<PAGE> 1
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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, 1997 Commission file number 1-878
BLAIR CORPORATION
Incorporated in Delaware I.R.S. Employer Identification Number:
220 Hickory Street
Warren, Pennsylvania 16366 25-0691670
(814) 723-3600
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
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 27, 1998 was $150,961,002. There were 8,987,343
shares of common stock outstanding as of February 27, 1998, which amount
represents the figure reported as outstanding by the Company's transfer agent as
of the record date (9,007,366 shares) reduced by 20,023 shares repurchased by
the Company prior to the record date but not reflected on the books of the
transfer agent.
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Stockholders for the fiscal year ended December 31,
1997 (the "Annual Report") is incorporated by reference into Part II and Part IV
of this Form 10-K. Portions of the Proxy Statement for the 1998 Annual Meeting
of Stockholders (the "Proxy Statement") are incorporated by reference into Part
III of this Form 10-K.
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<PAGE> 2
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 approximately 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 selected 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,
exercise and personal care items) directly to existing and prospective
customers. Sales of the menswear and womenswear products accounted for
approximately 87% of the Company's total sales in 1997, and sales of home
products accounted for the remaining 13% (approximately). Media and co-op
prospect advertising programs continue to be used as 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. In 1995, the Company tested a
catalog format to market its menswear and in early 1996, the Company tested a
catalog format to market its womenswear. The success of the pilot catalog
mailing programs prompted the Company to continually expand its catalog
distribution since 1993, and the Company anticipates that catalog mailings will
outnumber letter mailings in 1998.
Orders for merchandise are processed at the Company's corporate offices in
Warren, Pennsylvania. Letter 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. Catalog mailings are mailed from commercial
printers engaged by the Company. The Company serves customers throughout the
fifty states.
The Company's outlet stores enable it to more efficiently promote and
liquidate discontinued, overstocked and returned merchandise. The Delaware
retail store is the only Company retail facility located outside of its home
state of Pennsylvania.
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 1997, the Company continued its efforts to broaden its customer
information systems. The marketing and credit departments are continually
updated in order to enhance the Company's ability to market to both customers
and prospects.
(D) FOREIGN OPERATIONS AND EXPORT SALES.
The Company does not derive any revenue from sales of merchandise outside
of the United States.
<PAGE> 3
ITEM 2. PROPERTIES
The Company owns the following properties:
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, Information
Services, Human Resources, Merchandise, Order Handling and Planning
departments.
2. Blair Distribution Center (Route 62, Irvine, Pennsylvania) -- a
542,275 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
38,660 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 the following properties:
1. Blair Retail Store (Wilmington, Delaware) -- a 11,765 square foot
retail facility.
2. Warehouse Building (Route 62, Starbrick, Pennsylvania) -- a 30,000
square foot metal warehouse facility.
3. Telephone Call Center (Erie, Pennsylvania) -- a 21,870 square foot
metal call center facility.
4. Telephone Call Center (Franklin, Pennsylvania) -- a 17,500 square foot
cement block call center facility.
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 1997 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 1997 Annual Report to Stockholders.
<PAGE> 4
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 pages
15 through 18 of the Company's 1997 Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
7 through 14 of the Company's 1997 Annual Report to Stockholders.
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 1998 Annual Meeting of Stockholders (the "1998 Proxy
Statement") is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the caption "Executive Compensation" in the
1998 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 1998
Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-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 1997 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.
<PAGE> 5
All other schedules set forth in the applicable accounting regulations of
the Securities and Exchange Commission either are not required under the related
instructions or are not applicable and, therefore, have been omitted.
(3) List of Exhibits.
3 (i) Certificate of Incorporation of the Company
3 (ii) Bylaws of the Company
*10 Stock Accumulation and Deferred Compensation Plan for
Directors
*11 Computation of Earnings per Share (incorporated by reference
to page 7 of the 1997 Annual Report to Stockholders)
*13 1997 Annual Report to Stockholders
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,
1997.
(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.
<PAGE> 6
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.
BLAIR CORPORATION
(Registrant)
Date: March 20, 1998 By: /s/ KENT R. SIVILLO
-----------------------------------
Kent R. Sivillo
Vice President and Treasurer
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.
Date: March 20, 1998 By: /s/ MURRAY K. MCCOMAS
-----------------------------------
Murray K. McComas
President and Director
(Principal Executive Officer)
Date: March 20, 1998 By: /s/ BLAIR T. SMOULDER
-----------------------------------
Blair T. Smoulder
Executive Vice President
and Director
Date: March 20, 1998 By: /s/ MICHAEL J. SAMARGYA
-----------------------------------
Michael J. Samargya
Vice President, Information
Services, and Director
Date: March 20, 1998 By: /s/ STEVEN M. BLAIR
-----------------------------------
Steven M. Blair
Vice President, Order
Handling, and Director
Date: March 20, 1998 By: /s/ JOHN E. ZAWACKI
-----------------------------------
John E. Zawacki
Vice President, Womenswear,
and Director
Date: March 20, 1998 By: /s/ DAVID A. BLAIR
-----------------------------------
David A. Blair
Secretary and Director
<PAGE> 7
Date: March 20, 1998 By: /s/ KENT R. SIVILLO
-----------------------------------
Kent R. Sivillo
Vice President,
Treasurer and Director
(Principal Financial and
Accounting Officer)
Date: March 20, 1998 By: /s/ ROBERT D. CROWLEY
-----------------------------------
Robert D. Crowley
Vice President, Menswear,
and Director
Date: March 20, 1998 By: /s/ THOMAS P. MCKEEVER
-----------------------------------
Thomas P. McKeever
Vice President, Corporate Affairs
and Human Resources, and Director
<PAGE> 8
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, 1997
<PAGE> 9
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, 1997, are incorporated by reference in Item 8:
-- Consolidated Balance Sheets -- December 31, 1997 and 1996
-- Consolidated Statements of Income -- Years ended
December 31, 1997, 1996 and 1995
-- Consolidated Statements of Stockholders' Equity -- Years ended
December 31, 1997, 1996 and 1995
-- Consolidated Statements of Cash Flows -- Years ended
December 31, 1997, 1996 and 1995
-- Notes to Consolidated Financial Statements -- December 31, 1997
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.
<PAGE> 10
Blair Corporation and Subsidiary
Schedule II
Valuation and Qualifying Accounts
December 31, 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
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ADDITIONS-
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS- AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE OF PERIOD
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<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts $37,272,572 $ 32,222,092(A) $ 37,509,776(B) $31,984,888
For estimated loss on
returns 7,192,000 94,114,182 94,811,182(C) 6,495,000
----------- ------------ ------------ -----------
Totals $44,464,572 $126,336,274 $132,320,958 $38,479,888
=========== ============ ============ ===========
Year ended December 31, 1996:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts $40,508,071 $ 47,550,310(A) $ 50,785,809(B) $37,272,572
For estimated loss on
returns 6,676,000 100,976,722 100,460,722(C) 7,192,000
----------- ------------ ------------ -----------
Totals $47,184,071 $148,527,032 $151,246,531 $44,464,572
=========== ============ ============ ===========
Year ended December 31, 1995:
Allowance deducted from asset
accounts (customer accounts
receivable):
For doubtful accounts $32,256,161 $ 31,774,283(A) $ 23,522,373(B) $40,508,071
For estimated loss on
returns 7,571,000 96,320,044 97,215,044(C) 6,676,000
----------- ------------ ------------ -----------
Totals $39,827,161 $128,094,327 $120,737,417 $47,184,071
=========== ============ ============ ===========
</TABLE>
- ----------
Note (A) -- Current year provision for doubtful accounts, charged against
income.
