0000071525-95-000012.txt : 19950811 0000071525-95-000012.hdr.sgml : 19950811 ACCESSION NUMBER: 0000071525-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLAIR CORP CENTRAL INDEX KEY: 0000071525 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [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: 95560874 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 2ND QTR FILING 1995 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 June 30, 1995 Commission File Number 1-878 ------------- ------------ BLAIR CORPORATION ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 25-0691670 ----------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001 ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (814) 723-3600 ----------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable ----------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- As of August 10, 1995 the registrant had outstanding 9,322,382 shares of its common stock without nominal or par value. PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED) BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 CONSOLIDATED BALANCE SHEETS BLAIR CORPORATION AND SUBSIDIARY June 30 December 31 1995 1994 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,391,558 $ 2,183,136 Customer accounts receivable, less allowances for doubtful accounts and returns of $42,218,875 in 1995 and $39,827,161 in 1994 155,682,092 130,517,140 Inventories - Note F Merchandise 65,454,547 70,562,969 Advertising and shipping supplies 11,026,215 13,394,493 ------------ ------------ 76,480,762 83,957,462 Deferred income taxes 19,418,000 18,386,000 Prepaid expenses 570,706 558,370 ------------ ------------ TOTAL CURRENT ASSETS 254,543,118 235,602,108 PROPERTY, PLANT AND EQUIPMENT - at cost Land 1,130,454 1,130,454 Buildings 57,813,889 57,422,042 Equipment 31,906,829 32,195,892 Construction in progress 4,277,038 335,122 ------------ ------------ 95,128,210 91,083,510 Less allowances for depreciation 39,362,908 38,025,818 ------------ ------------ 55,765,302 53,057,692 ------------ ------------ TOTAL ASSETS $310,308,420 $288,659,800 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 56,750,000 $ 34,300,000 Trade accounts payable 38,377,339 34,832,191 Advance payments from customers 1,942,009 1,419,582 Accrued expenses - Note D 10,098,866 12,725,522 Federal and state income taxes 1,220,225 3,426,825 ------------ ------------ TOTAL CURRENT LIABILITIES 108,388,439 86,704,120 DEFERRED INCOME TAXES 1,857,000 1,939,000 STOCKHOLDERS' EQUITY Common Stock without par value: Authorized 12,000,000 shares; issued 10,075,440 shares (including shares held in treasury) - stated value 419,810 419,810 Additional paid-in capital 11,017,130 11,017,130 Retained earnings 207,383,836 207,683,352 ------------ ------------ 218,820,776 219,120,292 Less 801,958 shares of Common Stock in treasury - at cost 17,238,660 17,238,660 Less receivable from Employee Stock Purchase Plan 1,519,135 1,864,952 ------------ ------------ 200,062,981 200,016,680 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $310,308,420 $288,659,800 ============ ============ See accompanying notes. CONSOLIDATED STATEMENTS OF INCOME BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Net sales $150,619,577 $142,717,471 $278,260,082 $261,157,769 Other income - Note G 7,646,156 5,566,713 14,762,309 11,350,526 ------------ ------------ ------------ ------------ 158,265,733 148,284,184 293,022,391 272,508,295 Costs and expenses: Cost of goods sold 72,496,081 67,438,296 134,600,116 123,988,490 Advertising 39,253,756 30,112,279 68,384,718 57,613,644 General and administrative 25,582,046 22,901,698 50,597,968 44,144,643 Provision for doubtful accounts 8,184,466 6,621,046 14,670,533 11,908,112 ------------ ------------ ------------ ------------ 145,516,349 127,073,319 268,253,335 237,654,889 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 12,749,384 21,210,865 24,769,056 34,853,406 Income taxes - Note E 5,315,000 8,504,000 10,231,000 13,967,000 ------------ ------------ ------------ ------------ NET INCOME $ 7,434,384 $ 12,706,865 $ 14,538,056 $ 20,886,406 ============ ============ ============ ============ Net income per share based on average shares outstanding - Note C $ .80 $1.38 $1.57 $2.26 ===== ===== ===== ===== See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810 Additional paid-in capital 11,017,130 9,595,875 11,017,130 9,595,875 Retained Earnings: Balance at beginning of period 203,195,171 187,906,481 207,683,352 188,957,972 Net income 7,434,384 12,706,865 14,538,056 20,886,406 Cash dividends declared - Note B (3,245,719) (3,230,862) (14,837,572) (12,461,894) ------------ ------------ ------------ ------------ Balance at end of period 207,383,836 197,382,484 207,383,836 197,382,484 Treasury Stock: Balance at beginning of period (17,238,660) (17,526,017) (17,238,660) (16,056,017) Purchase of common stock for treasury -0- -0- -0- (1,470,000) ------------ ------------ ------------ ------------ Balance at end of period (17,238,660) (17,526,017) (17,238,660) (17,526,017) Receivable