's inventory was $16.9 million at March
31, 1996, $18.4 at December 31, 1995 and $21.2 million at March 31, 1995.
Women's inventory was $35.0 million at March 31, 1996, $36.2 million at
December 31, 1995 and $40.2 million at March 31, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
Liquidity and Sources of Capital - Continued
- --------------------------------
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 $531,987 during the
first quarter of 1996 and $1,513,055 during the first quarter of 1995.
In 1995, the company completed the total renovation of its headquarters
facility in Warren, Pennsylvania. Total cost of the renovation, expended over
more than 3 years, was $13.6 million.
In August 1995, the company's second telephone call center was opened in Erie,
Pennsylvania. The call center is located in a leased facility. Company plans
are to expand the Erie Call Center by late summer 1996 and to add a third call
center in early 1997. See Future Considerations.
In September 1995, the company completed a 64,475 square-foot warehouse
addition to its distribution center at a cost of $6.9 million. The continuing
study of the distribution center, focused on operational and customer service
improvements, includes examining the merits of a variety of service-enhancing
options, including a possible second distribution center located outside of the
Warren, Pennsylvania area.
Future cash needs for expansion of the business and capital expenditures will
be financed by cash flow from operations, the current borrowing arrangement and
other financing arrangements available to the company.
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 were reduced by postal rate and paper costs increases in 1995 and are
continuing to be pressured in 1996. Paper costs have retreated from their high
point at 1995 year-end, but were still well above first quarter 1995 levels
during the first quarter of 1996.
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
Impact of Inflation and Changing Prices - Continued
- ---------------------------------------
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.
Impact of Recently Issued Accounting Standard
- ---------------------------------------------
In March 1995, the Financial Accounting Standard Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". The Statement requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying value. The company adopted Statement
No. 121 in the first quarter of 1996. Currently, adoption of the Statement has
no effect on the company.
Future Considerations
- ---------------------
The company is faced with the ever-present challenge of keeping the customer
file alive and growing. This involves the acquisition of new customers
(prospects), the conversion of new customers to established customers (active
repeat buyers) and the retention of established customers. These steps are
vital in growing the business but are being impacted by the decline in consumer
retail spending, increased operating costs and increased competition in the
retail sector.
The company has been undergoing a strategic planning study (since early 1995)
in which our current marketing programs, operating systems and competitive
position have been assessed and looked at with future application and
effectiveness in mind. The continuing study has resulted in a new marketing
strategy whose development will require utilizing our existing strengths,
changing business processes and organizational structure and improving
information systems.
A prime aspect of the new marketing strategy involves targeting customers in
the "over 50", low-to-moderate income market. This market, though younger in
age than our existing customer file, is the fastest growing segment of the
population. Success of the new marketing strategy will require investment in
database management, operating systems, prospecting programs, catalog
marketing, telephone call centers and, possibly, a second distribution center.
Management believes that these investments should improve Blair Corporation's
position in new and existing markets and provide opportunities for future
earnings growth.
PART II. OTHER INFORMATION
BLAIR CORPORATION AND SUBSIDIARY
March 31, 1996
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
March 31, 1996.
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 May 10, 1996 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' 3/31/96 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FIRST QUARTER, 1996 10-Q FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,364,732
<SECURITIES> 0
<RECEIVABLES> 201,591,814<F1>
<ALLOWANCES> 52,984,248
<INVENTORY> 84,401,076
<CURRENT-ASSETS> 314,465,209
<PP&E> 98,184,604
<DEPRECIATION> 42,663,913
<TOTAL-ASSETS> 371,025,861
<CURRENT-LIABILITIES> 80,210,641
<BONDS> 0
0
0
<COMMON> 419,810
<OTHER-SE> 208,388,410<F2>
<TOTAL-LIABILITY-AND-EQUITY> 371,025,861
<SALES> 140,727,028
<TOTAL-REVENUES> 151,820,114
<CGS> 69,823,696
<TOTAL-COSTS> 141,433,220
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,929,165
<INTEREST-EXPENSE> 1,294,327
<INCOME-PRETAX> 10,386,894
<INCOME-TAX> 3,964,000
<INCOME-CONTINUING> 6,422,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,422,894
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
<FN>
<F1>AMOUNT REPRESENTS NET ACCOUNT RECEIVABLES.
<F2>AMOUNT INCLUDES ADDITIONAL PAID-IN CAPITAL, RETAINED EARNINGS, TREASURY
STOCK, AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
</FN>
</TABLE>