Note (B) -- Accounts charged off, net of recoveries.
Note (C) -- Sales value of merchandise returned.
<PAGE> 1
Exhibit 10
BLAIR STOCK ACCUMULATION AND DEFERRED COMPENSATION PLAN
FOR DIRECTORS
1. PURPOSE OF THE PLAN
The purpose of the Blair Stock Accumulation and Deferred Compensation Plan
for Directors (the "Plan") is (1) to further the identity of interests of
members of the Board of Directors of Blair Corporation (the "Company") with
those of the Company's stockholders generally through the grant of common stock
of the Company (the "Stock") and (2) to permit Directors to defer the payment of
all or a specified part of their compensation, including any grant of Stock by
the Company, for services performed as Directors.
2. ELIGIBILITY
Members of the Board of Directors of the Company who are not employees of
the Company or any of its subsidiaries or affiliates shall be eligible to
receive grants of Stock under the Plan. Members of the Board of Directors of the
Company who are not employees of the Company or any of its subsidiaries or
affiliates shall be eligible under this Plan to defer compensation for services
performed as Directors.
3. ADMINISTRATION AND AMENDMENT
The Plan shall be administered by the Executive Payroll Compensation
Committee of the Board of Directors or such other officers or Directors of the
Company not eligible under Article 2 hereof for participation in the Plan who
are selected by the Board of Directors (the "Committee"). The decision of the
Committee with respect to any questions arising as to the administration,
construction or interpretation of this Plan, including the severability of any
and all of the provisions thereof, shall be final, conclusive and binding. The
Board of Directors of the Company reserves the right to modify the Plan from
time to time, or to repeal the Plan entirely, provided, however, that (1) no
modification of the Plan shall operate to annul an election already in effect
for the current calendar year or any preceding calendar year; and (2) to the
extent required under Section 16 of the Securities Exchange Act of 1934
("Exchange Act"), Plan provisions relating to the amount, price and timing of
stock grants and options shall not be amended more than once every fiscal year,
except that the foregoing shall not preclude any amendment necessary to conform
to changes in the Internal Revenue Code or the Employee Retirement Income
Security Act.
The Committee is authorized, subject to the provisions of the Plan, from
time to time to establish such rules and regulations as it deems appropriate for
the proper administration of the Plan, and to make such determinations and take
such steps in connection therewith as it deems necessary or advisable.
4. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT/CHANGE IN LAW
It is the Company's intent that the Plan comply in all respects with Rule 16b-3
of the Exchange Act, or its successor, and any regulations promulgated
thereunder. If any provision of this Plan is found not to be in compliance with
such rule and regulations, the provision shall be deemed null and void, and the
remaining provisions of the Plan shall continue in full force and effect. All
transactions under this Plan shall be executed in accordance with the
requirements of Section 16 of the Exchange Act and regulations promulgated
thereunder.
The Board of Directors may, in its sole discretion, at any time modify the
terms and conditions of this Plan in response to and consistent with any changes
in applicable law, rule or regulation.
5. ANNUAL STOCK GRANT
Effective with the 1998 Annual Meeting and annually thereafter, each
Director eligible under Article 2 hereof shall be awarded an annual grant of not
more than one thousand (1,000) shares of Stock following his/her election to the
Board of Directors at the Annual Meeting of Stockholders, the number of shares
to be established each year by the Board of Directors. A Director elected to the
Board at a time other than at the Annual Meeting shall receive a grant of Stock
on the date such person becomes an eligible Director equal to the number of
shares determined by the Board of Directors as the annual grant for that year
prorated for the number of whole or partial months of service during such year
when such person serves as a Director.
<PAGE> 2
6. ELECTION TO DEFER
On or before December 31 of any year, commencing with 1997, a Director may
irrevocably elect to defer, until a specified year or the cessation of his
service as a Director of the Company, the receipt of all Stock granted under
Article 5 hereof and/or the payment of all or a specified part of all annual
retainer and committee and meeting fees payable to the Director for services as
a Director during the calendar year following the election and succeeding
calendar years , provided, however, that Stock may only be deferred in full (and
not in part) with respect to any annual grant of Stock pursuant to Article 5
hereof. When such an election is filed, the Director shall designate in his
election as to the particular year or years the amount of fees and/or Stock to
be deferred and to be credited pursuant to Article 7 hereof. Any person who
shall become a Director during any calendar year, and who was not a Director of
the Company on the preceding December 31, may elect, within thirty days after
election to the Board, to defer in the same manner the receipt of all Stock
granted under Article 5 of this Plan and/or the payment of all or a specified
part of fees not yet earned for the remainder of that calendar year and for
succeeding calendar years. Elections shall be made by written notice delivered
to the Secretary of the Company.
7. DIRECTORS' ACCOUNTS
Fees deferred in the form of cash shall be held in the general funds of the
Company and shall be credited to an account in the name of each eligible
participating Director. On the first business day of each quarter, interest
shall be credited to each account calculated on the basis of the cash balance in
each account on the last business day of the preceding quarter at the rate of
interest in effect on the immediately preceding March 31 with respect to the
Company's Profit Sharing and Saving Plan's Interest Income Fund (or at such
other rate as may be specified by the Committee from time to time). Stock
granted under Article 5 to be deferred in the form of stock units shall be
allocated to each Director's account based on the closing price of the Company's
common stock as reported on the Composite Tape of the American Stock Exchange
("Stock Price") on the effective date of the Stock grant. The Company shall not
be required to reserve or otherwise set aside shares of its authorized and
unissued or treasury common stock for the payment of its obligations hereunder,
but shall make available as and when required a sufficient number of shares of
common stock to meet the needs of the Plan. Unless otherwise determined by the
Board of Directors, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company or any participant or
other individual. To the extent any individual holds any rights by virtue of a
grant awarded under the Plan, such rights (unless otherwise determined by the
Board) shall be no greater than the rights of an unsecured general creditor of
the Company. An amount equal to any cash dividends (or the fair market value of
dividends paid in property other than dividends payable in common stock of the
Company) payable on the number of shares represented by the number of stock
units in each Director's account will be allocated to each Director's account,
in cash, on the dividend payment date. Any stock dividends payable on such
number of shares will be allocated in the form of stock units. If adjustments
are made to outstanding shares of common stock as a result of split-ups,
recapitalizations, mergers, consolidations and the like, an appropriate
adjustment will also be made in the number of stock units in a Director's
account. Stock units shall not entitle any person to rights of a stockholder
unless and until shares of Company common stock have been issued to that person
with respect to stock units as provided in Article 8.
8. PAYMENT FROM DIRECTORS' ACCOUNTS
The aggregate amount of Stock granted under Article 5 which has been
deferred and deferred fees, together with interest and dividend equivalents
accrued thereon, shall be paid in the year specified by the Director or, unless
otherwise specified, in the year after a Director ceases to be a Director of the
Company. Amounts deferred shall be paid in a lump sum or, if the Director
elects, in substantially equal annual installments over a period not to exceed
five (5) years as specified by the Director. The delivery election must be made
by written notice delivered to the Secretary of the Company prior to the
deferral date specified by the Director or the date he ceases to be a Director,
as the case may be, and the first installment (or lump sum payment ) shall be
paid promptly at the beginning of the following calendar year. Subsequent
installments shall be paid promptly at the beginning of each succeeding calendar
year until the entire amount credited to the Director's account shall have been
paid. In the event that installments are designated in the delivery election,
the cash amount remaining in the Director's account shall continue to bear
interest in accordance with the provisions of Article 7 hereof. Amounts credited
to a Director's account in cash shall be paid in cash and amounts credited in
stock units shall be paid in one share of common stock of the Company for each
stock unit, except that a cash payment will be made with any final installment
for any fraction of a stock unit remaining in the Director's account. Such
fractional share will be valued at the closing Stock Price on the date of
settlement.
<PAGE> 3
9. PAYMENT IN EVENT OF DEATH
A Director may file with the Secretary of the Company a written designation
of a beneficiary for his or her account under the Plan on such form as may be
prescribed by the Committee, and may, from time to time, amend or revoke such
designation. If a Director should die before all deferred amounts credited to
the Director's account have been distributed, the balance of any deferred Stock
and fees and interest and dividend equivalents then in the Director's account
shall be paid promptly to the Director's designated beneficiary. If the Director
did not designate a beneficiary, or in the event that the beneficiary designated
by the Director shall have predeceased the Director, the balance in the
Director's account shall be paid promptly to the Director's estate.
10. TERMINATION OF ELECTION
A Director may terminate his/her election to defer payment of fees in cash
or stock units by written notice delivered to the Secretary of the Company.
Termination shall become effective as of the end of the calendar year in which
notice of termination is given with respect to fees payable for services as a
Director during subsequent calendar years. Amounts credited to the account of a
Director prior to the effective date of termination shall not be affected
thereby and shall be paid only in accordance with Articles 7 and 8 hereof.
11. NONASSIGNABILITY
During the Director's lifetime, the right to any deferred Stock or fees
including interest and dividend equivalents thereon shall not be transferable or
assignable.
12. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the participant's creditors.
13. GOVERNING LAW
The validity and construction of the Plan shall be governed by the laws of
the State of Delaware.
14. EFFECTIVE DATE
This Plan shall become effective as of December 17, 1997, provided it is
approved by stockholders at the Company's 1998 Annual Meeting, and shall
continue in full force and effect until terminated by the Board of Directors.
<PAGE> 1
EXHIBIT 13
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $486,581,737 $544,129,005 $560,889,612
Other income-- Note 5 39,931,577 44,291,914 31,927,853
------------ ------------ ------------
526,513,314 588,420,919 592,817,465
Costs and expenses:
Cost of goods sold 242,828,539 268,757,869 277,278,340
Advertising 128,117,432 141,035,288 138,001,203
General and administrative 98,352,175 102,209,670 99,773,037
Provision for doubtful accounts 32,222,092 47,550,310 31,774,283
Interest 4,102,148 5,524,561 3,743,692
------------ ------------ ------------
505,622,386 565,077,698 550,570,555
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 20,890,928 23,343,221 42,246,910
Income taxes-- Note 6 7,637,000 8,617,000 16,979,000
------------ ------------ ------------
NET INCOME $ 13,253,928 $ 14,726,221 $ 25,267,910
============ ============ ============
Basic and diluted earnings per share based on
weighted average shares outstanding $1.45 $1.58 $2.72
===== ===== =====
</TABLE>
See accompanying notes.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
================================================================================
BOARD OF DIRECTORS AND STOCKHOLDERS
BLAIR CORPORATION AND SUBSIDIARY
We have audited the accompanying consolidated balance sheets of Blair
Corporation and Subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Buffalo, New York
January 30, 1998
7
<PAGE> 2
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
============================================================================================
DECEMBER 31 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,468,483 $ 4,115,533
Customer accounts receivable, less
allowances for doubtful accounts and
returns of $38,479,888 in 1997 and
$44,464,572 in 1996 157,636,096 193,772,056
Inventories:
Merchandise 68,143,275 74,537,691
Advertising and shipping supplies 10,584,134 13,310,907
------------- ------------
78,727,409 87,848,598
Deferred income taxes-- Note 6 9,910,000 17,022,000
Prepaid federal and state taxes 6,499,412 10,142,009
Prepaid expenses 391,532 655,915
------------- ------------
TOTAL CURRENT ASSETS 256,632,932 313,556,111
PROPERTY, PLANT AND EQUIPMENT
Land 1,142,144 1,130,454
Buildings 63,263,399 62,788,129
Equipment 38,859,725 36,540,127
------------- ------------
103,265,268 100,458,710
Less allowances for depreciation 51,322,255 46,251,580
------------- ------------
51,943,013 54,207,130
TRADEMARKS 921,623 993,867
------------- ------------
TOTAL ASSETS $309,497,568 $368,757,108
============= ============
</TABLE>
8
<PAGE> 3
<TABLE>
<CAPTION>
======================================================================================================
DECEMBER 31 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable-- Note 2 $ 38,600,000 $ 27,000,000
Trade accounts payable 46,358,297 40,497,362
Advance payments from customers 1,393,814 1,145,382
Accrued expenses-- Note 3 9,033,411 9,536,481
------------- -------------
TOTAL CURRENT LIABILITIES 95,385,522 78,179,225
DEFERRED INCOME TAXES-- Note 6 1,683,000 1,979,000
LONG-TERM DEBT -- Note 2 -0- 80,000,000
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 13,230,251 12,928,260
Retained earnings 223,868,940 216,068,537
------------- -------------
237,519,001 229,416,607
Less 1,067,724 shares in 1997 and 840,908
shares in 1996 of Common Stock in
treasury-- at cost 23,161,169 19,013,814
Less receivable from Employee Stock Purchase Plan 1,928,786 1,803,910
------------- -------------
212,429,046 208,598,883
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $309,497,568 $368,757,108
============= =============
</TABLE>
See accompanying notes.
9
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================================================
YEAR ENDED DECEMBER 31 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK $ 419,810 $ 419,810 $ 419,810
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 12,928,260 12,372,697 11,017,130
Issuance (net of forfeitures)
of Common Stock under
Employee Stock Purchase
Plan-- Note 4 288,303 555,563 1,355,567
Issuance of Common Stock to
non-employee directors 13,688 -0- -0-
------------- ------------- -------------
Balance at end of year 13,230,251 12,928,260 12,372,697
RETAINED EARNINGS:
Balance at beginning of year 216,068,537 211,588,111 207,683,352
Net income 13,253,928 14,726,221 25,267,910
Cash dividends declared per share --
$0.60 in 1997; $1.10 in 1996;
$2.30 in 1995 (5,453,525) (10,245,795) (21,363,151)
------------- ------------- -------------
Balance at end of year 223,868,940 216,068,537 211,588,111
TREASURY STOCK:
Balance at beginning of year (19,013,814) (16,927,008) (17,238,660)
Purchase of 276,866 shares in 1997;
120,300 shares in 1996; and -0- shares
in 1995 of Common Stock for treasury (4,551,438) (2,267,655) -0-
Issuance (net of forfeitures)
of Common Stock under
Employee Stock Purchase
Plan-- Note 4 395,646 180,849 311,652
Issuance of 1,500 shares of Common Stock to
non-employee directors 8,437 -0- -0-
------------- ------------- -------------
Balance at end of year (23,161,169) (19,013,814) (16,927,008)
RECEIVABLE FROM EMPLOYEE STOCK PURCHASE PLAN:
Balance at beginning of year (1,803,910) (1,887,595) (1,864,952)
Issuance (net of forfeitures)
of Common Stock under
Employee Stock Purchase
Plan-- Note 4 (362,765) (177,635) (530,468)
Repayments 237,889 261,320 507,825
------------- ------------- -------------
Balance at end of year (1,928,786) (1,803,910) (1,887,595)
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY $ 212,429,046 $ 208,598,883 $ 205,566,015
============= ============= =============
</TABLE>
See accompanying notes.
10
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
==================================================================================================================
YEAR ENDED DECEMBER 31 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 13,253,928 $ 14,726,221 $ 25,267,910
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 5,369,394 5,418,237 4,821,652
Provision for doubtful accounts 32,222,092 47,550,310 31,774,283
Provision for deferred income taxes 6,816,000 1,599,000 (195,000)
Compensation expense for stock awards 375,525 559,538 1,148,881
Changes in operating assets and liabilities
providing (using) cash:
Customer accounts receivable 3,913,868 (49,922,884) (92,656,626)
Inventories 9,121,189 (7,455,793) 3,564,657
Prepaid expenses 264,383 (127,624) 30,079
Trade accounts payable 5,860,935 (7,725,784) 13,390,955
Advance payments from customers 248,432 (9,777) (264,423)
Accrued expenses (503,070) (1,859,605) (1,329,436)
Federal and state taxes 3,642,597 (9,501,748) (4,067,087)
------------ ------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 80,585,273 (6,749,909) (18,514,155)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (3,033,033) (3,249,030) (8,058,340)
Purchase of trademarks -0- -0- (1,075,822)
------------ ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (3,033,033) (3,249,030) (9,134,162)
FINANCING ACTIVITIES
Net (repayments) proceeds from bank borrowings (68,400,000) 22,700,000 50,000,000
Dividends paid (5,453,525) (10,245,795) (21,363,151)
Purchase of Common Stock for treasury (4,551,438) (2,267,655) -0-
Decrease in notes receivable from
Employee Stock Purchase Plan 205,673 260,559 495,695
------------ ------------- -------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (78,199,290) 10,447,109 29,132,544
------------ ------------- -------------
NET (DECREASE) INCREASE IN CASH (647,050) 448,170 1,484,227
Cash at beginning of year 4,115,533 3,667,363 2,183,136
------------ ------------- -------------
CASH AT END OF YEAR $ 3,468,483 $ 4,115,533 $ 3,667,363
============ ============= =============
</TABLE>
See accompanying notes.
11
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: The consolidated financial statements include the accounts of
Blair Corporation and its wholly-owned subsidiary, Blair Holdings, Inc., a
Delaware Corporation (Company). 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
back against the allowance for doubtful accounts in the period received. As
reported in the balance sheet, the carrying amount, net of allowances for
doubtful accounts and returns for customer accounts receivable on credit sales,
approximates fair value.
Finance charges on time payment accounts are recognized on an accrual basis of
accounting.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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 1997, 1996
and 1995 amounted to $94,114,182, $100,976,722 and $96,320,044, respectively.
ALLOWANCES FOR DOUBTFUL ACCOUNTS: A provision for doubtful accounts is recorded
monthly as a percentage of gross sales based upon experience of delinquencies
and charge-offs and current credit market conditions. Management believes these
provisions are adequate based upon the relevant information presently available.
However, it is reasonably possible that the Company's provisions may change in
the near term.
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 $8,538,000 and $8,833,000 at December 31, 1997
and 1996, 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.
TRADEMARKS: Trademarks are stated on the basis of cost. All trademarks are being
amortized by the straight-line method for a period of 15 years. Amortization
expense amounted to $72,244, $71,852 and $17,930 in 1997, 1996 and 1995,
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
accounting. The contributions to the plan charged against income in 1997, 1996
and 1995 amounted to $1,407,745, $1,568,137 and $2,799,706, 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 1997, 1996 and 1995 amounted
to $1,852,557, $1,925,675 and $1,787,053, 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: The carrying amounts of cash, customer accounts
receivable, accounts payable and accrued liabilities approximate fair value due
to the short-term maturities of these assets and liabilities. The interest rates
on the Company's revolving credit facility are adjusted regularly to reflect
current market rates. Accordingly, the carrying amounts of the Company's
borrowings also approximate fair value.
NEW ACCOUNTING PRONOUNCEMENTS
Earnings Per Share
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share," was issued. SFAS 128 establishes standards for
computing and presenting earnings per share (EPS) and simplifies the existing
standards. This statement replaces the presentation of primary EPS with a
presentation of basic and diluted EPS. SFAS 128 was adopted in the financial
statements for the year ended December 31, 1997. The adoption of this standard
had no impact on the Company's earnings per share amounts.
Comprehensive Income
In June 1997, Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Comprehensive Income," was issued. SFAS130 establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. SFAS 130 is effective for fiscal years beginning
after December 15, 1997, and requires restatement of earlier periods presented.
Management does not believe the adoption of this standard will have an impact on
the financial statements of the Company.
Disclosures About Segments of an Enterprise and Related Information
In June 1997, Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS131 establishes standards for the way that a public enterprise
reports information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS 131 is
effective for fiscal years beginning after December 15, 1997, and requires
restatement of earlier periods presented. Management does not believe the
adoption of this standard will have a significant impact on the financial
statements of the Company.
RECLASSIFICATIONS: Certain amounts in the prior year financial statements have
been reclassified to conform with the current year presentation.
CONTINGENCIES: The Company is involved in certain items of litigation, arising
in the normal course of business. While it cannot be predicted with certainty,
management believes that the outcome will not have a material effect on the
Company's financial condition or results of operations.
12
<PAGE> 7
================================================================================
2. 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 is unsecured
and 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 December 31, 1997 and 1996, the Company was in
compliance with all the agreement's covenants. At December 31, 1997 and 1996,
the Company had borrowed $38,600,000 and $107,000,000 of which -0- and
$80,000,000 were classified as long-term.
Interest paid during 1997, 1996 and 1995 amounted to $4,186,967, $5,506,851 and
$3,630,505, respectively. The weighted average interest rate on average debt
outstanding was 5.96%, 5.89% and 6.53% for the years ended December 31, 1997,
1996 and 1995, respectively.
The Company has outstanding letters of credit amounting to approximately
$11,525,000 at December 31, 1997 related to inventory purchases.
3. ACCRUED EXPENSES
- --------------------------------------------------------------------------------
Accrued expenses consist of:
1997 1996
---- ----
Employee compensation $5,674,054 $6,089,723
Contribution to Profit Sharing and
Retirement Plan 1,407,745 1,568,137
Taxes, other than taxes on income 297,457 322,053
Other accrued items 1,654,155 1,556,568
---------- ----------
$9,033,411 $9,536,481
========== ==========
4. EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
The Company has an Employee Stock Purchase Plan (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, 1997 and 1996, 146,700 and 195,250
shares, respectively, were available to be issued under the Plan. The Company
follows APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for its Employee Stock Purchase Plan.
Compensation expense equals the difference between the exercise price and the
market price of the shares at the date of grant. Compensation expense related to
these awards amounted to $353,400, $559,538 and $1,148,881 for the years ended
December 31, 1997, 1996 and 1995, respectively. A summary of the activity under
the Plan is as follows:
1997 1996 1995
---- ---- ----
Shares granted and issued 49,600 34,700 49,150
Grant and issue price per share $7.50 $7.50 $11.00
Market value per share
at date of issue $14.625 $23.625 $34.375
Shares cancelled and forfeited 1,050 2,000 500
Original price per share $7.50 to $13.00 to $13.00 to
$16.00 $15.00 $16.00
Weighted average price per share $11.75 $14.00 $14.50
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123) requires the use of option valuation models to
determine the fair value of employee stock options. The Company's net income and
earnings per share amounts as reported are the same as what would be required
under SFAS No. 123.
5. OTHER INCOME
- --------------------------------------------------------------------------------
Other income consists of:
1997 1996 1995
---- ---- ----
Finance charges on time
payment accounts $36,416,174 $42,503,052 $30,339,372
Miscellaneous 3,515,403 1,788,862 1,588,481
----------- ----------- -----------
$39,931,577 $44,291,914 $31,927,853
=========== =========== ===========
6. INCOME TAXES
- --------------------------------------------------------------------------------
The components of income tax expense are as follows:
1997 1996 1995
---- ---- ----
Currently payable:
Federal $ 2,012,000 $6,682,000 $15,366,000
State (1,191,000) 336,000 1,808,000
------------ ---------- -----------
821,000 7,018,000 17,174,000
Deferred (credit) 6,816,000 1,599,000 (195,000)
------------ ---------- -----------
$ 7,637,000 $8,617,000 $16,979,000
============ ========== ===========
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:
1997 1996 1995
---- ---- ----
Statutory rate applied to
pretax income $7,311,825 $8,170,127 $14,786,419
State income taxes, net
of federal benefit 256,100 365,950 1,833,000
Other items 69,075 80,923 359,581
---------- ---------- -----------
$7,637,000 $8,617,000 $16,979,000
========== ========== ===========
Components of the deferred tax asset and liability under the liability method as
of December 31, 1997 and 1996 are as follows:
1997 1996
---- ----
Current net deferred tax asset:
Doubtful accounts $ 6,960,000 $14,441,000
Returns allowance 2,013,000 1,853,000
Inventory obsolescence 1,937,000 1,937,000
Inventory costs 778,000 876,000
Vacation pay 1,321,000 1,257,000
Advertising costs (4,113,000) (4,150,000)
Other items 1,014,000 808,000
----------- -----------
$ 9,910,000 $17,022,000
=========== ===========
Long-term deferred tax liability:
Property, plant and equipment $ 1,683,000 $ 1,979,000
=========== ===========
Income taxes (refunded) paid during 1997, 1996 and 1995 amounted to
($2,224,794), $15,553,202 and $21,241,087, respectively.
7. CONCENTRATION OF BUSINESS RISK
- --------------------------------------------------------------------------------
The Company is primarily in the business of selling men's and women's fashion
wearing apparel and accessories and home product 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 lines accounted for 87%, 83% and 85% of total 1997, 1996 and 1995
sales, respectively. The home products merchandise line accounted for the
remaining sales volume.
13
<PAGE> 8
QUARTERLY RESULTS OF OPERATIONS
================================================================================
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
QUARTER ENDED Quarter Ended
March June September December March June September December
31 30 30 31 31 30 30 31
----------------------------------------------- ---------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $110,882 $127,546 $102,810 $145,344 $140,727 $138,931 $112,095 $152,376
Cost of goods
sold 55,117 63,639 52,630 71,443 69,824 67,309 55,224 76,402
Net income 1,965 3,620 2,256 5,413 6,423 6,761 1,481 62
Basic and diluted
earnings
per share .21 .40 .25 .59 .69 .72 .16 .01
</TABLE>
Quarter ended December 31,1997 includes an additional provision for doubtful
accounts of $3.1 million (pretax), $.20 net income per share and quarter ended
December 31, 1996 includes an additional provision for doubtful accounts of $9.5
million (pretax), $.59 net income per share, due to actual bad debt experience
exceeding prior estimates.
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, 1997
was 2,761.
<TABLE>
<CAPTION>
1997 1996
SALES PRICE DIVIDENDS Sales Price Dividends
HIGH LOW DECLARED High Low Declared
<S> <C> <C> <C> <C> <C> <C>
First Quarter 20-3/4 $15-3/4 $.15 $35 $24-5/8 $.35
Second Quarter 17-3/4 13-5/16 .15 27 22 .25
Third Quarter 18-1/4 15-1/16 .15 24 20-3/4 .25
Fourth Quarter 20-1/4 16-5/8 .15 21-3/8 16-3/8 .25
</TABLE>
The payment of dividends is not subject to any restrictions. The payment of
dividends is dependent on 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 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $486,581,737 $544,129,005 $560,889,612 $535,792,222 $519,174,324
Net income 13,253,928 14,726,221 25,267,910 37,678,710 30,853,053
Total assets 309,497,568 368,757,108 353,333,548 288,881,909 245,605,064
Long-term debt -0- 80,000,000 80,000,000 -0- -0-
Per share:
Basic and diluted
earnings 1.45 1.58 2.72 4.07 3.34
Cash dividends
declared .60 1.10 2.30 2.05 2.60
</TABLE>
14
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================================================
RESULTS OF OPERATIONS
COMPARISON OF 1997 AND 1996
Net income for 1997 decreased 10.0% as compared to 1996. The year 1997 was
negatively impacted by lower net sales and deteriorating bad debt experience.
Net sales for 1997 were 10.6% lower than 1996 net sales. Sales declined in
1997 due to a reduction in the volume of advertising mail, tightened credit
management and elimination of high-dollar, high-credit-risk electronics items in
the Home Products line. Advertising mail volume was reduced as a result of the
elimination of pre-approved credit offers to prospects and, to a lesser extent,
the early stage implementation of mail stream optimization and segmentation.
Response rates were mixed -- reduced by tighter credit management, improved by
mail stream optimization and segmentation -- but remained about the same
overall. Gross sales revenue generated per advertising dollar decreased 1.7%. In
1997, the average order size ($60) remained approximately the same, but the
total number of orders shipped dropped (reduction in advertising) as compared to
1996. Returns as a percentage of adjusted gross sales increased to 16.4% in 1997
from 15.7% in 1996. Returns are higher on Blair Credit (Easy Payment Plan) and
credit card sales, and these sales (combined) grew to 71% of gross mail order
sales in 1997 from 68% in 1996. Returns are also higher on Womenswear sales, and
Womenswear sales grew to 65% of gross mail order sales in 1997 from 59% in 1996.
Other income decreased 9.8% in 1997 as compared to 1996 due to a 14.3%
drop in finance charges assessed on Easy Payment Plan accounts receivable.
Average Easy Payment Plan accounts receivable decreased 15.2%, approximately
$37,000,000.
Cost of goods sold as a percentage of net sales increased to 49.9% in 1997
from 49.4% in 1996. Increased returns and liquidation of the electronics items
in the Home Products line were primarily responsible for the higher cost of
goods in 1997.
Advertising expense in 1997 decreased 9.2% from 1996. Increased catalog
mailings were more than offset by reductions in circular letter mailings, co-op
and media volume and paper costs.
The total number of catalog mailings released in 1997 was 67% higher than
in 1996 (100.7 million vs. 60.3 million). The catalog has been the primary
advertising format for Home Products for over three years. The Company released
initial test mailings of Menswear catalogs in July 1995 and began full mailings
to prospects and customers in September 1996. The Company released initial test
mailings of Womenswear catalogs in January 1996 and began full mailings in the
first quarter of 1997. The increased catalog volume and lower paper prices
resulted in a net catalog mailing cost increase of $18,523,000 over 1996.
Catalog mailings from all three product lines, including combined line
offerings, are continually tested as to mailing frequency, page density, product
mix, number of pages and size.
The total number of circular mailings released in 1997 was 35% less than
in 1996 (114.0 million vs. 176.0 million). The decreased circular volume and
lower paper prices resulted in a circular mailing cost decrease of $28,247,000
from 1996. Circular mailings have decreased primarily due to the expansion of
the catalog advertising program.
Total volume of the co-op and media advertising programs decreased 20% in
1997 as compared to 1996 (1.47 billion vs. 1.83 billion). The decreased co-op
and media volume and lower paper prices resulted in a co-op and media cost
decrease of $3,155,000 from 1996. The co-op and media advertising volume has
declined because the unproductive advertising placements have been eliminated.
General and administrative expense decreased 3.8% in 1997 as compared to
1996. The lower general and administrative expense was primarily the result of
declines in wages and benefits and in professional service fees. Wages and
benefits were down due to a 4.9% drop in the average number of employees in 1997
as compared to 1996. The Company's study of its existing marketing programs, in
support of the strategic plan to target the "over 40, low-to-moderate income"
market, is coming to a conclusion, and thus professional service fees have
declined.
The provision for doubtful accounts as a percentage of credit sales was
1.9% lower in 1997 as compared to 1996. A reduction in the provision due to
lower credit sales and finance charges was nearly offset by an additional
provision due to actual bad debt experience exceeding prior estimates. Credit
sales decreased 27% and finance charges decreased 14% in comparison to 1996. The
estimated provision for doubtful accounts is based on current expectations,
sales mix (prospect/customer) and prior years' experience. Due to increases in
the delinquency and charge-off rates experienced in 1997 on prior receivables,
1997 included an additional provision for doubtful accounts of $8.3 million
(pretax), $.52 net income per share. Due to increases in the delinquency and
charge-off rates experienced in 1996 on prior receivables, 1996 included an
additional provision for doubtful accounts of $11.5 million (pretax), $.71 net
income per share. The 1997 provision for doubtful accounts increased the
allowance for doubtful accounts to a higher percentage of delinquencies at
year-end 1997 than at year-end 1996. Recoveries of bad debts previously charged
off, which more than doubled in 1997 over 1996, have been credited back against
the allowance for doubtful accounts. The Company, having previously completed a
study of its credit policies, continues to implement improved credit policies.
Revised credit granting and collection policies already implemented have
resulted in turning down more bad credit risks and in shortening and
strengthening the collection cycle. After some delay, credit granting models
addressing prospects (first-time buyers) were implemented in mid-September and
early-October 1997. Plans for the first quarter of 1998 include the
implementation of behavior and collection models to further strengthen credit
procedures. The full impact of the credit policies is not likely to be realized
until later in 1998.
Interest expense decreased 25.7% in 1997 as compared to 1996. Interest
expense has resulted primarily from the Company's borrowings necessary to
finance customer accounts receivable. Average borrowings outstanding have
decreased to $66,543,000 during 1997 from $92,806,000 during 1996. The reduction
in Blair Credit (Easy Payment Plan) sales, the increase in credit card sales and
improved credit policies are greatly responsible for lowering the levels of
customer accounts receivable and borrowings. The weighted average interest rate
on average debt outstanding was 5.96% for 1997 and 5.89% for 1996.
15
<PAGE> 10
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Income taxes as a percentage of income before income taxes were 36.6% in
1997 and 36.9% in 1996. The federal income tax rate was 35% in both years. The
difference in the total income tax rate was caused by a reduction in the
Company's effective state income tax rate.
COMPARISON OF 1996 AND 1995
Net sales for 1996 declined for the first time in nineteen years. Net
income for 1996 decreased 41.7% from 1995. Lower net sales and increases in the
provision for doubtful accounts, interest expense, professional service fees and
call center operating costs were primarily responsible for the reduction in
earnings.
Net sales for 1996 were 3.0% lower than 1995 net sales. Sales declined due
to the stoppage of pre-approved credit offers to prospects and an 8.5% increase
in the number of orders turned down (tightened credit granting policies in the
third quarter of 1996). The overall response rate was similar in both years (.5%
fewer orders received). Gross revenue generated per advertising dollar decreased
3.5%. In 1996, the total number of orders shipped decreased 2.7% and the average
order size increased 1.3% as compared to 1995. Returns as a percentage of
adjusted gross sales increased to 15.7% in 1996 from 14.8% in 1995. A higher
rate of return is experienced on Blair Credit (Easy Payment Plan) and credit
card sales, and these sales (combined) grew to 68% of gross mail order sales in
1996 from 57% in 1995.
Other income increased 38.7% in 1996 as compared to 1995. The increase was
primarily due to finance charges assessed on increased Easy Payment Plan
accounts receivable. Finance charges increased 40.1%, and average Easy Payment
Plan accounts receivable increased 29.7%, approximately $56,000,000.
Cost of goods sold as a percentage of net sales was approximately the same
in 1996, 49.39%, and 1995, 49.44%. The slight decrease in cost of goods resulted
from the impact of incentive pricing (reduced price offers on excess inventory
and promotional offers of free shipping and handling) and higher returns in 1996
being more than offset by the impact of larger than usual inventory writedowns
in 1995. The inventory writedowns were primarily attributable to the special
sale of excess inventory held in Wilmington, Delaware during September 1995.
Advertising expense in 1996 increased 2.2% from 1995. Increased catalog
volume was the prime cause of the higher advertising costs. 1996 paper prices
fell below 1995 prices during the third quarter and ended the year slightly
above year-end 1994 prices.
The total number of circular mailings released in 1996 was 12.3% less than
in 1995 (176.0 million in 1996, 200.8 million in 1995). An 8.9% decrease in
multi-product customer mailings (138.2 million in 1996, 151.7 million in 1995),
a 26.0% decrease in multi-product prospect mailings (30.9 million in 1996, 41.7
million in 1995) and a 6.5% decrease in single-product mailings (6.9 million in
1996, 7.4 million in 1995) resulted in a circular mailings cost decrease of
$9,882,000 from 1995. Circular mailings have decreased primarily due to the
expansion of the catalog advertising program.
Total volume of the co-op and media advertising programs decreased 8.5% in
1996 as compared to 1995 (1.83 billion in 1996, 2.00 billion in 1995). A 25.8%
decrease in co-op advertising and .8% decrease in media advertising resulted in
a co-op and media cost decrease of $2,425,000 from 1995.
The total number of catalog mailings released in 1996 was 52.6% more than
in 1995 (60.3 million in 1996, 39.5 million in 1995). The catalog has been the
primary advertising format for Home Products for over two years. The Company
started test mailing Menswear catalogs in July 1995 and started full mailings to
prospects and the customer file in September 1996. The Company started test
mailing Womenswear catalogs in January 1996 -- full mailings are starting in the
first quarter of 1997. A 53.5% increase in customer catalogs (30.5 million in
1996, 19.9 million in 1995) and a 51.7% increase in prospect catalogs (29.8
million in 1996, 19.6 million in 1995) resulted in a catalog mailings cost
increase of $15,356,000 over 1995. In 1996, 37.2 million Home Products (22.8
million customer, 14.4 million prospect), 14.6 million Menswear (4.3 million
customer, 10.3 million prospect) and 8.5 million Womenswear (3.4 million
customer, 5.1 million prospect) catalogs were mailed. In 1995, 35.9 million Home
Products (19.0 million customer, 16.9 million prospect) and 3.6 million Menswear
(.9 million customer, 2.7 million prospect) catalogs were mailed. Catalog
mailings in all three product lines will be continually tested as to mailing
frequency, page density, product mix and number of pages.
General and administrative expense increased 2.4% in 1996 as compared to
1995. The increased expense was primarily the result of a $1,637,000 increase in
professional service fees. The Company's strategic plan to target the "over 50,
low-to-moderate income" market has required a study of its existing marketing
programs. The multi-faceted study was at its height during the second half of
1996. Conclusions and a plan of action will be forthcoming. The Company's
expansion of its 800-number capabilities, again supporting the strategic plan,
has also added to operating costs. Since September 1, 1995, all catalog mailings
have been offering toll-free telephone ordering. The Company opened a second
call center, located in Erie, Pennsylvania, in August 1995. Due to the
increasing telephone order volume from the expanding catalog mailing programs,
the Company added 75% more capacity to the Erie Call Center in September 1996
and opened a third call center in Franklin, Pennsylvania, in January 1997. The
Company now offers toll-free telephone ordering in all advertising mailings
(circular letter and catalog).
The provision for doubtful accounts as a percentage of credit sales
increased 55.6% in 1996 as compared to 1995. Total credit sales decreased 4.8%
and total finance charges increased 40.1%. Prospect credit sales decreased 13.5%
and prospect finance charges increased 81.0%. 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/customer) and prior years' experience. Due to increasing
delinquency and charge-off rates experienced in 1996, the rate used in providing
for bad debts in 1996 was increased. 1996 includes an additional provision for
doubtful accounts of $11.5 million (pretax), $.71 per share, due to
deterioration of bad debt experience. $9.5 million (pretax), $.59 per share, of
the $11.5 million was provided in the fourth quarter of 1996. Recoveries of bad
debts previously charged off have been credited back against the allowance for
doubtful accounts. The Company recently
16
<PAGE> 11
================================================================================
completed a study of its credit policies and is currently implementing improved
policies. Revised credit granting and collection policies already implemented
have resulted in turning down more bad credit risks and in shortening and
strengthening the collection cycle. It is anticipated that the full impact of
the improved credit policies will not be realized until late 1997.
Interest expense increased 47.6% in 1996 as compared to 1995. Interest
expense has resulted primarily from the Company's borrowings necessary to
finance customer accounts receivable. Borrowings outstanding averaged
approximately $92,806,000 in 1996 as compared to $57,202,000 in 1995. The
weighted average interest rate on average debt outstanding was 5.89% for 1996
and 6.53% for 1995.
Income taxes as a percentage of income before income taxes were 36.9% in
1996 and 40.2% in 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 December 31, 1997, the Company was in
compliance with all the covenants. Borrowings outstanding at December 31, 1997
were $38,600,000, all classified as current. Borrowings outstanding at December
31, 1996 were $107,000,000, of which $80,000,000 was classified as long-term.
The Company intends to renew the existing or a similar type credit facility in
1998.
The ratio of current assets to current liabilities was 2.69 at December
31, 1997, 4.01 at December 31, 1996 and 4.50 at December 31, 1995. Working
capital decreased $74,129,476 in 1997 due to the reduction in long-term debt.
Working capital increased $5,154,075 in 1996 due to reductions in dividends paid
and purchases of property, plant and equipment. The 1997 decrease was primarily
reflected in decreased customer accounts receivable, inventories, deferred
income taxes and prepaid federal and state taxes and increased notes payable
(current) and trade accounts payable. The 1996 increase was primarily reflected
in increased inventories and prepaid federal and state taxes and decreased trade
accounts payable more than offsetting increased notes payable.
Merchandise inventory turnover was 2.6 in 1997, 2.9 in 1996 and 3.0 in
1995. Merchandise inventory as of December 31, 1997 decreased 8.6% from December
31, 1996 and increased 5.5% from December 31, 1995. Inventory levels have been
impacted by the continuing effort to increase order fulfillment rates; by the
transition to a larger catalog operation; by the elimination of high-dollar,
high- credit-risk electronics items in the Home Products line in 1997 and by
lower than anticipated response and higher turndowns in the second half of 1996.
The Company is currently installing a new catalog inventory management system
that is expected to come on line in early 1998.
Regarding the Company's three product lines, Home Products net sales as a
percentage of total net sales were 13.4% ($65.3 million) in 1997, 17.3% ($94.1
million) in 1996 and 16.1% ($90.5 million) in 1995. Menswear net sales were
23.2% ($112.7 million) in 1997, 25.1% ($136.5 million) in 1996 and 24.0% ($134.6
million) in 1995. Womenswear net sales were 63.4% ($308.5 million) in 1997,
57.6% ($313.5 million) in 1996 and 59.9% ($335.8 million) in 1995. Home Products
inventory totaled $6.8 million at December 31, 1997, $18.5 million at December
31, 1996 and $10.0 million at December 31, 1995. Menswear inventory was $17.6
million at December 31, 1997, $21.6 million at December 31, 1996 and $18.4
million at December 31, 1995. Womenswear inventory was $43.7 million at December
31, 1997, $34.4 million at December 31, 1996 and $36.2 million at December 31,
1995.
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 $3,033,033, $3,249,030
and $8,058,340 during 1997, 1996 and 1995, respectively. Capital expenditures
for 1998, 1999 and 2000 are projected to be approximately $7,000,000 a year in
order to support the new marketing strategy. The increased capital expenditures
will result primarily from expanding the Company's database capabilities in
target marketing, credit management and mail stream optimization.
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 call center was opened in Erie,
Pennsylvania. A 75% expansion of the Erie Call Center was completed in September
1996. A third call center, located in Franklin, Pennsylvania, was added in
January 1997. Further expansion and refinement of all three call centers --
Warren, Erie and Franklin -- was completed by September 1997.
See "Future Considerations."
The Company recently declared a quarterly dividend of $.15 per share
payable on March 15, 1998. It is the Company's intent to continue paying
dividends; however, the Company will evaluate its dividend practice on an
on-going basis. See "Future Considerations."
The Company bought back 120,300 shares of its common stock at a total
price of $2,267,655 ($18.85 per share) in 1996. The Company bought back 276,866
shares at a total price of $4,551,438 ($16.44 per share) in 1997. The Company
intends to continue buying back stock; however, the Company will assess future
buy-back opportunities on an on-going basis.
Future cash needs will be financed by cash flow from operations, the
current borrowing arrangement and, if needed, other financing arrangements that
may be available to the Company. The Company's current projection of future cash
requirements, however, may be affected in the future by numerous factors,
including changes in customer payments on accounts receivable, consumer credit
industry trends, sales volume, operating cost fluctuations and unplanned capital
spending.
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,
17
<PAGE> 12
================================================================================
selling prices have been raised sufficiently to offset increased merchandise
costs, thereby, realizing profit margins that continue to build fiscal strength.
Profit margins have been pressured by paper cost and postal rate increases.
Paper prices have been on a roller coaster ride since 1994 -- reached their high
point at 1995 year-end, retreated below 1995 levels during the third quarter of
1996, reached their low point during the first quarter of 1997, increased
quarterly throughout the rest of 1997 and will again increase in the first
quarter of 1998. Overall, paper prices were lower in 1997 than in 1996 and, as
they presently stand, will be higher in 1998 than they were in 1997. Postal
rates increased in 1995, increased again in 1996 (slight increase due to the
USPS Classification Reform) and are expected to increase again sometime in 1998.
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.
ACCOUNTING PRONOUNCEMENTS
- --------------------------------------------------------------------------------
In 1997, the Financial Accounting Standards Board issued three new
statements that the Company needed to consider.
In February, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," was issued. Statement No. 128 establishes standards for
computing and presenting earnings per share and simplifies the existing
standards. Statement No. 128 replaces the presentation of primary earnings per
share with a presentation of basic and diluted earnings per share. The Company
adopted Statement No. 128 in the December 31, 1997 financial statements, and the
adoption had no impact on the Company's earnings per share amounts.
In June, Statement of Financial Accounting Standards No. 130,
"Comprehensive Income," was issued. Statement No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Statement No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company believes that the
adoption of Statement 130 will not have an impact on its financial statements.
In June, Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information," was issued. Statement
No. 131 establishes standards for the way that a public enterprise reports
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. Statement No. 131 is effective
for fiscal years beginning after December 15, 1997. The Company believes that it
operates as one segment, which includes three product lines (Home Products,
Menswear and Womenswear) and that adoption of Statement No. 131 will not have a
significant impact on its financial statements.
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 increased operating costs,
increased competition in the retail sector and record levels of consumer debt.
The Company underwent a strategic planning study in 1995 in which our
marketing programs, operating systems and competitive position were assessed and
looked at with future application and effectiveness in mind. The continuing
strategic planning process 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.
The prime aspect of the new marketing strategy involves targeting
customers in the "over 40, low-to-moderate income" market. This redefinition of
our target customer from "over 50" to "over 40" has been made possible by the
ability of our catalog advertising to reach younger buyers within our
traditional list sources. This market, though younger in age than our
traditional 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.
The Company is faced with the task of becoming Year 2000 compliant. The
Company's plan to become Year 2000 compliant is well underway with completion
expected in the first quarter of 1999 at an estimated cost of $400,000 ($300,000
in 1998, $100,000 in 1999).
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
- --------------------------------------------------------------------------------
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties, including without limitation, the following:(i) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (ii) the Company's plans and
results of operations will be affected by the Company's ability to manage its
growth, accounts receivable and inventory; and (iii) other risks and
uncertainties as indicated from time to time in the Company's filings with the
Securities and Exchange Commission.
18
<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 January 30, 1998, included in the
1997 Annual Report to Stockholders of Blair Corporation.
Our audits also included the financial statement schedule of Blair Corporation
and Subsidiary listed in Item 14(a). This schedule is the responsibility of
Blair Corporation'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 Statement
on Form S-8 dated July 17, 1997, pertaining to the Blair Corporation Employee
Stock Purchase Plan, of our report dated January 30, 1998, 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
Buffalo, New York
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR
CORPORATION'S 12/31/97 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH YEAR END, 1997 10-K FILING FOR BLAIR CORPORATION.
</LEGEND>
<CIK> 0000071525
<NAME> BLAIR CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,468,483
<SECURITIES> 0
<RECEIVABLES> 157,636,096<F1>
<ALLOWANCES> 38,479,888
<INVENTORY> 78,727,409
<CURRENT-ASSETS> 256,632,932
<PP&E> 103,265,268
<DEPRECIATION> 51,322,255
<TOTAL-ASSETS> 309,497,568
<CURRENT-LIABILITIES> 95,385,522
<BONDS> 0
0
0
<COMMON> 419,810
<OTHER-SE> 212,009,236<F2>
<TOTAL-LIABILITY-AND-EQUITY> 309,497,568
<SALES> 486,581,737
<TOTAL-REVENUES> 526,513,314
<CGS> 242,828,539
<TOTAL-COSTS> 505,622,386
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 32,222,092
<INTEREST-EXPENSE> 4,102,148
<INCOME-PRETAX> 20,890,928
<INCOME-TAX> 7,637,000
<INCOME-CONTINUING> 13,253,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,253,928
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
<FN>
<F1>AMOUNT REPRESENTS NET ACCOUNTS RECEIVABLE.
<F2>AMOUNT INCLUDES ADDITIONAL PAID-IN-CAPITAL, RETAINED EARNINGS, TREASURY STOCK,
AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
</FN>
</TABLE>