from Employee Stock Purchase Plan: Balance at beginning of period (1,593,827) (1,537,890) (1,864,952) (1,713,840) Payments 74,692 61,582 345,817 237,532 ------------ ------------ ------------ ------------ Balance at end of period (1,519,135) (1,476,308) (1,519,135) (1,476,308) ------------ ------------ ------------ ------------ TOTAL STOCKHOLDERS' EQUITY $200,062,981 $188,395,844 $200,062,981 $188,395,844 ============ ============ ============ ============ See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS BLAIR CORPORATION AND SUBSIDIARY Six Months Ended June 30 1995 1994 ------------ ------------ OPERATING ACTIVITIES Net income $ 14,538,056 $ 20,886,406 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,298,038 2,261,542 Provision for doubtful accounts 14,670,533 11,908,112 Provision for deferred income taxes (1,114,000) (2,308,000) Changes in operating assets and liabilities (using) providing cash: Customer accounts receivable (39,835,485) (15,570,000) Inventories 7,476,700 2,122,076 Prepaid expenses (12,336) (321,394) Trade accounts payable 3,545,148 (1,987,790) Advance payments from customers 522,427 344,673 Accrued expenses (2,626,656) 648,601 Federal and state income taxes (2,206,600) (1,673,000) ------------ ------------ NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (2,744,175) 16,311,226 INVESTING ACTIVITIES Purchases of property, plant and equipment (5,005,648) (2,734,628) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (5,005,648) (2,734,628) FINANCING ACTIVITIES Net proceeds from (repayments on) lines of credit 22,450,000 (1,100,000) Dividends paid (14,837,572) (12,461,894) Purchase of common stock for treasury -0- (1,470,000) Payments on receivable from Employee Stock Purchase Plan 345,817 237,532 ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,958,245 (14,794,362) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 208,422 (1,217,764) Cash and cash equivalents at beginning of year 2,183,136 2,937,432 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,391,558 $ 1,719,668 ============ ============ See accompanying notes. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Blair Corporation and its wholly-owned subsidiary have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information refer to the financial statements and footnotes included in the company's annual report on Form 10-K for the year ended December 31, 1994. The consolidated financial statements include the accounts of Blair Corporation and its wholly-owned subsidiary, Blair Holdings Inc. All significant intercompany accounts are eliminated upon consolidation. NOTE B - DIVIDENDS DECLARED 2-09-94 $1.00 per share 2-07-95 $1.25 per share 4-19-94 .35 4-18-95 .35 7-20-94 .35 7-19-95 .35 10-19-94 .35 NOTE C - NET INCOME PER COMMON SHARE Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Net income $ 7,434,384 $12,706,865 $14,538,056 $20,886,406 Average shares outstanding 9,273,482 9,231,032 9,273,482 9,241,032 Net income per common share $ .80 $1.38 $1.57 $2.26 NOTE D - ACCRUED EXPENSES Accrued expenses consist of: June 30 December 31 1995 1994 ----------- ----------- Employee compensation $ 5,675,833 $ 6,426,098 Contribution to profit sharing and retirement plan 1,637,898 4,023,519 Taxes, other than taxes on income 1,188,649 699,387 Other accrued items 1,596,486 1,576,518 ----------- ----------- $10,098,866 $12,725,522 =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 NOTE E - INCOME TAXES The components of income tax expense are as follows: Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Currently payable: Federal $ 8,222,000 $ 8,150,000 $10,035,000 $13,257,000 State 1,139,000 1,893,000 1,310,000 3,018,000 ----------- ----------- ----------- ----------- 9,361,000 10,043,000 11,345,000 16,275,000 Deferred (credit) (4,046,000) (1,539,000) (1,114,000) (2,308,000) ----------- ----------- ----------- ----------- $ 5,315,000 $ 8,504,000 $10,231,000 $13,967,000 =========== =========== =========== =========== The differences between total tax expense and the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes are as follows: Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Statutory rate applied to pre-tax income $ 4,462,285 $ 7,423,803 $ 8,669,170 $12,198,692 State income taxes, net of federal tax benefit 785,850 1,017,900 1,429,350 1,643,200 Other items 66,865 62,297 132,480 125,108 ----------- ----------- ----------- ----------- $ 5,315,000 $ 8,504,000 $10,231,000 $13,967,000 =========== =========== =========== =========== Components of the provision for deferred income tax credit are as follows: Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Provision for estimated returns $ 140,000 $ (133,000) $ 67,000 $ 876,000 Provision for doubtful accounts 216,000 153,000 618,000 483,000 Advertising costs 3,751,000 1,466,000 461,000 847,000 Other items - net (61,000) 53,000 (32,000) 102,000 ----------- ----------- ----------- ----------- $ 4,046,000 $ 1,539,000 $ 1,114,000 $ 2,308,000 =========== =========== =========== =========== Significant components of the company's deferred tax assets and liability as of June 30, 1995 and December 31, 1994 are as follows: June 30 December 31 1995 1994 ----------- ----------- Current deferred tax assets - net: Doubtful accounts $13,684,000 $13,066,000 Returns allowances 2,510,000 2,443,000 Inventory obsolescence 1,863,000 1,883,000 Vacation pay 1,241,000 1,264,000 Inventory costs 1,459,000 1,479,000 Advertising costs (1,701,000) (2,162,000) Other items 362,000 413,000 ----------- ----------- $19,418,000 $18,386,000 =========== =========== Long-term deferred tax liability: Tax over book depreciation $ 1,857,000 $ 1,939,000 =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 NOTE F - INVENTORIES Inventories are valued at the lower of cost or market. Cost of merchandise inventories is determined principally on the last-in, first-out (LIFO) method. Cost of advertising and shipping supplies is determined on the first-in, first- out (FIFO) method. If the FIFO method had been used for all merchandise inventories, the total amount would have increased by approximately $8,930,000 at June 30, 1995 and $8,690,000 at December 31, 1994, respectively. NOTE G - OTHER INCOME Other income consists of: Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Finance charges on time payment accounts $ 7,291,797 $ 5,288,174 $14,012,119 $10,744,718 Other items 354,359 278,539 750,190 605,808 ----------- ----------- ----------- ----------- $ 7,646,156 $ 5,566,713 $14,762,309 $11,350,526 =========== =========== =========== =========== 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 wherin shares of treasury stock may be issued to certain employees at a price established at the discretion of the Employee Stock Purchase Plan Committee. The stock issued under the Plan was 49,150 shares on July 10, 1995 and 42,450 share on July 7, 1994. NOTE I - RECLASSIFICATIONS Certain amounts previously reported in the 1994 financial statements have been reclassified to conform with current year classifications. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Results of Operations --------------------- Net sales for the second quarter and six months of 1995 were record highs. Despite the record sales, net income was off 41.5% for the second quarter and 30.4% for the six months of 1995 as compared to 1994. The reductions in earnings were primarily attributable to increased postage, paper, payroll and prospecting costs. Net sales for 1995 increased 5.5% and 6.5% over the prior record sales of the second quarter and first six months of 1994. The record 1995 sales resulted from an increased advertising effort and the company's expansion of the credit limits extended to our better customers. Response to the advertising effort was mixed - down 2.1% second quarter and up 9.9% year-to-date for customer multi-product circular mailings, down 18.9% and 16.8% for prospect multi- product circular mailings, down 21.1% and 3.8% for co-op and media, down 8.4% and 5.5% for customer catalogs and up over 25% for prospect catalogs. Sales revenue generated per advertising dollar decreased 19.6% and 10.8% in the 1995 periods primarily due to increased advertising cost (postage, paper and prospect catalogs). The number of orders filled increased .6% and .9% and the average order size increased 5.2% and 5.4%. Returns as a percentage of adjusted gross sales were approximately the same (15%) in 1995 as in 1994. Other income increased 37.4% and 30.1% in the second quarter and six months of 1995 as compared to 1994. The increases were primarily due to finance charges earned on increased Easy Payment Plan accounts receivable. Prospect multi- product circular mailings and prospect catalogs offer revolving credit to first- time buyers. These programs along with the expansion of the credit limits extended to our better customers and the reduction in our minimum payment schedule (effective January 1, 1995 - from 10% to 5% on average) have been greatly responsible for an increase in average Easy Payment Plan accounts receivable of 27.3% (approximately $36,800,000) in the first six months of 1995 as compared to 1994. Easy Payment Plan gross sales increased 12.4% and 16.4% in the 1995 to 1994 comparisons. Cost of goods sold as a percentage of net sales increased to 48.1% and 48.4% in 1995 from 47.3% and 47.5% in 1994. The higher cost of goods primarily resulted from increased delivery costs. Increased postal rates and the higher cost to ship larger and heavier merchandise in the expanded line of home products drove delivery costs up. Advertising expenses in the second quarter and first six months of 1995 increased 30.4% and 18.7% from 1994. Increases in catalog mailings, the co-op and media programs and postage and paper costs were primarily responsible for the increased advertising expense. The total number of circular mailings released in the second quarter of 1995 was the same as in 1994 (59.5 million). A 6.0% increase in multi-product customer mailings (1995 - 45.7 million, 1994 - 43.1 