-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, miVnhiA0TD6hrxZkw7Dl0gB938U3MG5VtZBZah4OwjlkmyTpIsJx4ofz5C1Kx2Hd mGff53Umdf1ry1HHeEH9nQ== 0000071525-94-000015.txt : 19941121 0000071525-94-000015.hdr.sgml : 19941121 ACCESSION NUMBER: 0000071525-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLAIR CORP CENTRAL INDEX KEY: 0000071525 STANDARD INDUSTRIAL CLASSIFICATION: 5961 IRS NUMBER: 250691670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00878 FILM NUMBER: 94559361 BUSINESS ADDRESS: STREET 1: 220 HICKORY ST CITY: WARREN STATE: PA ZIP: 16366 BUSINESS PHONE: 8147233600 FORMER COMPANY: FORMER CONFORMED NAME: NEW PROCESS CO DATE OF NAME CHANGE: 19890507 10-Q 1 3RD QTR FILING 1994 United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q --------- QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Period Ended September 30, 1994 Commission File Number 1-878 ------------------ ----------- BLAIR CORPORATION - - ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 25-0691670 - - ---------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001 - - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (814) 723-3600 - - ---------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - - ---------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- As of November 10, 1994 the registrant had outstanding 9,273,482 shares of its common stock without nominal or par value. PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED) BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 CONSOLIDATED BALANCE SHEETS BLAIR CORPORATION AND SUBSIDIARY September 30 December 31 1994 1993 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,679,917 $ 2,937,432 Customer accounts receivable, less allowances for doubtful accounts and returns of $36,388,849 in 1994 and $34,255,648 in 1993 113,030,615 112,452,666 Inventories - Note F Merchandise 67,500,549 47,419,661 Advertising and shipping supplies 17,603,340 14,652,580 ------------ ------------ 85,103,889 62,072,241 Deferred income taxes 15,693,000 15,807,000 Prepaid federal and state income taxes 6,841,374 -0- Prepaid expenses 703,858 409,562 ------------ ------------ TOTAL CURRENT ASSETS 223,052,653 193,678,901 PROPERTY, PLANT AND EQUIPMENT - at cost Land 1,130,454 719,791 Buildings 55,905,495 54,816,920 Equipment 31,453,832 29,721,911 Construction in progress 937,506 522,692 ------------ ------------ 89,427,287 85,781,314 Less allowances for depreciation 37,088,639 33,855,151 ------------ ------------ 52,338,648 51,926,163 ------------ ------------ TOTAL ASSETS $275,391,301 $245,605,064 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 33,500,000 $ 11,600,000 Trade accounts payable 35,671,382 34,579,040 Advance payments from customers 2,270,191 1,886,186 Accrued expenses - Note D 10,437,603 9,651,354 Federal and state income taxes -0- 4,758,684 ------------ ----------- TOTAL CURRENT LIABILITIES 81,879,176 62,475,264 DEFERRED INCOME TAXES 1,891,000 1,926,000 STOCKHOLDERS' EQUITY Common Stock without par value: Authorized 12,000,000 shares; issued 10,075,440 shares (including shares held in treasury) - stated value 419,810 419,810 Additional paid-in capital 11,017,130 9,595,875 Retained earnings 199,374,563 188,957,972 ------------ ------------ 210,811,503 198,973,657 Less 801,958 shares in 1994 and 809,408 shares in 1993 of Common Stock in treasury - at cost 17,238,660 16,056,017 Less receivable from Employee Stock Purchase Plan 1,951,718 1,713,840 ------------ ------------ 191,621,125 181,203,800 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $275,391,301 $245,605,064 ============ ============ See accompanying notes. CONSOLIDATED STATEMENTS OF INCOME BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Net sales $115,000,342 $111,492,801 $376,158,111 $368,276,024 Other income - Note G 6,346,377 5,119,373 18,288,274 15,532,828 ------------ ------------ ------------ ------------ 121,346,719 116,612,174 394,446,385 383,808,852 Costs and expenses: Cost of goods sold 55,053,697 53,974,479 179,042,187 177,489,011 Selling 27,523,841 27,754,393 85,137,485 93,278,883 General and administrative 24,193,569 22,303,189 68,338,212 63,868,248 Provision for doubtful accounts 5,894,815 6,177,729 18,394,298 16,351,918 ------------ ------------ ------------ ------------ 112,665,922 110,209,790 350,912,182 350,988,060 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 8,680,797 6,402,384 43,534,203 32,820,792 Income taxes - Note E 3,443,000 2,639,000 17,410,000 13,671,000 ------------ ------------ ------------ ------------ NET INCOME $ 5,237,797 $ 3,763,384 $ 26,124,203 $ 19,149,792 ============ ============ ============ ============ Net income per share based on average shares outstanding - Note C $ .56 $ .40 $2.82 $2.07 ===== ===== ===== ===== See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810 Additional paid-in capital: Balance at beginning of period 9,595,875 7,775,814 9,595,875 7,775,814 Issuance of Common Stock under Employee Stock Purchase Plan 1,421,255 1,817,937 1,421,255 1,817,937 ------------ ------------ ------------ ------------ Balance at end of period 11,017,130 9,593,751 11,017,130 9,593,751 Retained earnings: Balance at beginning of period 197,382,484 179,977,549 188,957,972 182,111,957 Net income 5,237,797 3,763,384 26,124,203 19,149,792 Cash dividends declared - Note B (3,245,718) (3,243,111) (15,707,612) (20,763,927) ------------ ------------ ------------ ------------ Balance at end of period 199,374,563 180,497,822 199,374,563 180,497,822 Treasury Stock: Balance at beginning of period (17,526,017) (16,418,906) (16,056,017) (16,418,906) Purchase of Common Stock for treasury -0- -0- (1,470,000) -0- Issuance of Common Stock under Employee Stock Purchase Plan 287,357 365,013 287,357 365,013 ------------ ------------ ------------ ------------ Balance at end of period (17,238,660) (16,053,893) (17,238,660) (16,053,893) Receivable from Employee Stock Purchase Plan: Balance at beginning of period (1,476,308) (1,124,205) (1,713,840) (1,454,490) Issuance of Common Stock under Employee Stock Purchase Plan (551,850) (712,800) (551,850) (712,800) Payments 76,440 61,582 313,972 391,867 ------------ ------------ ------------ ------------ Balance at end of period (1,951,718) (1,775,423) (1,951,718) (1,775,423) ------------ ------------ ------------ ------------ TOTAL STOCKHOLDERS' EQUITY $191,621,125 $172,682,067 $191,621,125 $172,682,067 ============ ============ ============ ============ See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS BLAIR CORPORATION AND SUBSIDIARY Nine Months Ended September 30 1994 1993 ------------ ------------ OPERATING ACTIVITIES Net income $ 26,124,203 $ 19,149,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,419,139 3,333,954 Provision for doubtful accounts 18,394,298 16,351,918 Provision for deferred income taxes 79,000 (2,362,000) Gain on disposition of equipment (259,877) -0- Changes in operating assets and liabilities (using) providing cash: Customer accounts receivable (18,972,247) (23,842,557) Inventories (23,031,648) (5,651,737) Prepaid federal and state income taxes (6,841,374) -0- Prepaid expenses (294,296) (275,600) Trade accounts payable 1,092,342 1,396,403 Advance payments from customers 384,005 (308,243) Accrued expenses 786,249 (2,447,181) Federal and state income taxes (4,758,684) (4,320,160) ------------ ------------ NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (3,878,890) 1,024,589 INVESTING ACTIVITIES Purchases of property, plant and equipment (4,024,716) (7,748,744) Proceeds from sale of short-term investments -0- 902,576 Proceeds from sale of property, plant and equipment 452,969 -0- ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (3,571,747) (6,846,168) FINANCING ACTIVITIES Proceeds from lines of credit 117,500,000 84,400,000 Repayments on lines of credit (95,600,000) (67,700,000) Dividends paid (15,707,612) (20,763,927) Purchase of Common Stock for treasury (1,470,000) -0- Issuance of Common Stock under Employee Stock Purchase Plan 1,708,612 2,182,950 Increase in notes receivable from Employee Stock Purchase Plan (237,878) (320,933) ------------ ------------ NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 6,193,122 (2,201,910) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (1,257,515) (8,023,489) Cash and cash equivalents at beginning of year 2,937,432 9,118,850 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,679,917 $ 1,095,361 ============ ============ See accompanying notes. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Blair Corporation and its wholly-owned subsidiary have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1994 are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information refer to the financial statements and footnotes included in the company's annual report on Form 10-K for the year ended December 31, 1993. On September 2, 1993, Blair formed a new wholly-owned subsidiary, Blair Holdings, Inc., a Delaware Corporation. The consolidated financial statements include the accounts of Blair Corporation and its subsidiary. All significant intercompany accounts and transactions are eliminated upon consolidation. NOTE B - DIVIDENDS DECLARED 2-10-93 $1.55 per share 2-09-94 $1.00 per share 5-12-93 .35 4-19-94 .35 8-10-93 .35 7-20-94 .35 11-10-93 .35 10-19-94 .35 NOTE C - NET INCOME PER COMMON SHARE Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Net income $ 5,237,797 $ 3,763,384 $26,124,203 $19,149,792 Average shares outstanding 9,262,870 9,254,895 9,250,767 9,234,847 Net income per common share $ .56 $ .40 $2.82 $2.07 NOTE D - ACCRUED EXPENSES Accrued expenses consist of: September 30 December 31 1994 1993 ----------- ----------- Employee compensation $ 6,442,307 $ 5,081,753 Contribution to profit sharing and retirement plan 2,794,620 3,294,397 Taxes, other than taxes on income -0- 199,687 Other accrued items 1,200,676 1,075,517 ----------- ----------- $10,437,603 $ 9,651,354 =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 NOTE E - INCOME TAXES The components of income tax expense are as follows: Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Currently payable: Federal $ 1,088,000 $ 3,680,000 $14,345,000 $12,690,000 State (32,000) (339,000) 2,986,000 3,343,000 ----------- ----------- ----------- ----------- 1,056,000 3,341,000 17,331,000 16,033,000 Deferred (credit) 2,387,000 (702,000) 79,000 (2,362,000) ----------- ----------- ----------- ----------- $ 3,443,000 $ 2,639,000 $17,410,000 $13,671,000 =========== =========== =========== =========== The deferred income tax provisions for 1993 include a credit of $312,000 relating to the increase in the statutory federal income tax rate from 34% to 35% enacted into law in August 1993, effective January 1, 1993. The currently payable state income tax provisions for 1994 and 1993 include downward adjustments of the company's effective state tax rate. The differences between total tax expense and the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes are as follows: Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Statutory rate applied to pre-tax income $ 3,038,279 $ 2,505,018 $15,236,971 $11,487,277 State income taxes, net of federal tax benefit 342,550 (247,760) 1,958,750 1,904,500 Other items 62,171 381,742 214,279 279,223 ----------- ----------- ----------- ----------- $ 3,443,000 $ 2,639,000 $17,410,000 $13,671,000 =========== =========== =========== =========== Components of the provision for deferred income tax expense (credit) are as follows: Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ----------- ---------- ----------- ----------- Provision for estimated returns $ (32,000) $ 168,000 $ (908,000) $ (118,000) Provision for doubtful accounts (255,000) (813,000) (738,000) (1,703,000) Cumulative effect adjustment as of January 1, 1993 of change in method of accounting for income taxes -0- -0- -0- (207,000) Advertising costs 2,788,000 -0- 1,941,000 -0- Other items - net (114,000) (57,000) (216,000) (334,000) ----------- ----------- ----------- ----------- $ 2,387,000 $ (702,000) $ 79,000 $(2,362,000) =========== =========== =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 NOTE E - INCOME TAXES - Continued In the first quarter of 1993, the company adopted Financial Accounting Standards Board Statement No. 109 on accounting for income taxes. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method. This accounting change did not have a material impact on the company - financial position increased by $207,000, $.02 per share. Significant components of the company's deferred tax assets and liability as of September 30, 1994 and December 31, 1993 are as follows: September 30 December 31 1994 1993 ----------- ----------- Current deferred tax assets - net: Allowance for doubtful accounts $12,243,000 $11,505,000 Allowance for returns 2,641,000 1,733,000 Allowance for inventory obsolescence 1,792,000 1,705,000 Accrued vacation pay 1,085,000 1,061,000 Inventory costs 1,089,000 1,019,000 Advertising costs (3,551,000) (1,610,000) Other items 394,000 394,000 ----------- ----------- $15,693,000 $15,807,000 =========== =========== Long-term deferred tax liability: Tax over book depreciation $ 1,891,000 $ 1,926,000 =========== =========== NOTE F - INVENTORIES Inventories are valued at the lower of cost or market. Cost of merchandise inventories is determined principally on the last-in, first-out (LIFO) method. Cost of advertising and shipping supplies is determined on the first-in, first- out (FIFO) method. If the FIFO method had been used for all merchandise inventories, the total amount would have increased by approximately $8,583,000 at September 30, 1994 and $8,358,000 at December 31, 1993, respectively. NOTE G - OTHER INCOME Other income consists of: Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 ----------- ----------- ---------- ----------- Finance charges on time payment accounts $ 5,451,049 $ 4,468,942 $16,195,767 $13,487,622 Other items 895,328 650,431 2,092,507 2,045,206 ----------- ----------- ----------- ----------- $ 6,346,377 $ 5,119,373 $18,288,274 $15,532,828 =========== =========== =========== =========== Finance charges on time payment accounts are recognized on an accrual basis of accounting based upon principal balances outstanding. NOTE H - EMPLOYEE STOCK PURCHASE PLAN The company has an Employee Stock Purchase Plan wherein shares of treasury stock may be issued to certain employees at a price established at the discretion of the Employee Stock Purchase Plan Committee. The stock issued under the Plan was 42,450 shares on July 7, 1994 and 44,550 shares on July 6, 1993. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Results of Operations - - --------------------- Net sales for the third quarter and nine months of 1994 were record highs. Net income increased 39.2% in the third quarter and 36.4% in the first nine months of 1994 as compared to the same periods of 1993. Net income for the first nine months of 1994 was the second highest in company history - 1.3% less than the record first nine months of 1990. The improved earnings were primarily attributable to increased response rates to the company's 1994 advertising programs. The increased response rates enabled the company to achieve record sales levels despite reductions in total advertising dollars spent. Net sales for 1994 increased 3.1% and 2.1% over the sales of the third quarter and first nine months of 1993. Response to customer multi-product circular advertising mailings increased 12.9% and 11.5% in 1994. Response to the home furnishings customer catalogs - not up to expectations for the third quarter - was 2.0% and 30.5% better than the response to home furnishings customer multi- product circular mailings in 1993. Response to the co-op and media programs increased 4.1% and 8.3% in 1994. In 1994, the company generated more gross sales per advertising dollar than in 1993 - 3.5% more in the third quarter, 11.4% more in the first nine months. The number of orders filled in 1994 decreased 2.9% and 6.1% from 1993 but the average order size increased 5.0% and 7.8%. Returns as a percentage of adjusted gross sales were comparable in the two years - 15.1% and 15.0% in 1994, 14.8% and 15.3% in 1993. Other income increased 24.0% and 17.7% in the third quarter and nine months of 1994 as compared to 1993. The increases were primarily due to finance charges assessed on increased Easy Payment Plan accounts receivable. Prospect multi- product circular mailings (since 1992) and prospect catalogs (since 4th quarter 1993) offer revolving credit to first-time buyers via the Easy Payment Plan. These programs have been greatly responsible for an average 18.6% increase (approximately $21,300,000) in Easy Payment Plan accounts receivable in 1994 as compared to 1993. Easy Payment Plan gross sales were 7.8% and 8.1% higher in the third quarter and nine months of 1994 as compared to 1993. Cost of goods sold as a percentage of net sales decreased to 47.9% and 47.6% in 1994 from 48.4% and 48.2% in 1993. Fewer prospect (first-time buyers) orders at incentive pricing were primarily responsible for the improved margins in the 1994 periods. Selling expenses in the third quarter and first nine months of 1994 decreased .8% and 8.7% from 1993. The decreased selling expenses were primarily attributable to reductions in circular advertising mailings. The total number of circular advertising mailings released in the third quarter of 1994 was 28.7% less than in 1993 (1994 - 44,070,000, 1993 - 61,772,000). A 14.5% decrease in multi-product customer mailings (1994 - 34,564,000, 1993 - 40,435,000), a 58.9% decrease in multi-product prospect mailings (1994 - 7,811,000, 1993 - 18,987,000) and a 27.9% decrease in single-product mailings (1994 - 1,695,000, 1993 - 2,350,000) resulted in a cost reduction of approximately $4,970,000. The total number of circular advertising mailings released in the nine months of 1994 was 22.0% less than in the first nine months of 1993 (1994 - 156,835,000, 1993 - 201,092,000). A 13.8% decrease in multi-product customer mailings (1994 - 117,878,000, 1993 - 136,747,000), a ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Results of Operations - Continued - - --------------------- 43.9% decrease in multi-product prospect mailings (1994 - 31,895,000, 1993 - 56,810,000) and a 6.3% decrease in single-product mailings (1994 - 7,062,000, 1993 - 7,535,000) resulted in a cost reduction of approximately $14,490,000. Customer circular mailings have decreased in 1994 primarily due to the better targeting of mailings, the removal of non-responding names from the customer file and full customer list mailings of the home furnishings catalogs. Prospect circular mailings have decreased in 1994 due to the elimination of poorly performing acquired mailings lists, tightened credit policies and prospect home furnishings catalog mailings. Total volume of the co-op and media advertising programs in 1994 increased 9.6% in the third quarter (1994 - 312 million, 1993 - 284 million) and decreased 8.3% in the first nine months (1994 - 1,344 million, 1993 - 1,466 millions) as compared to 1993. The increased volume and a 7.7% reduction in average production and placement costs resulted in a net cost increase of approximately $40,000 in the third quarter of 1994. The decreased volume and a 5.3% reduction in average production and placement costs resulted in a cost decrease of approximately $1,840,000 in the first nine months of 1994. Home furnishings catalogs, offering 350 to 400 products, mailed in 1994 numbered 9,622,000 (5,453,000 prospect) in the third quarter and 15,593,000 (5,715,000 prospect) in the first nine months. In 1993, 696,000 (all customer) catalogs were mailed in the third quarter. Response continues to be favorable but fell short of expectations in the third quarter 1994. Customer home furnishings catalog mailings have been scheduled for the fourth quarter 1994 and test mailings of men's and women's apparel catalogs have been scheduled for fall 1995 and spring 1996. Catalog mailings increased selling expenses in the third quarter and nine months of 1994 by approximately $4,540,000 and $7,830,000. General and administrative expenses increased 8.5% in the third quarter and 7.0% in the nine months of 1994 as compared to 1993. The higher expenses for 1994 primarily resulted from increased wages and profit sharing. Wages increased 5.3% and 5.8% due to normal pay increases and a larger work force. The number of employees increased, on average, 8.6% in the third quarter and 4.5% year-to-date. Profit sharing increased 25.6% and 35.1% due to the improved earnings in 1994. The provision for doubtful accounts as a percentage of credit sales decreased 8.6% in the third quarter and increased 7.8% in the nine months of 1994 as compared to 1993. Credit sales increased 4.5% in the third quarter and 4.4% year-to-date. Prospect (first-time buyer) credit sales as a percentage of total credit sales were approximately 9.1% in the 1994 periods as compared to approximately 10.7% and 12.3% in 1993. The 1994 provisions included favorable adjustments of prior period provisions of approximately $140,000 and $210,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Results of Operations - Continued - - --------------------- The 1993 provisions included unfavorable adjustments of prior period provisions of approximately $930,000 and $1,340,000. In 1994, bad debts have been provided for using rates based on current expectations and 1993 experience. Had similar rates been applied to the third quarter and first nine months of 1993, the 1993 provisions for doubtful accounts would have been approximately $400,000 lower (third quarter) and $3,200,000 higher (nine months). As a percentage of credit sales, the revised 1993 provisions would have been 2.4% and 10.9% higher than the 1994 provisions. Income taxes as a percentage of income before income taxes were 39.7% and 40.0% in the third quarter and nine months of 1994 as compared to 41.2% and 41.7% in 1993. An increase in the federal income tax rate from 34% to 35% was enacted into law in August 1993, retroactive to January 1, 1993. The federal increase was more than offset by the downward adjustments of the company's effective state income tax rate. The state effective rate declined further in the third quarter of 1994 when the Pennsylvania statutory rate fell from 12.25% to 11.99%, effective January 1, 1994. The company adopted Financial Accounting Standards Board Statement No. 109 on accounting for income taxes in the first quarter of 1993. Due to the relative insignificance of the adoption of this change in accounting, it was reported as a reduction in the company's first quarter 1993 income tax expense in the amount of $207,000. On August 30, 1993, the company opened a new retail store in Wilmington, Delaware. The Delaware site was chosen due to the population density of Delaware and the surrounding states and the favorable business climate. In addition, on September 2, 1993, Blair formed a new wholly-owned subsidiary, Blair Holdings, Inc., a Delaware corporation. Liquidity and Sources of Capital - - -------------------------------- All working capital needs were met and suppliers' invoices were timely paid in order to maximize discounts. The company has $40,000,000 available in lines of credit, $10,000,000 with no specified expiration date and $30,000,000 expiring May 31, 1995. Management anticipates renewing the lines upon their expiration. The company incurred a total of $117,500,000 in short-term borrowings during the first nine months of 1994, $33,500,000 of which was outstanding at September 30, 1994. There were no long-term borrowings and excess funds when available were invested in federal government obligations, commercial paper and tax free securities. The ratio of current assets to current liabilities was 2.72 at September 30, 1994, 3.10 at December 31, 1993 and 2.94 at September 30, 1993. Working capital increased $9,969,840 during the nine months of 1994. The increase was primarily reflected in increased merchandise inventories and prepaid federal and state income taxes offsetting increased notes payable to banks. The 1994 nine month increase in working capital was the result of the increase in net income and the reductions in capital expenditures and dividends. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Liquidity and Resources - Continued - - ----------------------- Merchandise inventory turnover was 3.45 at September 30, 1994, 3.82 at December 31, 1993 and 3.70 at September 30, 1993. Merchandise inventory as of September 30, 1994 has increased approximately 30% from September 30, 1993, 43% from December 31, 1993, 32% from March 31, 1994 and 38% from June 30, 1994. Merchandise inventory is normally at it's highest level at September 30, in anticipation of fourth quarter sales. However, the majority of the growth was due to the expansion of home furnishings inventory in order to service the 350-400 product catalogs. Home furnishings net sales as a percentage of total net sales have increased to 16.8% ($19.3 million) in the third quarter and 13.8% ($51.8 million) in the first nine months of 1994 as compared to 12.1% ($13.5 million) and 11.1% ($40.8 million) in 1993. Home furnishing inventory has increased to $15.8 million at September 30, 1994 from $4.1 million at September 30, 1993. The reduction in inventory turns has resulted primarily from the increased home furnishings inventory. The company had added new facilities, modernized its existing facilities and acquired new cost saving equipment during the last several years. Capital expenditures for property, plant and equipment totaled $4,024,716 during the nine months of 1994 and $7,748,744 during the first nine months of 1993. The company has completed over 98% of the renovation of its headquarters facility in Warren. Renovation of the first two levels was completed in February 1993. The remaining two levels should be completed by the end of 1994. Total cost of the renovation is estimated at $13,600,000 (including office furniture). Total cost incurred as of September 30, 1994 was approximately $13,400,000. The new Delaware retail store which opened August 30, 1993 and the new wholly- owned subsidiary, Blair Holdings, Inc., formed September 2, 1993, are both in leased facilities and required little in the way of capital expenditure. The company completed its new Erie, Pennsylvania outlet store. Total cost of the new store, which opened May 23, 1994, was $2.1 million. The old Erie store building was sold in August 1994. The company has undertaken a study of the distribution center, focused on operational and customer service improvements. On October 19, 1994, the Board of Directors approved a 65,000 square-foot warehouse addition to the distribution center. Estimated cost of the project is $5.7 million. Construction is expected to begin in December 1994 with completion anticipated by June 1995. Further developments from the study may result in 1995. It is anticipated that planned capital expenditures for the years ahead will be financed by cash flow from operations and short-term borrowings. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Impact of Inflation and Changing Prices - - --------------------------------------- Although inflation has moderated in our economy, the company is continually seeking ways to cope with its impact. To the extent permitted by competition, increased costs are passed on to customers by selectively increasing selling prices over a period of time. During the past several years, selling prices have been raised sufficiently to offset increased merchandise costs, thereby realizing profit margins that continue to build fiscal strength. The company principally uses the LIFO method of accounting for its merchandise inventories. Under this method, the cost of products sold reported in the financial statements approximates current costs and thus reduces distortion in reported income due to increasing costs. The charges to operations for depreciation represent the allocation of historical costs incurred over past years and are significantly less than if they were based on the current cost of productive capacity being used. Property, plant and equipment are continuously being expanded and updated. Recent major projects are discussed under Liquidity and Sources of Capital. Assets acquired in prior years will, of course, be replaced at higher costs but this will take place over many years. New assets, when acquired, will result in higher depreciation charges, but in many cases, due to technological improvements, savings in operating costs should result. The company considers these matters in setting pricing policies. Present tax laws do not allow deductions for the impact of inflation. Thus, taxes are levied on the company at rates which, in real terms, exceed established statutory rates. In general, during periods of inflation, this tax policy results in a tax on stockholders' investment in the company. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY September 30, 1994 Item 5. Other Information ----------------- The company filed a Registration Statement on Form S-8 on July 6, 1994 registering 42,450 shares of the company's Common Stock which was offered for purchase on July 7, 1994 to selected employees of the company under and in accordance with the company's Employee Stock Purchase Plan. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- None (b) Reports on Form 8-K -------------------- No reports on Form 8-K were filed during the quarter ended September 30, 1994. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BLAIR CORPORATION -------------------------------- (Registrant) Date November 10, 1994 By Giles W. Schutte - - ----------------------------- -------------------------------- Giles W. Schutte Executive Vice President and Treasurer (Principal Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR CORPORATION 9/30/94 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH THIRD QUARTER, 1994 10-Q FILING FOR BLAIR CORPORATION. 0000071525 BLAIR CORPORATION 9-MOS DEC-31-1994 SEP-30-1994 1,679,917 0 149,419,464 36,388,849 85,103,889 223,052,653 89,427,287 37,088,639 275,391,301 81,879,176 0 419,810 0 0 191,201,315 275,391,301 376,158,111 394,446,385 179,042,187 350,912,182 0 18,394,298 324,436 43,534,203 17,410,000 0 0 0 0 26,124,203 2.82 2.82 THIS AMT INCLUDES ADD'L PD. IN CAPITAL, RETAINED EARNINGS, TREASURY STOCK AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.
-----END PRIVACY-ENHANCED MESSAGE-----