million), a 14.8% decrease in multi-product prospect mailings (1995 - 11.5 million, 1994 - 13.5 millions), a 21.4% decrease in single-product mailings (1995 - 2.3 million, 1994 - 2.9 million), an 11.6% increase in average mailing cost (postage) and 12.8% increase in average production cost (primarily paper) resulted in a net circular mailings cost increase of approximately $3,538,000. The total number ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Results of Operations - Continued --------------------- of circular mailings released in the six months of 1995 was 8.5% less than in 1994 (1995 - 103.2 million, 1994 - 112.8 million). A 7.7% decrease in multi- product customer mailings (1995 - 76.9 million, 1994 - 83.3 million), a 7.9% decrease in multi-product prospect mailings ( 1995 - 22.2 million, 1994 - 24.1 million), a 22.4% decrease in single-product mailings ( 1995 - 4.2 million, 1994 - 5.4 million), an 11.9% increase in average mailing cost (postage) and an 11.8% increase in average production cost (primarily paper) resulted in a net circular mailings cost increase of approximately $2,825,000. Total volume of the co-op and media programs in 1995 increased 30.1% in the second quarter (1995 - 511 million, 1994 - 393 million) and 5.3% in the six months (1995 - 1.09 billion, 1994 - 1.03 billion) as compared to 1994. The increased volumes and 20.5% and 9.9% increases in average production and placement costs (primarily paper and postage) resulted in co-op and media cost increases of approximately $964,000 (second quarter) and $631,000 (six months). In the second quarter, 14.1 million home products catalogs were mailed (8.3 million to prospects) in 1995 as compared to 4.9 million (.1 million to prospects) in 1994. In the first six months, 19.2 million were mailed (9.3 million to prospects) in 1995 as compared to 6.0 million (.3 million to prospects) in 1994. The increased volumes and mailing costs resulted in catalog cost increases of approximately $4,723,000 (second quarter) and $7,231,000 (six months). The catalog format has become the primary advertising format for home products and will be tested for men's apparel starting in July 1995 and women's apparel in spring 1996. General and administrative expenses increased 11.7% in the second quarter and 14.6% in the six months of 1995 as compared to 1994. Increases in wages and benefits, interest, telephone and professional services were primarily responsible for the increased general and administrative expenses. Wages and benefits increased 9.8% and 12.1% due to normal pay increases, a larger work force and an increase in the normal work week from 37 1/4 hours to 40 hours. On average, the number of employees has increased 4.9% in the second quarter and 4.4% year-to-date. The work week was extended to 40 hours at the beginning of the fourth quarter 1994. Interest expense was higher (second quarter - $913,308 in 1995, $94,830 in 1994; six months - $1,528,934 in 1995, $167,073 in 1994) due to increased borrowings needed to finance higher customer accounts receivable balances. Telephone expense has increased because the company has improved it's 800 - number capabilities (ordering and customer service). By September 1, 1995, all catalogs (home products and men's) will offer an 800 ordering number. Professional services were higher primarily due to consulting fees related to the study of the company's distribution systems. The provision for doubtful accounts as a percentage of credit sales increased 12.4% and 9.8% in the 1995 periods as compared to 1994. The increased provisions were based on the increased charge offs experienced in 1994. Total credit sales increased 8.8% and 11.4% and total finance charges increased 37.9% and 30.4% in 1995. Prospect (first-time buyer) credit sales and finance charges carry a higher credit risk. Prospect credit sales increased 18.3% and 9.6% in the 1995 periods. Prospect finance charges increased 22.1% and 18.1%. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Results of Operations - Continued --------------------- The estimated bad debt rate used in providing for doubtful accounts is based on current expectations, sales mix (prospect vs. established customer) and prior year's experience. The rates used in providing for bad debts has remained relatively consistent since mid-1994. Recoveries of bad debts previously charged off have been credited back against the allowance for doubtful accounts. Income taxes as a percentage of income before income taxes were 41.7% and 41.3% in the second quarter and six months of 1995 as compared to 40.1% in 1994. The federal income tax rate was 35% in both years. The company's effective state income tax rate was lower in 1995 as the Pennsylvania statutory rate fell from 12.25% to 11.99% in the third quarter of 1994, retroactive to January 1, 1994 and to 10.99% effective January 1, 1995. In June 1995, retroactive to January 1, 1995, the Pennsylvania statutory rate was reduced to 9.99%. In addition, the effective state rate was further reduced by the provision enacted by Pennsylvania regarding the apportionment of business income - allows double weighting the sales factor. The reductions in the effective state income tax rate caused reductions in the company's net deferred tax asset and increases in income tax expense of approximately $185,000 in the first quarter of 1995 and $638,000 in the second quarter of 1995. If there are no other changes, income taxes as a percentage of income before income taxes will be approximately 39% in the second half of 1995. Liquidity and Sources of Capital -------------------------------- All working capital and cash requirements were met and suppliers' invoices were timely paid in order to maximize discounts. Effective March 9, 1995, the company has $60,000,000 available in lines if credit, $10,000,000 with no specified expiration date and $50,000,000 expiring September 30, 1995. Management is currently negotiating a new line of credit arrangement. Short- term borrowings outstanding during the first half of 1994 averaged approximately $7,800,000 as compared to approximately $47,300,000 during the first half of 1995. $56,750,000 was outstanding at June 30, 1995, $56,450,000 at August 10, 1995. The ratio of current assets to current liabilities was 2.35 at June 30, 1995, 2.72 at December 31, 1994 and 3.35 at June 30, 1994. Working capital decreased $2,743,309 in the six months of 1995. The decrease was primarily reflected in increased notes payable and trade accounts payable and decreased inventories more than offsetting increased customer accounts receivable. Dividends paid ($14,837,572) and capital expenditures ($5,005,648) were primarily responsible for the reduction in working capital. Working capital increased $6,683,958 during the first six months of 1994. The increase was primarily reflected in increased customer accounts receivable and deferred income taxes and decreased note payable to bank, trade accounts payable and federal and state income taxes offsetting decreased cash and cash equivalents and inventories. The 1994 six month increase in working capital was the result of the record net income and reductions in capital expenditures and dividends. Merchandise inventory turnover was 3.0 at June 30, 1995, 3.3 at December 31, 1994 and 3.7 at June 30, 1994. Merchandise inventory as of June 30, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Liquidity and Resources - Continued ----------------------- decreased 7.2% from December 31, 1994 and increased 33.8% from June 30, 1994. Net sales for the six months of 1995 increased 6.6% over the first half of 1994. Inventory levels have been impacted by the continuing effort to increase order fulfillment rates, lower than anticipated customer response in the fourth quarter of 1994 and the expansion of home products and men's inventories to service catalogs. Home products net sales as a percentage of total net sales increased to 15.3% ($42.6 million) in 1995 as compared to 12.4% ($32.5 million) in 1994. Men's net sales decreased to 22.8% ($63.3 million) from 25.9% ($67.6 million) and women's increased to 61.9% ($172.3 million) from 61.7% ($161.0 million). Home products inventory totaled $11.7 million at June 30, 1995, as compared to $13.3 million at December 31, 1994 and $10.2 million at June 30, 1994. Men's inventory was $17.8 million at June 30, 1995, $18.9 million at December 31, 1994 and $13.5 million at June 30, 1994. Women's inventory was $35.9 million at June 30, 1995, $38.4 million at December 31, 1994 and $25.2 million at June 30, 1994. The company has added new facilities, modernized its existing facilities and acquired new cost saving equipment during the last several years. Capital expenditures for property, plant and equipment totaled $5,005,648 during the six months of 1995 and $2,734,628 during the first six months of 1994. The company will soon complete the renovation of its headquarters facility in Warren. The lower two levels were completed in February 1993 and the upper two levels, minus a few thousand square feet, were completed near the end of 1994. Total cost of the renovation is estimated at $13,600,000, $13,550,000 of which was incurred as of June 30, 1995. The company completed its new Erie, Pennsylvania outlet store. Total cost of the new store, which opened May 23, 1994, was $2.1 million. The old Erie store building was sold in August 1994. The company has undertaken a study of its distribution center, focused on operational and customer service improvements. On October 19, 1994, the Board of Directors approved a 64,000 square-foot warehouse addition to the distribution center. Construction began in January 1995 with completion anticipated in early September 1995. Estimated cost of the project is $6.85 million and, as of June 30, 1995, total cost incurred was approximately $4,250,000. The continuing study includes examining the merits of a variety of service-enhancing options, including a possible second distribution center located outside of the Warren, Pennsylvania area. It is anticipated than planned capital expenditures for the years ahead will be financed by cash flow from operations and borrowings. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Impact of Inflation and Changing Prices --------------------------------------- Although inflation has moderated in our economy, the company is continually seeking ways to cope with its impact. To the extent permitted by competition, increased costs are passed on to customers by selectively increasing selling prices over a period of time. During the past several years, selling prices have been raised sufficiently to offset increased merchandise costs, thereby realizing profit margins that continue to build fiscal strength. Profit margins will be pressured by postal rate and paper cost increases in 1995. The company's estimate of the increased cost of postage and paper approximates $12,000,000. The company principally uses the LIFO method of accounting for its merchandise inventories. Under this method, the cost of products sold reported in the financial statements approximates current costs and thus reduces distortion in reported income due to increasing costs. The charges to operations for depreciation represent the allocation of historical costs incurred over past years and are significantly less than if they were based on the current cost of productive capacity being used. Property, plant and equipment are continuously being expanded and updated. Recent major projects are discussed under Liquidity and Sources of Capital. Assets acquired in prior years will, of course, be replaced at higher costs but this will take place over many years. New assets, when acquired, will result in higher depreciation charges, but in many cases, due to technological improvements, savings in operating costs should result. The company considers these matters in setting pricing policies. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The company's Annual Meeting of Stockholders was held April 18, 1995. (b) At the Annual Meeting of Stockholders, all of the company's directors were elected at said meeting, as follows: David A. Blair John O. Hanna Michael J. Samargya Robert W. Blair Gerald A. Huber Giles W. Schutte Steven M. Blair Murray K. McComas Blair T. Smoulder Robert D. Crowley Thomas P. McKeever John E. Zawacki Since all of the directors of the company were elected at the Annual Meeting of Stockholders, there are no directors whose term of office as a director continued after the meeting. (c) The following other matter was voted upon at the meeting, and the following number of affirmative votes and negative votes were cast with respect to such matter: The reappointment by the company's Board of Directors of the firm of Ernst & Young L.L.P. as independent certified public accountants to examine the financial statements and perform the annual audit of the company for the year ending December 31, 1995 was ratified. This ratification received 8,448,042 affirmative votes and 2,261 negative votes. Item 5. Other Information ----------------- The company adopted the Restated Certificate of Incorporation of Blair Corporation on April 25, 1995. The Restated Certificate reflects amendments that have already been made and are already of record. (Exhibit A to Form 10-Q) The company filed a Registration Statement on Form S-8 on July 7, 1995 registering 49,150 shares of the company's Common Stock which was offered for purchase on July 10, 1995 to selected employees of the company under and in accordance with the company's Employee Stock Purchase Plan. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- None (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter ended June 30, 1995. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A --------- RESTATED CERTIFICATE OF INCORPORATION OF BLAIR CORPORATION Blair Corporation, a Corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT: 1. The name of the Corporation is Blair Corporation. Blair Corporation was originally incorporated under the name "New Process Company" and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 23, 1924. 2. Pursuant to Section 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation of the Corporation only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation and theretofore amended or supplemented, and no discrepancy between those provisions and this Restated Certificate of Incorporation exists. 3. This Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. The Board of Directors of the Corporation at the organization meeting of the Board of Directors held April 18, 1995 duly adopted resolutions setting forth the Restated Certificate of Incorporation. 4. The text of the Restated Certificate of Incorporation of the Corporation as heretofore amended or supplemented is hereby restated to read in its entirety as follows: FIRST: The name of this Corporation is BLAIR CORPORATION. SECOND: Its principal office in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name and address of its resident agent is the Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. THIRD The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are: To manufacture, purchase, import or otherwise acquire, own, mortgage, pledge, sell, export, assign and transfer, or otherwise dispose of, to invest, trade, deal in and deal with, goods, wares and merchandise and real and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the goodwill, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A - Continued --------- To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage, or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this Corporation. To guarantee, purchase, hold, sell, assign, transfer, mortgage,pledge or otherwise dispose of shares of the capital stock of, or any bonds, securities or evidence of indebtedness created by any other corporation or corporations organized under the laws of this state or any other state, country, nation or government, and while the owner thereof to exercise all the rights, powers and privileges of ownership. To issue bonds, profit sharing debentures of obligations of this Corporation from time to time, for any of objects or purposes of the Corporation, and to secure the same by mortgage, pledge, deed of trust, or otherwise. To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital; and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly. To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, colony or Country. In general, to carry on any other business in connection with the foregoing, whether manufacturing or otherwise, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the act hereinafter referred to, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do. The foregoing clauses shall be construed both to objects and powers; and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the powers of this Corporation. FOURTH: 1. The authorized capital stock of the Corporation shall be PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A - Continued --------- 12,000,000 shares of Common Stock without nominal or par value, all of one class. 2. Each share of Common Stock without nominal or par value of the Corporation issued and outstanding or held in the treasury of the Corporation as of the close of business on the date this amendment becomes effective is hereby reclassified and changed into two fully paid and non- assessable shares of Common Stock without nominal or par value of the Corporation, and each holder of record of a certificate for one or more shares of Common Stock without nominal or par value of the Corporation, as of the close of business on the date this amendment becomes effective shall be entitled to receive, as soon as practicable, and without surrender of such certificate, a certificate or certificates representing one additional share of Common Stock for each one share of Common Stock represented by the certificate of such holder. 3. The Common Stock may be issued from time to time for such consideration as may be fixed from time to time by the Board of Directors, and any and all shares so issued, when the full consideration for which as fixed by the Board of Directors has been paid or delivered, shall be deemed fully paid and non-assessable. 4. No holder of Common Stock of the Corporation shall be entitled, as such, as a matter of right to subscribe for or purchase any part of any new or additional issue of shares of Common Stock of the Corporation or any securities of the Corporation convertible into, or evidencing the right to purchase shares of Common Stock whether now or hereafter authorized, or whether issued for cash, property, or services, or by way of dividend. FIFTH: The amount of capital stock with which this Corporation will commence business is One Thousand Dollars (1,000.00). SIXTH: The names and places of residence of the original subscribers to the capital stock and the number of shares subscribed for by each are as follows: NUMBER OF SHARES -------------- ----------------------- COMMON NAME RESIDENCE PREFERRED FOUNDERS MANAGEMENT ------------------------------------------------------------------- J.L. Blair Warren, PA 1 2 2 L.A. BLAIR Warren, PA 1 1 1 H.C. Putnam Warren, PA 2 SEVENTH: This Corporation is to have perpetual existence. EIGHTH: The private property of the stockholders shall not be subject to the payment of the corporate debts to any extent whatever. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A - Continued --------- NINTH: In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this Corporation. From time to time to determine whether and to what extent, and at what times and places, and under that conditions and regulations, the accounts and books of this Corporation, (other than the stock ledger), or any of them, shall be open to inspection or stockholders; and no stockholder shall have any right of inspecting any account, book or document of this Corporation except as conferred by statute, unless authorized by resolution of the stockholders or Directors. If the by-laws so provide, to designate two or more of its number to constitute an executive committee, which committee shall for the time being, as provided in said resolution or in the by-laws of this Corporation, have and exercise any or all of the powers of the Board of Directors in the management of the business and affairs of this Corporation, and have power to authorize the seal of this Corporation to be affixed to all papers which may require it. Pursuant to the affirmative vote of the holders of at least a majority of each class of stock issued and outstanding, having voting power, given at stockholders' meeting duly called for that purpose, the Board of Directors shall have power and authority at any meeting to sell, lease, or exchange all of the property and assets of this Corporation, including its goodwill and its corporate franchises, upon such terms and conditions as its Board of Directors deems expedient and for the best interests of the Corporation. This Corporation may in its by-laws confer powers upon its Directors in addition to the foregoing, and in addition to the powers and authorization expressly conferred upon them by the statute. Both stockholders and Directors shall have power, if the by-laws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware, and to keep the books of this Corporation (subject to the provisions of the statutes), outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors. TENTH: This Corporation reserves the right to amend, alter, change or repair any provision conveyed in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders therein are granted subject to this reservation. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A - Continued --------- ELEVENTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as the same may be amended and supplemented from time to time, indemnify any and all Directors and officers which it shall have power to indemnify under said Section 145 from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Section and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in their official capacity while holding such office, and shall continue as to a person who has ceased to be a Director or officer, and shall inure to the benefit of the heirs, executors and administrators of such a person. A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach ofthe Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, as the same exists or hereafter may be amended, or (iv) for any transaction from which the Director derived an improper personal benefit. If the General Corporation Law of Delaware hereafter is amended to authorize the further elimination or limitation of the liability of Directors, then the liability of a Director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended General Corporation Law of Delaware. Any repeal or modification of the paragraph by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a Director of the Corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation, to be signed by Murray K. McComas, its President and attested by David A. Blair, its Secretary, this 25th day of April ,1995. ---------- ------------ ATTEST: BLAIR CORPORATION By: David A. Blair By: Murray K. McComas ---------------------------- ----------------------------- David A. Blair Murray K. McComas Its Secretary Its President PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1995 Exhibit A - Continued --------- BE IT RESOLVED, that it is deemed to be in the best interest of the Corporation that the Certificate of Incorporation of the Corporation be restated in its entirety, in the form of Restated Certificate of Incorporation of the Corporation attached as EXHIBIT A hereto (the "Restated Certificate"), and that the same be, and hereby is, adopted as the Restated Certificate of Incorporation of the Corporation; and BE IT FURTHER RESOLVED, that the officers of the Corporation be, and they hereby are, authorized, empowered and directed to execute and file the Restated Certificate with the Secretary of State of Delaware; and BE IT FURTHER RESOLVED, that the officers of the Corporation be, and they hereby are, authorized, empowered and directed, in the name of and on behalf of the Corporation, to do all such acts and things as in their Judgment shall be necessary or appropriate to carry out, comply with and effectuate the resolutions adopted at this meeting. 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 August 10, 1995 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 6/30/95 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SECOND QUARTER, 1995 10-Q FILING FOR BLAIR CORPORATION. 0000071525 BLAIR CORPORATION 6-MOS DEC-31-1995 JUN-30-1995 2,391,558 0 197,900,967 42,218,875 76,480,762 254,543,118 95,128,210 39,362,908 310,308,420 108,388,439 0 419,810 0 0 199,643,171 310,308,420 278,260,082 293,022,391 134,600,116 268,253,335 0 14,670,533 1,528,934 24,769,056 10,231,000 14,538,056 0 0 0 14,538,056 1.57 1.57 AMOUNT INCLUDES ADD'L PAID-IN CAPITAL, RETAINED EARNINGS, TREASURY STOCK AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE.