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<SEC-DOCUMENT>0000950152-07-002221.txt : 20070316
<SEC-HEADER>0000950152-07-002221.hdr.sgml : 20070316
<ACCEPTANCE-DATETIME>20070316151340
ACCESSION NUMBER:		0000950152-07-002221
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20070316
DATE AS OF CHANGE:		20070316

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-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-00878
		FILM NUMBER:		07699837

	BUSINESS ADDRESS:	
		STREET 1:		220 HICKORY ST
		CITY:			WARREN
		STATE:			PA
		ZIP:			16366
		BUSINESS PHONE:		8147233600

	MAIL ADDRESS:	
		STREET 1:		220 HICKORY STREET
		CITY:			WARREN
		STATE:			PA
		ZIP:			16366

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NEW PROCESS CO
		DATE OF NAME CHANGE:	19890507
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>l24091ae10vk.htm
<DESCRIPTION>BLAIR CORP.  10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>Blair Corp.  10-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>






<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>For the fiscal year ended December&nbsp;31, 2006<BR>
Commission file number 1-878</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>BLAIR CORPORATION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Incorporated in Delaware
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">I.R.S. Employer Identification Number:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">220 Hickory Street <BR>
Warren, Pennsylvania 16366<BR>
(814)&nbsp;723-3600
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25-0691670</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered pursuant to Section&nbsp;12(b) of the Act:</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="40%">&nbsp;</TD>
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    <TD width="55%">&nbsp;</TD>
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<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">TITLE OF EACH CLASS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">NAME OF EACH EXCHANGE ON WHICH REGISTERED</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">Common Stock, without nominal or par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">American Stock Exchange</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered pursuant to Section&nbsp;12(g) of the Act: None</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check if registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of the
Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<FONT face="Wingdings">&#111;</FONT>Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13 or
15(d) of the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<FONT face="Wingdings">&#111;</FONT>Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<FONT face="Wingdings">&#254;</FONT>Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of the registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a nonaccelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (check one):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Large
accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Accelerated filer &nbsp;<FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Non-accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Act).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<FONT face="Wingdings">&#111;</FONT>Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate market value, based upon the last sales price of $29.75 as quoted on The American
Stock Exchange for June&nbsp;30, 2006, of the common stock held by non-affiliates of the registrant,
i.e., persons other than directors and executive officers of the registrant is approximately
$116,039,429.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The registrant had 3,854,287 shares of common stock outstanding as of March&nbsp;5, 2007.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Portions of the Proxy Statement for the 2007 Annual Meeting of Stockholders (the &#147;2007 Proxy
Statement&#148;) are incorporated by reference into Part&nbsp;III of this Form 10-K.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>








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</DIV>


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<!-- link1 "PART I" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PART I
</DIV>

<!-- link2 "ITEM 1. BUSINESS " -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 1.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>BUSINESS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;GENERAL.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Blair Corporation (the &#147;Company&#148;) was founded in 1910 by John L. Blair, Sr., and was incorporated
in 1924 under the laws of the State of Delaware. The Company&#146;s business consists of the sale of
fashion apparel for men and women, plus a wide range of home products. Although the Company&#146;s
revenues are generated primarily through direct mail merchandising, the Company has transitioned
into a multi-channel direct marketer, as an increasing amount of total sales revenue, approximately
22% in 2006, is being generated through its e-commerce Web site, which was launched in 2000. The
Company operates three retail stores, two in Pennsylvania and one in Delaware. The Company employs
approximately 2,000 people. None of the Company&#146;s employees are subject to collective bargaining
agreements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;23, 2007, Blair Corporation, a Delaware corporation (the &#147;Company&#148;), BLR Acquisition
Corp., a Delaware corporation (&#147;Merger Sub&#148;), and Appleseed&#146;s Topco, Inc., a Delaware corporation
and portfolio company of Golden Gate Capital (&#147;Appleseed&#146;s&#148;), entered into an Agreement and Plan of
Merger (the &#147;Merger Agreement&#148;) pursuant to which Appleseed&#146;s will acquire all of the outstanding
shares of the Company common stock for $42.50 per share in cash, without interest (&#147;Merger
Consideration&#148;), or approximately $173.6&nbsp;million in the aggregate. In addition, each outstanding
unvested restricted share of the Company will be converted into the right to receive cash in an
amount equal to the Merger Consideration, and the holders of all outstanding options to acquire
shares of the Company&#146;s common stock will receive an amount in cash equal to the excess, if any, of
the Merger Consideration over the per share exercise price of the option. Under the terms of the
Merger Agreement, the Company is to be acquired by Appleseed&#146;s through a merger of Merger Sub and
the Company, with the Company as the surviving corporation (the &#147;Merger&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The parties currently anticipate consummating the Merger in the Spring of 2007. Upon the closing of
the Merger, shares of the Company&#146;s common stock would no longer be listed on the AMEX. The
consummation of the Merger is subject to the approval of the Company&#146;s stockholders, and
satisfaction of other customary closing conditions. Pursuant to the terms of the Merger Agreement,
the Company was permitted to solicit additional proposals to acquire the Company for a period of 30&nbsp;days
following the date of the Merger Agreement. The Board of Directors of the Company, with assistance
of its independent advisors, solicited proposals during this period
but did not receive any proposals.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In November, 2005, the Company announced the completion of the sale of its credit portfolio to
World Financial Capital Bank, an industrial bank subsidiary of Alliance Data Systems Corporation.
The agreement between the two companies was announced on April&nbsp;27, 2005, with the closing of the
transaction occurring on November&nbsp;4, 2005. Gross sale proceeds were $166.2&nbsp;million, of which the
Company used $143&nbsp;million to repay debt primarily incurred in association with its August&nbsp;2005
tender offer of 4.4&nbsp;million shares. The net result of this transaction was a one-time gain of
$27.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(b)&nbsp;INFORMATION REGARDING INDUSTRY SEGMENTS.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company operates as one reporting segment in the business of selling women&#146;s and men&#146;s fashion
apparel and accessories and home furnishing items primarily through direct marketing sales which
generated $426&nbsp;million in net sales in 2006. The Company has one operating segment. Retail store
sales comprise less than 1% of the Company&#146;s total net sales and the method used to distribute the
Company&#146;s products (United States Postal Service or United Parcel Service) is the same for 99% of
the business (i.e., direct mail and internet). The Company&#146;s customer base is comprised of
individuals throughout the United States and is diverse in both geographic and demographic terms.
Advertising is done mainly by means of catalogs and the internet, which offer the Company&#146;s
merchandise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The format of the information used by the Company&#146;s CEO is consistent with the reporting format
used in the Company&#146;s 2006 Form 10-K and other external financial information. In addition, the
Company utilizes one general ledger and one budget (which is categorized only by product line such
as Womenswear, Menswear, Home and the stores) and does not operate by divisions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">For 2006, direct mail sales represented approximately 77% of total net sales, the internet accounts
for approximately 22% and the retail component accounts for approximately 1%. The Company
considers all of these components to be engaged in business activities from which revenues are
earned and expenses are incurred relating to transactions of the same enterprise. Additionally,
the Company&#146;s segment reporting is consistent with the presentation made to the Company&#146;s chief
operating decision maker. For these reasons, the Company believes it has one reportable segment.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A five-year summary of certain financial and operational information regarding the Company&#146;s
continuing operations can be found in Item&nbsp;6, Selected Financial Data, of this Annual Report on
Form 10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(c)&nbsp;DESCRIPTION OF BUSINESS.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company markets a wide range of merchandise, manufactured by a number of independent suppliers,
both domestic and foreign. Suppliers located outside of the United States provided approximately
40% of the Company&#146;s merchandise in 2006. Most of these suppliers have been associated with the
Company for many years and manufacture products based upon the Company&#146;s specifications. Suppliers
are selected in accordance with their ability to produce high quality products in a cost-effective
manner.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company markets its products mainly by direct mail. Catalogs depict 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 (such as bedspread ensembles, draperies, furniture covers, area
rugs, bath accessories, kitchenware, gifts, collectibles and personal care items) are mailed
directly to existing and prospective customers. Sales of the Menswear and Womenswear products
accounted for 88% of the Company&#146;s total sales in 2006, and sales of home products accounted for
the remaining 12%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Competition and Seasonality</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The environment for our products is very competitive and the Company has numerous competitors
throughout various channels within the industry. Our current and potential competitors include
brick and mortar retailers and catalog retailers, many of which possess significant brand
awareness, sales volume, and customer bases. Some of these competitors currently sell products
through the internet, mail order, or direct marketing. We believe that the principal competitive
factors in our market segments include value, credit, availability, convenience, brand recognition,
customer service, and reliability. The Company&#146;s annual earnings depend to a great extent on the
results of operations for the last quarter of its fiscal year when a significant portion of the
Company&#146;s sales and profits are recorded.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The cyclical nature of the retail business requires the Company to carry a significant amount of
inventory, especially prior to peak selling seasons when we and other retailers generally build up
inventory levels. We review our inventory levels in order to identify slow-moving merchandise and
broken assortments (items in stock that no longer have a sufficient range of sizes) and use
markdowns to clear merchandise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company considers its merchandise to be value-priced and competes for sales with other direct
marketers, retail department stores, specialty shops, discount store chains, e-commerce and
multi-channel marketers. The Company competes based on its sales expertise and its unique
combination of product, quality, price, credit, guarantee and service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Environmental</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Environmental protection requirements did not have a material effect upon the Company&#146;s operations
during fiscal 2006. While management believes it would be unlikely, it is possible that compliance
with such requirements would lengthen lead time in capital improvement plans and increase
construction costs and therefore, operating costs due in part to the expense and time required to
conduct environmental and ecological studies and any required remediation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Trademarks</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We believe that our registered and common law trademarks have significant value and are
instrumental to our ability to market and sustain demand for our merchandise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Direct Mail and Retail Business</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006 the Company had $3,854,993 of backlog orders of which the Company
reasonably did not expect to fill $419,423, compared to $4,866,035 of backlog orders as of December
31, 2005 of which the Company reasonably did not expect to fill $511,420. The majority of the
backlog orders were the result of ordered items being out of stock at the time the order was
originally placed. The reduction in backlog orders is the result of the Company&#146;s enhanced
inventory management efforts. Emphasis was placed on carrying greater quantities of recurring or
staple products and, conversely, lower levels of newly introduced or untested products were
maintained.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Media and co-op prospect advertising programs continue to be used as components of the Company&#146;s
customer acquisition strategy. The Company continued to expand its internet presence in 2006
generating $93.7&nbsp;million in net sales, approximately 22% of the Company&#146;s total net sales, as
compared to approximately $86.1&nbsp;million in net sales or 19% in 2005. The Company launched its
e-commerce Web site in the third quarter of 2000 and has continued to expand its affiliate
partnerships to extend the reach of the Web site. The Company&#146;s Web site has also become an
effective way to help liquidate excess inventory.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Catalog mailings are mailed from commercial printers engaged by the Company. Orders for merchandise
are processed at the
Company&#146;s corporate offices in Warren, Pennsylvania (telephone orders via the call centers in
Franklin, Pennsylvania, Erie, Pennsylvania and Warren, Pennsylvania) and orders are filled and
mailed from the Company&#146;s Distribution Center in Irvine, Pennsylvania. All of the Company&#146;s
products are warehoused in its Irvine, Pennsylvania Distribution Center. Currently, merchandise
returns operations are located in Erie, Pennsylvania. However, in November&nbsp;2006, the Company
announced it would be relocating its returns operations to its Distribution Center in Irvine,
Pennsylvania. The Company serves customers throughout the United States.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has retail facilities in Grove City and Warren, Pennsylvania, and Wilmington, Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(d)&nbsp;FOREIGN OPERATIONS AND EXPORT SALES.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company does not conduct export sales of merchandise from the United States.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company conducts its foreign operations through foreign offices maintained in Hong Kong,
Singapore, India, Pakistan and China that directly source more than 40%, 32% and 28% of the
Company&#146;s merchandise from foreign suppliers in 2006, 2005 and 2004, respectively. All activity is
intercompany and the foreign offices have insignificant amounts of cash and fixed assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As the Company continues to diversify merchandise sourcing opportunities, it expects to increase
its investment in product development and source more merchandise directly from foreign vendors.
The increased volume of purchases will further expose the Company to new and greater risks and
uncertainties, the occurrence of which could substantially impact the Company&#146;s ability to source
merchandise through foreign vendors and to realize any perceived cost savings. These risk factors
are further discussed in ITEM 1A. RISK FACTORS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(e)&nbsp;AVAILABLE INFORMATION.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company makes available free of charge copies of its Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments made to these reports
pursuant to Section 13(a) and 15(d) of the Exchange Act, on its Web
site at <u>www.blair.com</u>. Such
reports are posted as soon as reasonably practicable after being filed with the SEC.
</DIV>

<!-- link2 "ITEM 1A. RISK FACTORS " -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><U><B>ITEM 1A.</B></U></TD>
    <TD>&nbsp;</TD>
    <TD><U><B>RISK FACTORS </B></U></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In addition to the other information contained in this Form 10-K, the following risk factors should
be considered carefully in evaluating our business. Our business, financial condition, or results
of operations could be materially adversely affected by any of these risks. Please note that
additional risks not presently known to the Company or that the Company currently deems immaterial
may also impair its business and operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>Obtaining required approvals and satisfying closing conditions may delay or prevent completion of
the proposed acquisition of the Company by Appleseed&#146;s Topco, Inc.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;23, 2007, the Company, Appleseed&#146;s Topco, Inc. (&#147;Appleseed&#146;s&#148;) and BLR Acquisition Corp.
entered into the Agreement and Plan of Merger (&#147;Merger Agreement&#148;), which provides for the
acquisition of the Company by Appleseed&#146;s. The completion of the proposed acquisition of our
company by Appleseed&#146;s is conditioned upon the receipt of all material governmental authorizations,
consents, orders and approvals. Completion of the acquisition is also conditioned upon approval of the
transaction by the stockholders of the Company and the absence of injunctions, court order or law
that would restrain or prohibit consummation of the acquisition. No assurance can be given that the
required consents and approvals will be obtained or that the required conditions to closing will be
satisfied, and, if all required consents and approvals are obtained and the conditions are
satisfied, no assurance can be given as to the terms, conditions and timing of the approvals or
that they will satisfy the terms of the Agreement and Plan of Merger entered into on January&nbsp;23,
2007. Further, we are subject to recent claims related to the proposed acquisition from plaintiffs
who are seeking an injunction to prohibit consummation of the proposed acquisition and other relief
including monetary damages.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>Significant increases in the costs associated with its direct mail business could negatively affect
results of operations.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company incurs substantial costs associated with its catalog mailings, including paper,
postage, and human resource costs associated with catalog layout and design, production and
circulation and increased inventories. The cost of printing, paper and postage are governed by
contracts and other long term arrangements which serve to mitigate the risk of sudden or unexpected
increases. Most of these costs are incurred prior to mailing. As a result, it is not possible to
adjust the costs of a particular advertising mailing to reflect the actual subsequent performance
of the mailing.
</DIV>

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</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">
Since the direct mail business accounts for the majority of total net sales, any
performance shortcomings experienced by the direct mail business, such as the damage or delay
of delivery of catalogs or errors therein, would likely have a material adverse effect on the
overall business, financial condition, results of operations and cash flows.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>Net sales could be negatively impacted by a decline in response rates to advertising promotions, by
a decline in operating results or a reduction in the customer file.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Response rates are impacted by the Company&#146;s ability to continually develop and/or select the right
merchandise assortment, maintain appropriate inventory levels and creatively present merchandise in
a way that is appealing to customers. Consumer preferences cannot be predicted with certainty, as
they continually change and vary from region to region. On average, the design process for apparel
is initiated nine to ten months before merchandise is available to customers. Further, purchase
commitments are made four to six months in advance. These lead times make it difficult to respond
quickly to changing consumer preferences and magnify the consequences of any misjudgments made in
anticipating customer preferences. Consequently, if the Company misjudges customer merchandise
preferences or purchasing habits, sales may decline significantly, and markdowns may be required to
significantly lower prices in order to sell excess inventory, which would result in lower margins.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Response rates to advertising promotions and, as a result, the net sales generated by each
promotion, can be affected by other factors beyond the Company&#146;s control such as weak economic
conditions, and unseasonable weather in key geographic markets. In addition, a portion of all
advertising promotions are to prospective customers. These promotions involve risks not present in
promotions to existing customers, including lower and less predictable response rates.
Additionally, it has become more difficult for the Company and other direct marketers to obtain
quality prospect mailing lists, which may limit the Company&#146;s ability to maintain the size of its
active customer file. Lower response rates could result in lower-than-expected full-price sales,
higher inventory levels and/or subsequently higher-than-expected clearance sales at significantly
reduced margins.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, the Company faces substantial competition from discount retailers for basic elements
in the merchandise lines, and net sales may decline or grow at a reduced pace if it is unable to
differentiate its merchandise and shopping experience from discount retailers. Further, the retail
apparel industry has experienced significant price deflation over the past several years largely
due to the downward pressure on retail prices caused by discount retailers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s sales, revenue and operating income may be adversely impacted by changes in minimum
customer credit scores determined by a third party.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Historically, the Company has managed its own credit portfolio and set the minimum credit scores a
consumer must have to be entitled to purchase the Company&#146;s merchandise on credit. The Company
sold its receivables portfolio to World Financial Capital Bank, an industrial bank subsidiary of
Alliance Data Systems Corporation in November, 2005, and going forward they will have discretion
over the minimum credit score necessary to be eligible to purchase Blair merchandise on credit. If
the bank decides to raise the applicable credit rating standards, certain consumers will no longer
qualify to purchase Blair merchandise on credit, which could lower sales thereby lowering revenue
and operating income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, lower sales may result from hesitancy on the part of the Company&#146;s credit reliant
customers to purchase using the new Blair credit card.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the third quarter of 2006, the Company and Alliance Data Systems executed Amendment Number 2 to
the ADS Credit Program Agreement whereby credit is granted to customers with credit scores below
the originally established FICO level. Customers granted credit in this new FICO scoring range are
deemed &#147;Full Recourse Accounts&#148; and the Company assumes the bad debt risk. The recourse program is
an annual program that either party may discontinue with 60&nbsp;days notice. While this program
affords the Company the ability to offer credit to customers who have been a profitable segment in
the past, the increased credit risk assumed by the Company could reduce operating income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>Consumer concerns about purchasing items via the Internet as well as external or internal
infrastructure system failures could negatively impact e-commerce sales and costs.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The e-commerce business is vulnerable to consumer privacy concerns relating to purchasing items
over the Internet, security breaches, and failures of Internet infrastructure and communications
systems. If consumer confidence in making purchases over the Internet declines as a result of
privacy or other concerns, e-commerce sales could decline. The Company may be required to incur
increased costs in order to address any system failures or security breaches.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s net sales, operating income and inventory levels fluctuate on a seasonal basis.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company experiences seasonal fluctuations in its net sales and operating income. Seasonal
fluctuations also affect our inventory levels, since we usually order merchandise in advance of
peak selling periods and sometimes before new fashion trends are confirmed by customer purchases.
We must carry a significant amount of inventory. If we are not successful in selling inventory we
may have to sell the inventory at significantly reduced prices or we may not be able to sell the
inventory at all.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s sales and reputation depend on key vendors for timely and effective sourcing and
delivery of quality merchandise.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As a direct marketer, business depends largely on the ability to fulfill orders on a timely basis.
The Company generally maintains non-exclusive relationships with multiple vendors that manufacture
its merchandise. However, there are no contractual assurances of continued supply, pricing or
access to new products, and any vendor could discontinue selling to the Company at any time. If the
Company was required to change vendors or if a key vendor was unable to timely supply desired
merchandise in sufficient quantities on acceptable terms, delays in filling customer orders could
be experienced resulting in lost sales and a decline in customer satisfaction.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s increasing reliance on direct sourcing from foreign vendors may negatively impact the
cost to source and deliver merchandise.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As it continues to diversify merchandise sourcing opportunities, the Company expects to increase
its investment in product development and source more merchandise directly from foreign vendors.
For the year ended December&nbsp;31, 2006, the Company was importer of record on approximately 40% of
total merchandise purchases. The increased volume of purchases will further expose the Company to
new and greater risks and uncertainties, the occurrence of which could substantially impact the
Company&#146;s ability to source merchandise through foreign vendors and to realize any perceived cost
savings. Considerations include, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Failure of foreign vendors to adhere to quality assurance standards or standards for conducting business;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Changing or uncertain economic conditions, political uncertainties or unrest, or epidemics or other health or
weather-related events in foreign countries resulting in the
disruption of trade from exporting countries;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Restrictions on the transfer of funds or transportation delays or interruptions; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Delays or cancellation of shipments as a result of geopolitical factors or other events related to factory or shipping
lines.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company enforces a code of conduct that sets guidelines for vendors regarding employment
practices such as wages and benefits, health and safety, working hours and working age, and for
environmental, ethical and legal matters. Although management believes it is allocating appropriate
resources to monitor compliance with such standards, if management or an outside third party
discovers that any of the Company&#146;s vendors are engaged in practices that materially violate vendor
code of conduct or other generally accepted social responsibility standards, sales could be
materially affected by any resulting negative publicity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company may be unable to fill customer orders efficiently, which could negatively impact
customer satisfaction.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">If the Company is unable to efficiently process and fill customer orders, customers may cancel or
refuse to accept orders, and customer satisfaction could be harmed. Considerations include, among
other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Failures in the efficient and uninterrupted operation of customer
service call centers or the Company&#146;s sole distribution center,
including system failures caused by telecommunications systems
providers and order volumes that exceed present telephone or
Internet system capabilities;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Delays or failures in the performance of third parties, such as
shipping companies and the U.S. postal and customs services,
including delays associated with labor disputes, labor union
activity, inclement weather, natural disasters, health epidemics
and possible acts of terrorism; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="justify"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disruptions or slowdowns in order processing or fulfillment
systems resulting from increased security measures implemented by
U.S. customs, or from homeland security measures, telephone or
Internet down times, system failures, computer viruses, electrical
outages, mechanical problems, human error or accidents, fire,
natural disasters or comparable events.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s success is dependent upon its management team.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The loss of key personnel could have a material adverse effect on the business. Furthermore, the
location of the Company&#146;s corporate headquarters outside of a major metropolitan area may make it
more difficult to replace key employees who leave, or to add qualified employees needed to manage
growth opportunities.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>Any determination that the Company has a material weakness in its internal control over financial
reporting could have a negative impact on stock price.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Management continues to apply significant management and financial resources to document, test,
monitor and enhance internal control over financial reporting in order to meet the ongoing
requirements of the Sarbanes-Oxley Act of 2002. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
In addition, because of changes in conditions, the effectiveness of internal control may vary over
time. Management cannot be certain that internal control systems will be adequate or effective in
preventing fraud or human error. Any failure in the effectiveness of internal control over
financial reporting could have a material effect on financial reporting or cause the Company to
fail to meet reporting obligations, which upon disclosure, could negatively impact the market price
of the Company&#146;s common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s stock price is susceptible to significant fluctuation.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Blair&#146;s stock price may fluctuate substantially as a result of limited public float or as a result
of quarter-to-quarter variations in the actual or anticipated financial results of Blair or other
companies in the retail industry or markets served by Blair. In addition, the stock market has
experienced price and volume fluctuations that have affected the market price of many retail and
other stocks and that have often been unrelated or disproportionate to the operating performance of
these companies.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s business, results of operations and future financial performance will depend on the
risk factors listed above, as well as other risk factors not currently known to management and the
board of directors that may arise in the future. Any one or more of these risk factors could have
a material adverse effect on the Company.
</DIV>
<!-- link2 "ITEM 1B. UNRESOLVED STAFF COMMENTS" -->

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><U><B>ITEM 1B.</B></u></TD>
    <TD>&nbsp;</TD>
    <TD><U><B>UNRESOLVED STAFF COMMENTS</B></U></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>
<!-- link2 "ITEM 2. PROPERTIES" -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>PROPERTIES</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company owns the following properties:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1.&nbsp;Blair Headquarters (220 Hickory Street, Warren, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2.&nbsp;Blair Distribution Center South (Route 62, Irvine, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3.&nbsp;Blair Distribution Center North (Route 62, Irvine, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4.&nbsp;Blair Warehouse Outlet (Route 62, Starbrick, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5.&nbsp;Bell Warehouse Building (Liberty Street, Warren, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6.&nbsp;Starbrick Warehouse Building (Route 62, Starbrick, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">7.&nbsp;Blair House on Blair Warehouse Outlet (Route 62, Starbrick, Pennsylvania) property
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is not currently using the Blair Warehouse Outlet building in Starbrick, Pennsylvania.
The Company intends to sell the building and believes that the sale will be completed in 2007.
The outlet building is a sheet metal warehouse design and the Company has considered the possible
impairment of the facility. A $150,000 impairment charge was taken on this property in 2005 as a
result of an independent appraisal. An additional $441,000 impairment charge was taken in 2006 to
reduce the value of this asset to its estimated fair value less costs to sell.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company leases the following properties:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1.&nbsp;Blair Retail Store (Wilmington, Delaware).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2.&nbsp;Telephone Call Center (Erie, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3.&nbsp;Telephone Call Center (Franklin, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4.&nbsp;Blair Retail Store (Grove City, Pennsylvania).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. Blair Returns Center (Erie, Pennsylvania).
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">6.&nbsp;International Trade Offices (Hong Kong, Pakistan, Singapore, India, and China).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, four of the Company&#146;s wholly-owned subsidiaries lease office space in the Wilmington,
Delaware area, which they
use as their principal offices.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;29, 2006, the Company announced that it will close its leased Returns Center in Erie,
Pennsylvania, and move all returns operations to the Blair Distribution Complex in Irvine, Pa.,
located approximately seven miles from its Warren headquarters. Technological improvements and
productivity enhancements at its Distribution Complex have made the transfer possible and will
enable the Company to process returns and redistribute merchandise to its inventory more
efficiently.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2006, the Company closed its International Trade Office in Taiwan. In January&nbsp;2007,
the Company opened a liaison office in Pakistan. This decision was based on geographical support
for the Company&#146;s direct sourcing efforts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Management believes that these properties are capable of meeting the Company&#146;s anticipated needs
for the near future.
</DIV>
<!-- link2 "ITEM 3. LEGAL PROCEEDINGS" -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 3.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>LEGAL PROCEEDINGS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;24, 2007, Mr.&nbsp;Richard P. Pogozelski, a purported stockholder of the Company, filed a
complaint styled Pogozelski v. Blair Corporation, (Civil Action No.&nbsp;2695-N) in the Court of
Chancery of the State of Delaware in New Castle County against the Company, certain members of our
board of directors and Appleseed&#146;s. The complaint alleged, among other things, that the Company&#146;s
directors have not acted reasonably and breached their fiduciary duties by failing to maximize
stockholder value with regard to the proposed acquisition by Appleseed&#146;s. Among other things, the
complaint sought class action status, a court order enjoining the Company and our directors from
proceeding with or consummating the proposed acquisition of the Company by Appleseed&#146;s,
compensatory damages, costs and expenses and the payment of attorneys&#146; and experts&#146; fees. The
Company believes that the complaint is without merit and intends to defend this lawsuit vigorously.
On March&nbsp;1, 2007, we and the other defendants filed a motion to dismiss the class action complaint
for failure to state a claim upon which relief can be granted. As of the date of this 10-K, the
court has not ruled on this motion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is not involved in any other pending legal proceedings other than legal proceedings
occurring in the ordinary course of business. Management believes that none of these legal
proceedings, individually or in the aggregate, will have a material adverse impact on the results
of operations or financial condition of the Company.
</DIV>
<!-- link2 "ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS" -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 4.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "PART II" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "ITEM 5. MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES" -->

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 5.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s common stock is traded on the American Stock Exchange (symbol: BL). The number of
record holders of the Company&#146;s common stock at December&nbsp;31, 2006, was 1,710.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Sales Price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dividends</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Sales Price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dividends</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Declared</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Declared</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company will not be paying its regular cash dividends. On January&nbsp;23, 2007, the Company
entered into an Agreement and Plan of Merger (&#147;Merger Agreement&#148;) with Appleseed&#146;s Topco, Inc., a
Delaware corporation and portfolio company of Golden Gate Capital (&#147;Appleseed&#146;s&#148;), and BLR
Acquisition Corp., a Delaware corporation (&#147;Merger Sub&#148;) pursuant to which Appleseed&#146;s will acquire
all of the outstanding shares of the Company&#146;s common stock for $42.50 per share in cash, without
interest (&#147;Merger Consideration&#148;), or approximately $173.6&nbsp;million in the aggregate. Pursuant to
the terms of the Merger Agreement, the Company is not permitted to declare, set aside or pay any
dividends on Company common stock. The parties currently anticipate, subject to receipt of
regulatory approvals and satisfaction of customary closing conditions, that the proposed
acquisition of the Company by Appleseed&#146;s will be completed in the Spring of 2007. Upon completion
of the proposed acquisition, all shares of the Company&#146;s common stock will no longer be listed on
the AMEX.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STOCK PERFORMANCE GRAPH</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following line graph compares the yearly percentage change in the cumulative total stockholder
return on the Common Stock with the cumulative total return of the AMEX Market Value Index and the
S&#038;P 1500 Retailing Index. The graph below assumes $100 invested, after the close of the American
Stock Exchange on Friday December&nbsp;31, 2001, in each of the Common Stock, AMEX Market Value Index
and S&#038;P 1500 Retailing Index and further assumes that all quarterly dividends were reinvested at
the average of the closing prices at the beginning and end of each such quarter.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 6pt">Among Blair Corporation Common Stock, AMEX Market Value Index<BR>
and S &#038; P 1500 Retailing Index **
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><IMG src="l24091al2409101.gif" alt="(PERFORMANCE GRAPH)">
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">1/1/2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD>Blair Corporation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AMEX Market Value Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">S&#038;P1500 Retailing Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Total return assumes reinvestment of dividends.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Fiscal year ending December&nbsp;31.</TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Refer to Item&nbsp;12, under the caption &#147;Equity Compensation Plan Information&#148; on page 25, for
additional information on the Company&#146;s equity compensation plans.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link2 "ITEM 6.  SELECTED FINANCIAL DATA" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6.  SELECTED FINANCIAL DATA</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2002</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">426,425,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">456,625,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">496,120,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">581,939,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">568,545,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,135,556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,245,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,094,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,238,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,975,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,097,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends
declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<!-- link2 "ITEM 7.  MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7.  MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Comparison of 2006 and 2005</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><U><B>Overview</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">During 2006, the Company continued its efforts to address declining sales and the impact of
challenging times in the retail catalog market. These efforts primarily include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Ongoing investments in information systems as they support the
order fulfillment, merchandise procurement, customer services and
the outsourced credit origination functions.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Completion of an extensive consumer and brand strategy study for
the Company&#146;s Home product line. The study identified long-term
opportunities to enhance profitability and improve shareholder
value by focusing new business initiatives on specific customer
profiles that are currently underserved.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Continued partnering with Alliance Data to enhance the private
label credit program. The Company believes this will provide
tools for recognizing and rewarding the Company&#146;s best customers,
while increasing sales and customer loyalty.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Changes to the Company&#146;s organizational structure and leadership
team. Going forward, the Company&#146;s business operations will
consist of three principal groups: Merchandising and Design,
Merchandise Procurement and Marketing Services. This new
organizational structure is intended to provide a consistent focus
on the Company&#146;s core business and reduce general and
administrative costs.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">There can be no assurance that the implementation of new initiatives such as these will improve
sales and productivity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net sales for 2006 decreased by 6.6% to $426.4&nbsp;million from $456.6&nbsp;million in 2005. The Company
reported net income for the year ended December&nbsp;31, 2006, of $216,210, or $0.06 per basic and
diluted share, compared to $31.5&nbsp;million, or $4.79 per basic share and $4.71 per diluted share, for
2005. The per share results for the years ended December&nbsp;31, 2006 and 2005, reflect the reduction
of weighted-average shares outstanding resulting from the Company&#146;s tender offer for the repurchase
of 4.4&nbsp;million outstanding shares on August&nbsp;16, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The decrease in net sales for the year ended December&nbsp;31, 2006 is a result of several factors.
Changes to the Company&#146;s credit program resulted in a loss of 17% of previous year credit buyers,
who historically were more than twice as productive as cash or third party credit buyers. This resulted in lower sales and unproductive circulation with
reduced advertising efficiency. In 2005, the Company sold its credit portfolio to a third party
provider. Net income and earnings per share results for the year ended December&nbsp;31, 2006 reflect
the impact of the transition from the Company managing its proprietary credit program to having a
third party administer Blair Credit. The Company continues to work closely with its credit partner
to develop and define marketing initiatives that will provide additional customer benefits and
improve Blair Credit usage when buying its products. Throughout the year, the Company continued to
see improved acceptance for Blair Credit. The Company anticipates a return over time of Blair
Credit activity to a level approaching that of the proprietary credit program. In addition,
selling prices eroded during the year negatively impacting net sales. Management believes that
competitive price point repositioning and increased offerings of lower priced tops and bottoms did
not generate sufficient lift in units and orders to offset the drop in selling prices and average
order value. These offerings lacked the offsetting balance of more fashionable categories such as
suits, dresses and separates, which usually carry higher price points and margins. The Company has
recognized this and is in the process of adjusting the imbalance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Excluding the net results generated by the November&nbsp;2005 sale of the credit portfolio, net income
for the year ended December&nbsp;31, 2005 would have been $7.5&nbsp;million, or $1.14 per basic and $1.12 per
diluted share, compared to the reported net income of $31.5&nbsp;million or $4.79 per basic share and
$4.71 per diluted share.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Also adversely affecting results for 2006, were the inflationary impact of the January&nbsp;2006 postage
rate increase, increased catalog circulation, increased catalog page counts and higher customer
acquisition costs. These variables reduced advertising efficiency, measured as a percent of net
sales, from 26.1% to 29.6%. This decline in efficiency equates to an adverse impact on pre-tax
earnings of $14.9&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">While the Company continued to realize favorable improvements in the product procurement area,
these benefits were offset by increases in outbound freight charges. Cost of goods sold as a
percentage of net sales for 2006 was 44.8%, a slight increase from 44.7% for 2005. The
improvements in product procurement are the results of increased direct sourcing by the Company,
continued partnering with all vendors and lower inventory liquidation costs. The January&nbsp;2006
postage rate increase and the loss of a key freight consolidator, who filed for bankruptcy, were
the primary factors contributing to the increase in outbound freight charges.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Serving to reduce the prior year negative impact on earnings associated with the sale of the credit
portfolio and advertising inefficiency was a pre-tax $18.7&nbsp;million reduction in general and
administrative expenses. Of the $18.7&nbsp;million reduction, $6.3&nbsp;million pertains to the elimination
of prior year costs associated with the Company&#146;s proprietary credit portfolio. In addition, $2.4
million relates to the elimination of prior year costs associated with the August&nbsp;2005 tender
offer. The remaining $10&nbsp;million primarily consists of the lack of current year charges for
several compensation plans that are based on reported results of $6.5&nbsp;million, reductions in
healthcare and workers compensation claims experience of $1.9&nbsp;million, and lower wages and related
benefits associated with reductions in workforce that took place in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Results of Operation</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net income for 2006 decreased 99.3% to $216,210 or $0.06 per basic and diluted earnings per share,
compared to $31.5&nbsp;million, or $4.79 basic earnings per share and $4.71 diluted earnings per share,
in 2005. The significant decrease in earnings is primarily related to the lack of the one-time
pre-tax gain on the sale of the Company&#146;s proprietary credit program of $27.7&nbsp;million recorded in
2005 and advertising inefficiency.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net sales for 2006 decreased $30.2&nbsp;million to $426.4&nbsp;million or 6.6% less than net sales for 2005.
The decrease in net sales for 2006 is primarily attributable to reductions in average selling
prices as the Company experienced higher unit sales, but at lower price points and margins.
Management continues to monitor its merchandise and pricing strategy to maximize results. In
addition, 2005 net sales included $1.9&nbsp;million from the Crossing Pointe catalog and the Allegheny
Trail business which were discontinued in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table illustrates net sales and the percent of net sales that each product line
represents.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Product Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Womenswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">283.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">66.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">293.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">310.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Menswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Home</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Crossing Pointe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allegheny Trail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">426.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">456.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Gross sales revenue generated per advertising dollar decreased approximately 11% for 2006 compared
to 2005. The primary reasons for the reduction in advertising efficiency include the January&nbsp;2006
postage rate increase, increased catalog page count and circulation, reduced Blair credit buyer
productivity and reduced response to the Company&#146;s traditional letter-mailings channel of its
direct marketing programs. Although the total number of orders shipped increased approximately 2%,
the average order size decreased approximately 5% for 2006 as compared to 2005. In addition to the
change in sales mix, the Company has reduced average selling prices in key product areas as part of
a price point repositioning strategy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The provision for returned merchandise of $61.3&nbsp;million as a percentage of gross sales increased 65
basis points or $3.3&nbsp;million in 2006 as compared to 2005. As the Company included more commodities
(i.e., Tops and Bottoms) in its 2006 product
offerings in support of its lower pricing strategy, the product mix in catalogs included more of
these items with higher return rates.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Other revenue decreased approximately $29.2&nbsp;million or 81% to $6.8&nbsp;million in 2006 as compared to
2005. The decrease was directly related to the elimination of finance charge revenues associated
with the Company&#146;s proprietary credit program. Subsequent to the sale of the Company&#146;s proprietary
credit program on November&nbsp;4, 2005, and prior to the third quarter of 2006, the Company no longer
realized finance charge revenues on time payment accounts. As a result of Amendment Number 2 to
the ADS Credit Program Agreement, the Company receives 50% percent of finance charges and late
payment fees assessed on outstanding balances related to Full Recourse Account sales. This amount
was $184,000 for the year ended December&nbsp;31, 2006
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold decreased $13.3&nbsp;million or 6.5% to $190.8&nbsp;million in 2006 compared to 2005. As
a percentage of net sales, cost of goods sold was 44.8% in 2006 compared to 44.7% in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s gross profit, net sales less cost of goods sold, may not be comparable to that of
other direct marketers, as some direct marketers include all costs related to their distribution
network in cost of goods sold and others, such as Blair Corporation, may exclude a portion of these
costs from cost of goods sold, including them in a line item such as general and administrative
expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Two opposing factors contributed to cost of goods sold as percentage of net sales being flat in
2006 compared to 2005. First, increased direct sourcing significantly lowered merchandise
acquisition costs. The Company plans to continue to expand internal product development and direct
sourcing as part of its strategic initiatives to further reduce cost of goods and increase
profitability. The Company&#146;s direct sourcing offices, its only foreign operations, directly
sourced more than 40% of the Company&#146;s merchandise from foreign suppliers in 2006 as compared to
32% in 2005. The existence of these offices serves to lower the Company&#146;s cost of acquiring
merchandise. Other factors that contributed to improvement in the percentage include internal
efforts to lower overall shipping costs and initiatives to lower overall inventory liquidation
costs. Second, the January&nbsp;2006 postage increase and the loss of a freight consolidator, who filed
bankruptcy, served to offset the improvement in the cost of merchandise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Advertising expense in 2006 increased $6.8&nbsp;million or 5.7% to $126.1&nbsp;million. The January&nbsp;2006
postage rate increase, increased catalog circulation, increased catalog page counts and higher
customer acquisition costs contributed to the increase from the prior year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The total number of catalog mailings released in 2006 was 1.8&nbsp;million or 1% greater than those
released in 2005. The increase in catalog circulation reflects the Company&#146;s transition from
traditional letter style mailings to catalogs and increased customer acquisition efforts through an
increase in prospect circulation. The total number of prospect catalog mailings increased 306,000
or 1% for year ended December&nbsp;31, 2006 as compared to the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The total number of letter mailings and related item-focused catalogs released in 2006 decreased by
5.9&nbsp;million or 16.8% from those released in 2005. In the third quarter of 2006, the Company
replaced traditional letter mailings with a newly designed, item-focused catalog featuring a
collection of best selling products. The new catalog&#146;s first mailing occurred in July&nbsp;2006. The
total circulation for this new catalog released in 2006 was 14.5&nbsp;million. This circulation
combined with the circulation of traditional letter-style mailings in 2006 decreased 5.9&nbsp;million or
16.8% compared to the circulation of the traditional letter-style mailing in 2005. The reduction
in circulation was in recognition of this new advertising vehicle and the Company&#146;s continued
migration to conventional catalogs. As Management evaluated the performance of this new catalog
format, it concluded that the incremental sales generated from the catalog were not sufficient to
warrant continued circulation of this vehicle. As a result, this catalog format will not be used
in 2007. All prepaid catalog production costs for this format that were incurred in 2006 for 2007
circulation of approximately $890,000 were written off and charged to advertising expense in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Total circulation of the co-op and media advertising programs increased by 49.7&nbsp;million pieces or
4.6% in 2006 as compared to 2005 as part of the Company&#146;s expanded customer acquisition efforts in
2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The
Company maintains one e-commerce site, <u>www.blair.com</u>. For the year ended December&nbsp;31, 2006,
the Company generated $93.7&nbsp;million in e-commerce net sales as compared to $86.1&nbsp;million for the
year ended December&nbsp;31, 2005, an 8.8% increase. The year-over-year increase reflects continued
customer interest in migrating to the Company&#146;s website and the impact of internal initiatives
designed to encourage customers to purchase online. Improved site search and enhanced navigation
capabilities were also implemented during 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">General and administrative expense decreased by $18.7&nbsp;million or 13.8% in 2006 as compared to 2005.
As a percent of net sales, general and administrative expenses were 27.4% for 2006 compared to
29.7% for 2005. Of the $18.7&nbsp;million reduction, $6.3&nbsp;million pertains to the elimination of prior
year costs associated with the Company&#146;s proprietary credit portfolio. In addition, $2.4&nbsp;million
relates to the elimination of prior year costs associated with the August&nbsp;2005 tender offer. The
remaining $10&nbsp;million primarily consists of $6.5&nbsp;million attributable to the lack of current year
charges for several compensation plans that are based on reported results, reductions in healthcare
and workers compensation claims experience of $1.9&nbsp;million, and lower wages and related benefits
associated with reductions in workforce that took place in 2006.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The reduction in healthcare claims
is the result of a reduction in large claims incurred from December&nbsp;31, 2005 to December&nbsp;31, 2006.
The reduction in workers compensation claims experience is the result of a favorable adjustment
for prior year claims outstanding from December&nbsp;31, 2005 to December&nbsp;31, 2006. Serving to offset
the significant reduction in general and administrative expenses were severance costs of $4.6
million, an increase of $2.0&nbsp;million over 2005 severance costs, for former employees who have
separated from the Company. The severance costs relate to the Company&#146;s ongoing evaluation of its
business practices in light of changes in the marketplace and its business model.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">After excluding the unusual expenses associated with severance and the prior year costs associated
with the August&nbsp;2005 tender offer, general and administrative expenses as a percent of net sales
were 26.4% for the year ended December&nbsp;31, 2006 compared to 28.7% for the year ended December&nbsp;31,
2005. This improvement in efficiency equates to a favorable impact on pre-tax earnings of $9.8
million. Reduced variable employee costs associated with the sale of the Company&#146;s proprietary
credit portfolio in November&nbsp;2005 and lower sales volume served to lower general and administrative
expense by approximately $4.5&nbsp;million. However, reduced variable employee costs associated with
these factors were more than offset by increases in customer service calls and talk time per call
primarily associated with helping customers make the transition to the third party credit provider.
In addition, the Company has experienced an increase in telephone orders as a percent of total
orders placed. Although they are more cost effective than telephone orders, mail orders have
become a smaller portion of total order mix (phone, mail and web) due to the declining sales volume
associated with the Company&#146;s traditional letter-style mailings. Orders in response to the
traditional letter-style mailings were primarily placed via the mail order channel. The
remaining improvement in efficiency is primarily related to lower earnings related benefits,
improved healthcare and workers compensation experience, and lower wages and benefits associated
with reductions in workforce that took place in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The
provision for doubtful accounts decreased $11&nbsp;million from $11.7&nbsp;million to $687,000 or 94.1%
in 2006 compared to 2005. The 2005 amount represents ten months of operation as the Company&#146;s
proprietary credit portfolio was sold to World Financial Capital Bank, an industrial bank
subsidiary of Alliance Data Systems Corporation on November&nbsp;4, 2005. Subsequent to the sale of the
Company&#146;s credit portfolio in November&nbsp;2005, and prior to the third quarter of 2006, the Company
did not recognize provisions for doubtful accounts. In the third quarter of 2006, the Company and
Alliance Data Systems (ADS)&nbsp;executed Amendment Number 2 to the ADS Credit Program Agreement whereby
credit is granted to customers with credit scores below the originally established FICO level.
Customers granted credit in this newly established FICO scoring range are deemed &#147;Full Recourse
Accounts&#148;. In accordance with the ADS agreement, the Company assumes the credit risk associated
with the Full Recourse Sales. Gross sales and finance charge revenues associated with this
program were $3.2&nbsp;million for the year ended December&nbsp;31, 2006. The provision for doubtful
accounts recognized on these sales during 2006 was $544,000. The credit risk associated with these
accounts is greater due to their lower FICO scores. Management believes the combination of the
profitability on the merchandise sales to these customers and the performance history of accounts
in these FICO scoring ranges when the Company serviced its own proprietary credit program makes the
offer of credit to this group beneficial. The recourse program is an annual program that either
party may discontinue with 60&nbsp;days notice.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net interest (income)&nbsp;expense, improved by $1.9&nbsp;million in 2006 compared to 2005 and resulted in
net interest income of ($1.3) million. The Company had no borrowings outstanding in 2006 which
resulted in no interest expense other than interest related to capital leases. Interest income was
comparable to the prior year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net other expense increased approximately $431,000 to $478,000 in 2006 as compared to 2005. The
primary reason for the increase was a $441,000 impairment charge taken in 2006 on the Company&#146;s
warehouse outlet building located in Starbrick, Pennsylvania. The Company intends to sell the
building and believes that the sale will be completed in 2007. The outlet building is a sheet
metal warehouse design. A $150,000 impairment charge was taken on this property in 2005 as a
result of an independent appraisal. The additional $441,000 impairment charge was taken in 2006 to
reduce the value of this asset to its estimated fair value less costs to sell.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Income tax (benefit)&nbsp;provision as a percentage of income before income taxes were (148.1%) in 2006
and 35.8% in 2005. The effective tax rate in 2006 has been impacted by the benefit of tax-exempt
interest ($176,000 or 39.0%), the state tax benefit net of federal benefit ($157,000 or 34.4%), the
benefit from the change in federal rate on deferred taxes from 35% to 34% ($49,000 or 10.7%) and
the benefit of 2005 foreign tax credits recorded in 2006 ($116,000 or 25.7%). The statutory
federal income tax rate was 35% in 2006 and 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Comparison of 2005 and 2004</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><U><B>Overview</B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">During 2005, the Company made significant progress towards its strategy of focusing on its core
customers in an effort to improve profitability and enhance shareholder value.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net sales for 2005 decreased by 8.0% to $456.6&nbsp;million from $496.1&nbsp;million in 2004. Net income for
2005 was $31.5&nbsp;million, $4.79 per basic share and $4.71 per diluted share, compared to $14.9
million, or $1.83 per basic share and $1.80 per diluted share, for 2004. Two major events took
place in 2005 that account for the significant increase in net income and earnings per share from
2004 to 2005. These events, a tender offer and the sale of the Company&#146;s credit portfolio,
resulted in a significant increase in the Company&#146;s return on invested capital.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2005, the Company completed a tender offer to purchase 4,400,000 shares, or approximately
53% of its outstanding common stock, at $42 per share and aggregate price of $184.8&nbsp;million. The
total purchase price of the stock of $184.8&nbsp;million, plus related expenses of $4.2&nbsp;million, was
recorded as treasury stock effective August&nbsp;16, 2005. The significant reduction in weighted
average shares outstanding has increased the ownership interest of the remaining shareholders and
earnings per share. Without the reduction in outstanding shares, earnings per basic and diluted
share, for 2005 were $3.83 and $3.78, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2005, the Company announced the completion of the sale of its credit portfolio to World
Financial Capital Bank, an industrial bank subsidiary of Alliance Data Systems Corporation. The
agreement between the two companies was announced on April&nbsp;27, 2005, with the closing of the
transaction occurring on November&nbsp;4, 2005. Gross sale proceeds were $166.2&nbsp;million, of which the
Company used $143&nbsp;million to repay debt primarily incurred in association with its August&nbsp;2005
tender offer of 4.4&nbsp;million shares. The net result of this transaction was a one-time gain of
$27.7&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net income and earnings per share results for the twelve months ended December&nbsp;31, 2005, were
favorably impacted by the one-time gain of $27.7&nbsp;million from the sale of the Company&#146;s credit
portfolio. Further, net income was impacted by expenses of $4.9&nbsp;million, or $0.48 per basic share
and $0.47 per diluted share, based on weighted basic and diluted outstanding shares of 6,579,876
and 6,699,406, respectively, associated with the Company&#146;s tender offer and severance costs.
Expenses associated with the tender offer include loan origination fees and interest expense
related to a credit facility to fund the tender offer, and a compensation expenditure resulting
from the Company&#146;s decision to repurchase stock acquired by employees under its stock option award
program. Expenses also included severance costs for former employees who have separated from the
company. Without the favorable impact of the aforementioned gain and the expenses noted in this
paragraph, net income for 2005 was $16.9&nbsp;million or $2.57 per basic share and $2.52 per diluted
share as compared to $14.9&nbsp;million or $1.83 per basic share and $1.80 per diluted share for 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The financial performance of recurring operations was mixed in 2005. Net sales did not meet
internal expectations. Lower response rates than was anticipated to catalog and especially letter
mailings were a major contributing factor. Management believes the lower sales volume is
attributable to several factors, including tightening of credit granting parameters for the first
ten months of the year, customers&#146; acceptance of the fashion colors and styles that were featured
during each mailing season and reduced customer file counts from reduced prospecting in 2004.
Management also believes that the devastation and destruction caused by hurricanes Katrina and
Rita, which hit the Gulf region within a few weeks of one another in August and September of 2005,
contributed to the decline in the Company&#146;s net sales during the last six months of 2005. In
addition, it is management&#146;s belief that the widespread economic effects of the sharp increase in
gasoline prices during the third quarter 2005 may have had a negative effect on customer demand in
the northern region of the country, which accounts for approximately 40% of the Company&#146;s total
demand.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Management continually evaluates its mailing contact strategy, including circulation plans, page
counts and catalog density. There can be no assurance that the implementation of new initiatives
in this area will improve sales productivity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Offsetting the decline in profitability resulting from the net sales reduction were significant
improvements in both margins and bad debt experience. Margins improved significantly due to
deflationary experience on merchandise purchases, fewer promotions and less inventory liquidation
costs. In the fourth quarter of 2004, the Company raised the acceptable FICO (Beacon) credit
score that a customer is required to have in order to be eligible for Blair credit. This action
favorably impacted delinquency rates and related bad debt experience for the ten months of 2005
prior to the sale of the Company&#146;s proprietary credit portfolio to World Financial Capital Bank.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Finally, in furtherance of the Company&#146;s decision to focus on core operations, on January&nbsp;25, 2005,
the Company decided to phase out its Allegheny Trail wholesale business. This process was
substantially completed by April&nbsp;30, 2005. The Company has evaluated the impact of phasing out the
Allegheny Trail business on all assets associated with this operation. All appropriate reserves
have been recorded. This decision did not have a significant negative effect on 2005
profitability. The Company&#146;s intention is to more fully focus new business development efforts on
the core Blair brand and its proven appeal to significant market segments. The decision to focus
on core operations is based in part on the historical success of the Blair brand and an extensive
consumer and brand strategy study undertaken by the Company in 2004 as part of its efforts to
enhance profitability and shareholder value. Similar studies are planned in 2006 for the Menswear
and Home product lines.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Results of Operation</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net income for 2005 increased 112.2% to $31.5&nbsp;million or $4.79 basic earnings per share and $4.71
diluted earnings per share, compared to $14.9&nbsp;million, or $1.83 basic earnings per share and $1.80
diluted earnings per share, in 2004.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The
significant increase in earnings is primarily related to
the one-time gain on the sale of the Company&#146;s proprietary credit program of $27.7&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net sales for 2005 decreased $39.5&nbsp;million to $456.6&nbsp;million or 8.0% less than net sales for 2004.
In addition to the internal and external factors discussed in the overview, in May&nbsp;2004, the
Company announced that it would be discontinuing its Crossing Pointe catalog title at the end of
2004 and would be more fully focusing new business development efforts on the core Blair brand and
its proven appeal to significant market segments. The elimination of the Crossing Pointe catalog
title accounted for approximately $20&nbsp;million of the net sales reduction. Further, on January&nbsp;25,
2005, the Company decided to phase out its Allegheny Trail wholesale business. This process was
substantially completed by April&nbsp;30, 2005. The elimination of the Allegheny Trail wholesale
business accounted for approximately $837,000 of the net sales reduction.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The provision for returned merchandise of $61.4&nbsp;million as a percentage of gross sales decreased
66 basis points or $3.5&nbsp;million in 2005 as compared to 2004. Management attributes this favorable
change to improved product quality and fit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Other revenue decreased approximately $8.6&nbsp;million or 19.3% to $36.1&nbsp;million in 2005 as compared
to 2004. The decrease was primarily due to the elimination of finance charge revenues associated
with the Company&#146;s proprietary credit program. Subsequent to the sale of the Company&#146;s
proprietary credit program on November&nbsp;4, 2005, the Company no longer realizes finance charge
revenues on time payment accounts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold decreased $30.9&nbsp;million or 13.1% to $204.1&nbsp;million in 2005 compared to 2004. As
a percentage of net sales, cost of goods sold was 44.7% in 2005 compared to 47.4% in 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s gross profit, net sales less cost of goods sold, may not be comparable to that of
other direct marketers, as some direct marketers include all costs related to their distribution
network in cost of goods sold and others, such as Blair Corporation, may exclude a portion of these
costs from cost of goods sold, including them in a line item such as general and administrative
expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The improvement in cost of goods sold as a percentage of net sales reflects an increase in direct
sourcing, which significantly lowered merchandise acquisition costs. The Company plans to continue
to expand internal product development and direct sourcing as part of its strategic initiatives to
further reduce cost of goods and increase profitability. The Company&#146;s direct sourcing offices,
the Company&#146;s only foreign operations, directly sourced more than 32% of the Company&#146;s merchandise
from foreign suppliers in 2005 as compared to 28% in 2004. The existence of these offices serves
to lower the Company&#146;s cost of acquiring merchandise. Other factors that contributed to
improvement in the above percentage include a reduction in customer returns reflecting ongoing
programs to improve merchandise quality, internal efforts to lower overall shipping costs and
initiatives to lower overall inventory liquidation costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Advertising expense in 2005 decreased $9.0&nbsp;million or 7.0% to $119.3&nbsp;million. The Company&#146;s more
targeted mailings led to strategic adjustments to catalog and letter mailings, which resulted in
slight increases in circulation. A significant reduction in Crossing Pointe catalog mailings, as
a result of the Company&#146;s decision to discontinue circulation of its 4&nbsp;year old Crossing Pointe
catalog title at the end of 2004, was offset by increases in catalog mailings to the Company&#146;s
core customers. The reduction in advertising expenses is the result of multiple initiatives
undertaken by the Company in 2005 to reduce this cost. Increased use of the Company&#146;s photo
studio, implementing an in-house pre-press, and experiencing increased postal discounts that
resulted from co-mailing of catalogs all contributed to the reduction in selling expenses. In
addition to these factors, the Company&#146;s long-term print contract with its primary printing vendor
delivered significant savings in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The total number of catalog mailings released in 2005 was 711,000 or .4% greater than those
released in 2004. The total number of letter mailings released in 2005 was 1.6&nbsp;million or 4.7%
greater than those released in 2004. The Company&#146;s more targeted mailing strategy led to an
increase in customer catalog mailings of 9.2&nbsp;million or 6.5% and a reduction in prospect mailings
of 8.4&nbsp;million or 19.0%. The reduced prospect catalog circulation was attributable to reduced
Crossing Pointe circulation in 2005 compared to 2004. Total circulation of the co-op and media
advertising programs increased by 267.5&nbsp;million pieces or 32.4% in 2005 as compared to 2004. The
co-op and media advertising programs are primary resources for acquiring new customers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company launched its e-commerce sites in the third quarter of 2000. In 2005, the Company
generated $94.9&nbsp;million in e-commerce sales demand as compared to $91.7&nbsp;million in 2004. This
increase in the e-commerce channel demand was achieved despite the discontinued Crossing Pointe
catalog generating $8.3&nbsp;million less online sales demand in 2005 compared to 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">General and administrative expense increased by $4.2&nbsp;million or 3.2% in 2005 as compared to 2004.
As a percent of net sales, general and administrative expenses were 29.7% for 2005 compared to
26.5% for 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The 2005 general and administrative expenses include approximately $2.0&nbsp;million of costs associated
with financing the Company&#146;s tender offer and the sale of the Company&#146;s proprietary credit
portfolio, which closed on November&nbsp;4, 2005.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Expenses associated with these events include the
amortization of loan origination fees of $1.6&nbsp;million, and a compensation expenditure of $427,000
resulting from the Company&#146;s decision to repurchase stock acquired by employees under its stock
option award program as part of the tender offer. Expenses also included severance costs of $2.6
million for former employees who have separated from the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">After excluding these additional expenses referred to in the previous paragraph, general and
administrative expenses as a percent of net sales were 28.7% for the year ended December&nbsp;31, 2005
compared to 26.5% for the year ended December&nbsp;31, 2004. Reduced variable employee costs associated
with lower sales volume served to lower general and administrative expense by $2.4&nbsp;million and were
more than offset by increased employee costs. Increased employee costs resulted from unfavorable
health and workers compensation claims experience of $2.1&nbsp;million and increased employee benefits
associated with incentives and profit sharing related to improved earnings of $2.6&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The provision for doubtful accounts decreased $11.0&nbsp;million from $22.7&nbsp;million to $11.7&nbsp;million or
48.5% in 2005 compared to 2004. The 2005 amount represents ten months of operation as the
Company&#146;s proprietary credit portfolio was sold to World Financial Capital Bank, an industrial
bank subsidiary of Alliance Data Systems Corporation on November&nbsp;4, 2005. In addition to having
two less months of operations, the decrease is attributable to an 18.6% decrease in credit sales.
The reduction in credit sales primarily relates to a change in credit granting philosophy and the
elimination of the Crossing Pointe catalog title, which realized sales primarily via proprietary
credit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The estimated bad debt rate used in 2005 was 129 basis points lower than the bad debt rate used in
2004. The estimated bad debt rate decreased primarily due to reduced credit offers to prospects
as well as improved delinquency and charge-off experience. Prospect credit offers traditionally
result in higher bad debts. In the fourth quarter of 2004, the Company raised the acceptable FICO
(Beacon) credit score that a customer is required to have in order to be eligible for Blair
credit. This action positively impacted delinquency rates and related bad debt experience in
2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The net of interest expense and (income)&nbsp;increased by $691,223 in 2005 compared to 2004 and
resulted in net interest expense of $568,466. Interest expense primarily reflects the impact of
$85&nbsp;million of borrowings under the receivables securitization and $58&nbsp;million of borrowings under
the revolving credit facility incurred to finance the tender offer. Furthermore, interest rates
were higher in 2005 than in 2004. Interest income increased due to higher average cash balances
and increased interest rates. At December&nbsp;31, 2005, inventories were 1.1% lower. Further, gross
customer accounts receivable have been eliminated as a result of the sale of the Company&#146;s
proprietary credit program in November&nbsp;2005. Average borrowings were up considerably in 2005
compared to 2004 as a result of the borrowings associated with the tender offer. The interest rate
increases are due to the facilities&#146; varying interest rates that fluctuated based on certain LIBOR
indices, which tend to follow the recent increases in Federal Reserve rates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Other expense, net, decreased $174,866 or 78.9% to $46,833 in 2005 as compared to 2004. In 2004,
the Company charged off approximately $300,000 of construction in progress related to its decision
to phase out the Allegheny Trail business by April&nbsp;30, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The gain on sale of the receivables portfolio was generated as a result of the Company&#146;s decision
to sell its proprietary credit portfolio at a premium to World Financial Capital Bank, an
industrial bank subsidiary of Alliance Data Systems Corporation. The agreement between the two
companies was announced on April&nbsp;27, 2005, with the closing of the transaction occurring on
November&nbsp;4, 2005. Gross sale proceeds were $166.2&nbsp;million, of which the Company used $143&nbsp;million
to repay debt primarily
incurred in association with its August&nbsp;2005 tender offer of 4.4&nbsp;million shares. The favorable
components of the gain include the premium received for the portfolio and the reversal of the
allowance for doubtful accounts on the receivables sold. The gain was reduced by professional fees
incurred to close the transaction and severance costs due to those employees who were terminated as
part of the transaction.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Income taxes as a percentage of income before income taxes were 35.8% in 2005 and 36.4% in 2004.
The statutory federal income tax rate of 35% was impacted in 2005 by a change in estimated foreign
tax credits and a lower effective state income tax rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><U><B>Liquidity and Sources of Capital</B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Effective September&nbsp;30, 2006 the Company entered into a Second Amendment to its $75&nbsp;million
credit facility. The Second Amendment modified certain provisions in the credit facility which
included the fixed charge coverage ratio and borrowing base limitations on the usage of the
facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has access to a $75&nbsp;million credit facility, subject to an asset based borrowing
formula, pursuant to the terms of an amended and restated credit agreement dated as of July&nbsp;15,
2005 by, between and amongst the Company, and PNC Capital Markets, Inc. as lead arranger and PNC
Bank, N.A. and three other lending institutions.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The
amended and restated credit agreement provides
a senior secured first lien revolving credit facility not to exceed $75&nbsp;million, which matures in
July&nbsp;2010. Upon the occurrence of an Event of Default (as such term is defined in the amended and
restated credit agreement), PNC and/or the other lending institutions may declare a default of the
credit agreement and accelerate the loan pursuant to the terms of the credit agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The collateral for the revolving credit facility consists of certain of the Company&#146;s and its
subsidiaries&#146; assets, including, but not limited to, inventory, equipment, furniture, general
intangibles, intellectual property, fixtures, certain real property and improvements, the common
stock of the Company&#146;s domestic subsidiaries, as well as certain pledges on and against the assets
of the Company&#146;s direct and indirect foreign subsidiaries. At the Company&#146;s option, any loan under
the revolving credit facility shall bear interest at the Euro-Rate (calculated with reference to a
LIBOR-based formula in accordance with the amended and restated credit agreement) or a Base Rate
(as that term is defined in the amended and restated credit agreement), plus a margin, such margin
to be calculated in accordance with a performance based pricing grid. The Company is also required
to pay a commitment fee and reasonable out-of-pocket expenses pursuant to the amended and restated
credit agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had no borrowings outstanding under its $75&nbsp;million credit
facility. The Company had letters of credit totaling $2.7&nbsp;million outstanding, which reduces the
amount of borrowings available under the credit facility. Outstanding letters of credit totaled
$19.6&nbsp;million at December&nbsp;31, 2005. Letters of credit are comprised mainly of two categories. One
such category is comprised of commercial letters of credit used for the purpose of purchasing goods
from non-U.S. suppliers. The other category is comprised of performance guarantees for insurance
bonding purposes. All letters of credit have a term of one year or less.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, the Company was in compliance with all debt covenants associated with the
Second Amendment to its credit facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Interest paid during 2006, 2005 and 2004 was approximately $0, $1,903,000 and $339,000,
respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company had no borrowings outstanding during 2006. The higher level of interest in 2005 is
primarily due to outstanding borrowings during the third and fourth quarters as the Company
partially funded its August&nbsp;2005 stock tender offer with debt. The debt was repaid with the
proceeds from the sale of the Company&#146;s credit portfolio in November&nbsp;2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table and narrative highlight significant changes in cash and cash equivalents for
the years ended December&nbsp;31, 2006 and 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Twelve Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #ffffff">December 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(decrease)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(202,887</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,824,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(49,027,544</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,220,240</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,836,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,056,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8,678,136</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,192,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,514,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70,563</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">140,908</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash
equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,171,826</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,539,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(18,710,960</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net cash used in operating activities was $202,887 for the year ended December&nbsp;31, 2006, a $49
million decrease over the same period in fiscal 2005. This decrease is primarily attributable to
reduced earnings of $31.3&nbsp;million and net unfavorable changes in several components of working
capital. The primary factors are unfavorable changes to accounts payable of $15.6&nbsp;million and
accrued expenses of $16.9&nbsp;million offset by favorable changes in inventories of $14.2&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net cash used in investing activities decreased by $166.1&nbsp;million. In 2005, the proceeds from the
sale of the Company&#146;s proprietary credit portfolio created the one-time favorable impact to cash.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 $8.5&nbsp;million in 2006, compared to $8.0&nbsp;million in 2005. Most of the $8.5&nbsp;million
of capital expenditures in 2006 were attributable to improving the Company&#146;s information services
capabilities as they support the order fulfillment, merchandise procurement, customer services and
the outsourced credit origination functions.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Capital expenditures are projected to be approximately $4&nbsp;million in 2007. Approximately $3.7
million of the $4&nbsp;million is attributable to improving our information services capabilities as
they support the order taking and order fulfillment functions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The $196.5&nbsp;million increase in net cash used in financing activities for the twelve months ended
December&nbsp;31, 2006 over the comparable period in 2005 is primarily attributable to the cost and
related expenses of $189&nbsp;million for the purchase of 4.4&nbsp;million outstanding shares of the
Company&#146;s common stock in connection with a tender offer that was completed on August&nbsp;16, 2005.
The balance of the change pertains to the repayment of the $15&nbsp;million borrowing under a Receivable
Purchase Agreement. This agreement was terminated in November&nbsp;2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Cash funding requirements in 2005 were primarily for capital expenditures, purchases of common
stock for treasury and shareholder dividend payments.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">It is anticipated that future cash needs beyond 2006 will be financed by cash flow from operations,
available cash on hand, existing borrowing arrangements and, if needed, other financing
arrangements that may be available to the Company. However, the Company&#146;s current projection of
future cash requirements may be affected by numerous factors, including changes in sales volume,
operating cost fluctuations and revised capital spending activities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company operates as one business segment consisting of the Womenswear, Menswear, Home and
Stores product lines. An operating segment is identified as a component of an enterprise for which
separate financial information is available for evaluation by the chief decision-maker in deciding
on how to allocate resources and assess performance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Merchandise inventory turnover was 2.2 times at December&nbsp;31, 2006, 2.4 at December&nbsp;31, 2005, and
2.6 at December&nbsp;31, 2004. Merchandise inventory as of December&nbsp;31, 2006, decreased 13.9% from
December&nbsp;31, 2005, and decreased 9.3% from December&nbsp;31, 2004. Merchandise inventory levels were
generally lower from December&nbsp;31, 2005 through December&nbsp;31, 2006, due to strategic efforts to
maintain optimum inventory levels that achieved desired customer service levels and reduced
inventory liquidation costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The merchandise inventory levels are net of the Company&#146;s reserve for inventory obsolescence. The
reserve totaled $1&nbsp;million at December&nbsp;31, 2006, $1.5&nbsp;million at December&nbsp;31, 2005 and $3.6&nbsp;million
at December&nbsp;31, 2004. Inventory write-offs and write-downs (reductions to below cost) charged
against the reserve for obsolescence were $771,000 in 2006, $2.6&nbsp;million in 2005 and $6.3&nbsp;million
in 2004. In 2006, the Company continued its focus on reducing inventory liquidation costs. The
combination of enhanced Internet clearance activity and improved merchandise purchasing strategies
resulted in less liquidation inventory on hand and greater recovery rates above cost for the
inventory that required liquidation. In addition, the Company&#146;s decisions to discontinue its
Crossing Pointe catalog title in late 2004 and to phase out the Allegheny Trail wholesale business
by April&nbsp;30, 2005, resulted in writedowns of approximately $1.9&nbsp;million. These writedowns were
primarily provided for in the December&nbsp;31, 2004, inventory obsolescence reserve. Due to the
nonrecurring nature of the Crossing Pointe and Allegheny Trail write-downs and improved recovery
rates above cost on liquidated merchandise, the obsolescence reserve at December&nbsp;31, 2006, is
appropriately lower than the reserve at December&nbsp;31, 2005 and December&nbsp;31, 2004. Management
believes that the amount of the reserve for obsolescence is appropriate. A monthly provision for
obsolete inventory is added to the reserve and expensed to cost of goods sold, based on the levels
of merchandise inventory and merchandise purchases.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Off-Balance Sheet Arrangements</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has no off-balance sheet arrangements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Contractual Obligations</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has contractual obligations consisting of capital leases for digital camera
equipment, operating leases for buildings, data processing, office and telephone equipment,
revolving credit facility and receivables purchase agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><u>Payments Due By Period</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Contractual Obligations</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008 - 2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2010 - 2012</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Thereafter</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital Lease
Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,237,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,582,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,213,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unconditional
Purchase
Obligations &#151;
Outstanding Letters
of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,724,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,724,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving Credit
Facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,978,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,318,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,218,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">441,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has commercial commitments consisting of a revolving credit facility of $75&nbsp;million.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Amount of Commitment<BR>
<u>Expiration Per Period</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Other Commercial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total Amounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Less than</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 - 3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">4 - 5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After 5</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Commitments</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Committed</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">1 year</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">years</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">years</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">years</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving Credit
Facility &#151;
effective 7/15/05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">If an event of default should occur, payments and/or maturity of the lines of credit could be
accelerated. The Company is not in default and does not expect to be in default of any of the
provisions of the credit facility. (See &#147;Liquidity and Sources of Capital&#148; for details of the
Company&#146;s credit facility).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Critical Accounting Policies </B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Preparation of the Company&#146;s financial statements requires the application of a number of
accounting policies, which are described in &#147;Note 1. Significant Accounting Policies&#148; in the &#147;Notes
to Consolidated Financial Statements.&#148; The critical accounting policies, which if interpreted
differently under different conditions or circumstances could result in material changes to the
reported results; deal with properly valuing accounts receivable and inventory. Properly valuing
accounts receivable and inventory requires establishing proper reserve and allowance levels,
specifically the allowances for doubtful accounts, gift cards and returns, and the reserve for
inventory obsolescence. The Company&#146;s senior financial management and the Company&#146;s auditors
(Ernst &#038; Young) review the critical accounting policies and estimates with the Audit Committee of
the Board of Directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s revenue recognition policy is as follows: Sales (cash, Blair Credit, or third-party
credit card) are recorded when the merchandise is shipped to the customer, in accordance with the
provisions of Staff Accounting Bulletin No.&nbsp;101, Revenue Recognition in Financial Statements and
Staff Accounting Bulletin No.&nbsp;104, Revenue Recognition, as issued by the Securities &#038; Exchange
Commission. Prior to the sale of the Company&#146;s credit portfolio in November&nbsp;2005, Blair credit
sales were made under Easy Payment Plan sales arrangements. Monthly, a provision for potentially
doubtful accounts was historically charged against income based on management&#146;s estimate of
realization. Any recoveries of bad debts previously written-off were 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 Blair credit sales approximates fair value. Subsequent to the sale of the Company&#146;s
credit portfolio in November&nbsp;2005, and prior to the third quarter of 2006, the Company did not
recognize provisions for doubtful accounts.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The allowance for doubtful accounts on full recourse accounts are discussed in &#147;Results of
Operations.&#148; A change in the bad debt rate would cause changes in the provision for doubtful
accounts. Based on the Company&#146;s 2006 level of full recourse
credit sales and finance charges, net income would change by approximately $21,000, or $0.01 per
share, from a one percentage point change in the bad debt rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The liability for gift cards is recorded as a current liability. A monthly provision for
anticipated gift cards redeemed is recorded as a percentage of anticipated redemptions, based upon
historical experience. The provision is charged against gross sales to arrive at net sales, and
actual redemptions are charged against the allowance for gift cards. Gift cards are provided to
customers for use on future orders as a result of satisfying a minimum order value. A change in
the gift card redemption rate would cause changes in the provision for gift cards and the allowance
for gift cards. Based on the Company&#146;s 2006 level of gift cards issued and redeemed, net income
would change by approximately $15,000 or less than $0.01 per share, from a one percentage point
change in the redemption rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The allowance for returns is recorded as a current liability. A monthly provision for anticipated
returns is recorded as a percentage of gross sales, based upon historical experience. The
provision is charged against gross sales to arrive at net sales, and actual returns are charged
against the allowance for returns. Returns are generally more predictable as they settle within
two-to-three months but are impacted by season, new products and/or product lines, type of sale
(cash, credit card, Blair Credit) and sales mix (prospect/customer). A change in the returns rate
would cause changes in the provision for returns and the allowance for returns. Based on the
Company&#146;s 2006 level of sales, net income would change by approximately $1.4&nbsp;million, or $0.37 per
share, from a one percentage point change in return rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The reserve for inventory obsolescence and related items, inventory levels and write-downs, are
discussed in &#147;Liquidity and Sources of Capital&#148; and &#147;Future Considerations.&#148; The Company feels
that the reserve for inventory obsolescence is sufficient to cover the write-offs that will occur
in future years on merchandise in inventory as of December&nbsp;31, 2006. A change in the obsolescence
rate would cause changes in cost of goods sold and the reserve for inventory obsolescence. Based
on the Company&#146;s 2006 level of merchandise subject to obsolescence, net income would change by
approximately $1.4&nbsp;million, or $0.37 per share, from a one percentage point change in the
obsolescence rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s advertising expense policy is as follows: Advertising and shipping supply
inventories include printed advertising material and related mailing supplies for promotional
mailings, which are generally scheduled to occur within two months. These direct-response
advertising costs are then expensed over the period of expected future benefit, generally nine
weeks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had total net current deferred tax assets of $1,643,000. These
assets relate principally to asset valuation reserves including returns and inventory obsolescence.
Based on recent historical earnings performance and current projections, management believes that
a valuation allowance is not required against these deferred tax assets, except for the valuation
allowances against state net operating losses. The state net operating loss valuation allowance
was provided due to its uncertainty of realization based upon the state&#146;s net operating loss
carryforward rules.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Impact of Inflation and Changing Prices </B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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. Historically, profit
margins have been pressured by postal and paper rate increases. Paper rates decreased
approximately 4% in 2006, increased 2% in 2005 and increased 5% in 2004. Postal rates increased on
January&nbsp;9, 2006. The Company spent approximately $80&nbsp;million for postage and delivery services in
2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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. However, the Company
has been experiencing declining merchandise costs and the LIFO reserve has fallen to $605,000 at
December&nbsp;31, 2006, from $1.2&nbsp;million at December&nbsp;31, 2005. The LIFO reserve was $3.8&nbsp;million at
December&nbsp;31, 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are continuously being expanded and updated. Major projects are
discussed under &#147;Liquidity and Sources of Capital&#148;. Assets acquired in prior years will 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 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.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><U><B>Accounting Pronouncements </B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, <I>&#147;Accounting for Uncertainty in
Income Taxes &#151; an interpretation of FASB Statement No.&nbsp;109&#148; </I>(FIN 48), to create a single model to
address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income
taxes, by prescribing a minimum recognition threshold a tax position is required to meet before
being recognized in the financial statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after December&nbsp;15, 2006. The Company
will adopt FIN 48 as of January&nbsp;1, 2007, as required. The cumulative effect of adopting FIN 48 will
be recorded in retained earnings. While the company is still evaluating the impact of adoption of
FIN 48 on its consolidated financial statements, it believes that adoption of FIN 48 will increase
the liabilities accrued for uncertainty in income taxes at December&nbsp;31, 2006 by $0 to $1.3&nbsp;million
with a corresponding decrease in retained earnings at January&nbsp;1, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued Statement of Financial Accounting Standards No.&nbsp;157, &#147;Fair
Value Measurements&#148; (&#147;SFAS No.&nbsp;157&#148;), which defines fair value, established a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No.&nbsp;157 does not require new fair value measurements, but is applied
to the extent that other accounting pronouncements require or permit fair value measurements. SFAS
No.&nbsp;157 emphasizes that fair value is a market-based measurement that should be determined based on
the assumptions that market participants would use in pricing an asset or liability. Companies will
be required to disclose the extent to which fair value is used to measure assets and liabilities,
the inputs used to develop the measurements, and the effect for fiscal years beginning after
November&nbsp;15, 2007. The Company has not determined the effect, if any, the adoption of SFAS No.&nbsp;157
will have on the Company&#146;s financial position and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Future Considerations </B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is faced with the ever-present challenge of maintaining and expanding its customer
file. This involves the acquisition of new customers (prospects), the conversion of new customers
to established customers (active repeat buyers) and the retention and/or reactivation of
established customers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">These actions are vital in growing the business but are being negatively impacted by increased
operating costs, increased competition in the retail sector, high levels of consumer debt, varying
consumer response rates and an uncertain economy. The preceding factors can also negatively impact
the Company&#146;s ability to properly value inventories and receivables by making it more difficult to
establish proper reserve and allowance levels, specifically, the allowances for returns and the
reserve for inventory obsolescence.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s marketing strategy includes targeting customers in the &#147;40 to 75, low-to-moderate
income&#148; market. Success of the Company&#146;s marketing strategy requires investment in database
management, digital asset management, campaign management, financial and operating systems,
prospecting programs, catalog marketing, new product lines, telephone call centers, e-commerce and
fulfillment operations. Management believes that these investments should improve Blair
Corporation&#146;s position in new and existing markets and provide opportunities for future earnings
growth.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Requirements adopted by the Securities and Exchange Commission in response to the passage of the
Sarbanes-Oxley Act of 2002 require an ongoing review and evaluation of our internal control systems
and attestation of these systems by our independent auditors. We review our internal control
procedures and consider further documentation of such procedures that may be necessary in the
future on an ongoing basis. While we currently believe we have identified and committed the
appropriate resources to meet all of the requirements, there is always a risk inherent in any
control system that not all errors or misstatements will be detected. Any improvements in our
internal control systems or in documentation of such control systems could be costly to prepare or
implement, could divert attention of management of our finance staff, and may cause our operating
expenses to increase over the ensuing year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;23, 2007, Blair Corporation, a Delaware corporation (the &#147;Company&#148;), BLR Acquisition
Corp., a Delaware corporation (&#147;Merger Sub&#148;), and Appleseed&#146;s Topco, Inc., a Delaware corporation
and portfolio company of Golden Gate Capital (&#147;Appleseed&#146;s&#148;), entered into an Agreement and Plan of
Merger (the &#147;Merger Agreement&#148;) pursuant to which Appleseed&#146;s will acquire all of the outstanding
shares of Company common stock for $42.50 per share in cash, without interest (&#147;Merger
Consideration&#148;), or approximately $173.6&nbsp;million in the aggregate. In addition, each outstanding
unvested restricted share of the Company will be converted into the right to receive cash in an
amount equal to the Merger Consideration, and the holders of all outstanding options to acquire
shares of Company common stock will receive an amount in cash equal to the excess, if any, of the
Merger Consideration over the per share exercise price of the option.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Under the terms of the Merger Agreement, the Company is to be acquired by Appleseed&#146;s through a merger of Merger Sub and the
Company, with the Company as the surviving corporation (the &#147;Merger&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The parties currently anticipate consummating the Merger in the Spring of 2007. Upon the closing of
the Merger, shares of the Company&#146;s common stock would no longer be listed on the AMEX. The
consummation of the Merger is subject to the approval of the Company&#146;s stockholders, and satisfaction of other customary closing conditions. Pursuant to the
terms of the Merger Agreement, the Company was permitted to solicit additional proposals to acquire the Company
for a period of 30&nbsp;days following the date of the Merger Agreement. The Board of Directors of the
Company, with assistance of its independent advisors, solicited
proposals during this period but did not receive any proposals.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;24, 2007, Mr.&nbsp;Richard P. Pogozelski, a purported stockholder of the Company, filed a
complaint styled Pogozelski v. Blair Corporation, (Civil Action No.&nbsp;2695-N) in the Court of
Chancery of the State of Delaware in New Castle County against the Company, certain members of our
board of directors and Appleseed&#146;s. The complaint alleged, among other things, that the Company&#146;s
directors have not acted reasonably and breached their fiduciary duties by failing to maximize
stockholder value with regard to the proposed acquisition by Appleseed&#146;s. Among other things, the
complaint sought class action status, a court order enjoining the Company and our directors from
proceeding with or consummating the proposed acquisition of the Company by Appleseed&#146;s,
compensatory damages, costs and expenses and the payment of attorneys&#146; and experts&#146; fees. The
Company believes that the complaint is without merit and intends to defend this lawsuit vigorously.
On March&nbsp;1, 2007, we and the other defendants filed a motion to dismiss the class action complaint
for failure to state a claim upon which relief can be granted. As of the date of this 10-K, the
court has not ruled on this motion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Forward-looking statements in this report, including without limitation, statements relating
to the Company&#146;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. Words such as &#147;believes,&#148; &#147;anticipates,&#148; &#147;plans,&#148; &#147;expects,&#148; and similar expressions are
intended to identify forward-looking statements. Any statements contained in this report that are
not statements of historical fact may be deemed to be forward-looking statements. Such
forward-looking statements are included in, but not limited to, this ITEM 7.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Investors are cautioned that such forward-looking statements involve risks and uncertainties which
could cause actual results to differ materially from those in the forward-looking statements,
including without limitation the following: (i)&nbsp;the Company&#146;s plans, strategies, objectives,
expectations and intentions are subject to change at any time at the discretion of the Company;
(ii)&nbsp;the Company&#146;s plans and results of operations will be affected by the Company&#146;s ability to
manage its growth and inventory; (iii)&nbsp;external factors such as, but not limited to, changes in
consumer response rates, success of new business lines and increases in postal, paper and printing
costs; and (iv)&nbsp;other risks and uncertainties indicated from time to time in the Company&#146;s filings
with the Securities and Exchange Commission.
</DIV>
<!-- link2 "ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The carrying amounts of cash, 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&#146;s securitized and revolving credit facilities are adjusted regularly
to reflect current market rates. Accordingly, the carrying amounts of the Company&#146;s borrowings
also approximate fair value.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is subject to market interest rate risk from exposure to changes in interest rates
based upon its financing, investing and cash management activities. The Company utilizes
variable-rate debt to manage its exposure to changes in interest rates. The Company does not expect
changes in interest rates to have a material adverse effect on its income or cash flow in 2007. A
change of one percentage point in the interest rate would cause a change in interest expense, based
on the Company&#146;s levels of debt for the years 2006 and 2005, of approximately<br>
$-0- and $268,301,
respectively.
</DIV>
<!-- link2 "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See Item&nbsp;15 of this Report.
</DIV>
<!-- link2 "ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link2 "ITEM 9A. CONTROLS AND PROCEDURES" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9A. CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of the end of the period covered by this report, the Company carried out an evaluation, under
the supervision and with the participation of the Company&#146;s management, including the Company&#146;s
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company&#146;s disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)). Based on that evaluation, the Company&#146;s Chief Executive Officer and Chief
Financial Officer concluded that the Company&#146;s disclosure controls and procedures were effective to
ensure that the financial and nonfinancial information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act, including this
form 10-K for the period ended December&nbsp;31, 2006, is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission&#146;s rules and forms.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">For Management&#146;s report on internal controls, see page F-1 of the Company&#146;s finacial statements
contained at Item&nbsp;15. For the Independent Registered Public Accounting Firm&#146;s attestation report
on management&#146;s assessment on internal controls over financial reporting, see page F-3 of the
Company&#146;s financial statements contained at Item&nbsp;15.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Control over Financial Reporting</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">There were no significant changes in the Company&#146;s internal controls or in any other factors that
could significantly affect those controls subsequent to the date of the most recent evaluation of
the Company&#146;s internal controls by the Company, including any corrective actions with regard to any
significant deficiencies or material weaknesses.
</DIV>
<!-- link2 "ITEM 9B. OTHER INFORMATION" -->

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9B. OTHER INFORMATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Information regarding directors and executive officers of the Company appearing under the caption
&#147;Election of Directors&#148; in the 2007 Proxy Statement for the 2007 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission not later than 120&nbsp;days after the end of the
Company&#146;s fiscal year is hereby incorporated by reference.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Certain information regarding section 16 of the Exchange Act reporting by directors, officers and
beneficial owners of more than ten percent (10%) of the Company&#146;s common stock appearing under
caption &#147;Section&nbsp;16(a) Beneficial Ownership Reporting Compliance&#148; in the 2006 Proxy Statement is
hereby incorporated by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;26, 2004, the Company adopted a Code of Ethics for its Principal Executive Officer and
Senior Financial Officer (the &#147;Code of Ethics&#148;). A copy of the Code of Ethics is filed as Exhibit
14 to the 2003 Annual Report of Form 10-K. The Code of Ethics is also available free of charge by
writing to the Secretary of Blair Corporation, 220 Hickory Street, Warren, Pennsylvania, 16366.
</DIV>
<!-- link2 "ITEM 11. EXECUTIVE COMPENSATION" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 11. EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Information appearing under the caption &#147;Executive Compensation&#148; in the 2007 Proxy Statement is
hereby incorporated by reference, which will be filed with the Securities and Exchange Commission
not later than 120&nbsp;days after the end of the Company&#146;s fiscal year.
</DIV>
<!-- link2 "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Information setting forth the security ownership of certain beneficial owners and management
appearing under the captions &#147;Security Ownership of Certain Beneficial Owners,&#148; &#147;Security Ownership
of Management&#148; and &#147;Equity Compensation Plan Information&#148; in the 2007 Proxy Statement is hereby
incorporated by reference, which will be filed with the Securities and Exchange Commission not
later than 120&nbsp;days after the end of the Company&#146;s fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table gives information about the Company&#146;s Common Stock that may be issued upon the
exercise of options, warrants and rights under all existing equity compensation plans as of
December&nbsp;31, 2006.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Equity Compensation Plan Information</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities Remaining</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">to be Issued Upon</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise Price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available for Future Issuance</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under Equity Compensation</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Outstanding Options,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options, Warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans (Excluding Securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Warrants and Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reflected in Column (a)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Compensation Plans
Approved by Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,728</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Compensation Plans
Not Approved by Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,728</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<!-- link2 "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>

<!-- link2 "ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Information appearing under the caption &#147;Principal Accountant Fees and Services&#148; in the 2007 Proxy
Statement is hereby incorporated by reference, which will be filed with the Securities and Exchange
Commission not later than 120&nbsp;days after the end of the Company&#146;s fiscal year.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif"></DIV>
<!-- link1 "PART IV" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;EXHIBITS AND FINANCIAL STATEMENTS AND SCHEDULES.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statements. The Company&#146;s consolidated financial statements are included at pages
F-1 to F-26.</TD>
</TR>
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>



</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="93%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#300">Management&#146;s Annual Report on Internal Control Over Financial Reporting </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#301">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#302">Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#303">Consolidated Balance Sheets &#151; December&nbsp;31, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#304">Consolidated Statements of Income &#151; Years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#305">Consolidated Statements of Stockholders&#146; Equity &#151; Years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#306">Consolidated Statements of Cash Flows &#151; Years ended December&nbsp;31, 2006, 2005 and 2004 </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-5px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-5px"><A href="#307">Notes to Consolidated Financial Statements &#151; December&nbsp;31, 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" align="justify" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial Statement Schedules. SCHEDULE II &#151; VALUATION AND QUALIFYING ACCOUNTS is being
filed as part of this report on Form 10-K pursuant to Item&nbsp;15(c), and should be read in
conjunction with the consolidated financial statements of the Company described in Item
15(a)(1) above, which such Schedule&nbsp;II follows at page F-27.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>List of Exhibits.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exhibits filed as a part of this Form 10-K are as follows (filed herewith unless otherwise
noted):
</DIV>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="justify" valign="top">Agreement and Plan of Merger among Blair Corporation, BLR Acquisition
Corp. And Appleseed&#146;s Topco, Inc., dated as of January&nbsp;23, 2007 (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restated Certificate of Incorporation of the Company (2)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of Blair Corporation (3)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Common Stock Certificate (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Accumulation and Deferred Compensation Plan for Directors (5)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Blair Corporation 2000 Omnibus Stock Plan (6)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Blair Credit Agreement (7)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;2 to Credit Agreement (8)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;3 to Credit Agreement (9)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;4 to Credit Agreement (10)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;5 to Credit Agreement (11)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Severance Agreement &#151; Vice Presidents (12)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Severance Agreement &#151; CEO and Senior Vice Presidents
(13)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase, Sale and Capital Servicing Transfer Agreement (14)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Private Label Credit Program Agreement (15)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Private Label Program Agreement (16)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to the Private Label Program Agreement (17)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment Agreement, dated as of July&nbsp;15, 2005, which amends the
Receivables Purchase Agreement (18)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Credit Agreement, dated as of July&nbsp;15, 2005 (19)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;2 to Amended and Restated Credit Agreement, dated as of
October&nbsp;23, 2006 (20)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation and Loeb, dated as of May&nbsp;24, 2005 (21)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation and Mr.&nbsp;Phillip Goldstein and Mr.
Andrew Dakos, dated as of May&nbsp;24, 2005 (22)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation and Santa Monica and Mr.&nbsp;Lawrence
Goldstein, dated as of May&nbsp;25, 2005 (23)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter between Blair Corporation and Adelmo S. Lopez (24)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter between Blair Corporation and Larry J. Pitorak (25)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement regarding computation of per share earnings (26)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics (27)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of Blair Corporation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Independent Registered Public Accounting Firm</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEO Certification pursuant to Section&nbsp;302</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CFO Certification pursuant to Section&nbsp;302</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEO Certification pursuant to Section&nbsp;906</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CFO Certification pursuant to Section&nbsp;906</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;2.1 to the Company&#146;s Form 8-K filed with
the SEC on January&nbsp;23, 2007 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;A to the Company&#146;s Quarterly Report
on Form 10-Q filed with the SEC on August&nbsp;10, 1995 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;4.3 to the Company&#146;s Registration
Statement on Form S-8 filed with the SEC on July&nbsp;19, 2000 (SEC File No.&nbsp;333-41772).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;4.1 to the Company&#146;s Registration
Statement on Form S-8 filed with the SEC on July&nbsp;19, 2000 (SEC File No.&nbsp;333-41770).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;A to the Company&#146;s Proxy Statement
filed with the SEC on March&nbsp;20, 1998 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Appendix&nbsp;A to the Company&#146;s Proxy Statement
filed with the SEC on March&nbsp;14, 2003 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;99.1 to the Company&#146;s Form 8-K
filed with the SEC on January&nbsp;9, 2002 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.4 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on August&nbsp;8, 2003 (SEC File No.&nbsp;1-878). Certain
schedules to the agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.5 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878). Certain
schedules to the agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.6 to the Annual Report on Form 10-K of
the Company filed with the SEC on March&nbsp;1, 2005 (SEC File No.&nbsp;1-878). Certain
schedules to the Agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.7 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on May&nbsp;6, 2005 (SEC File No.&nbsp;1-878). Certain
schedules to the Agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.6 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.7 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K
filed with the SEC on April&nbsp;27, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;10.2 to the Company&#146;s Form 8-K
filed with the SEC on April&nbsp;27, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(16)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.12 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on August&nbsp;9, 2006 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(17)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.13 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on August&nbsp;9, 2006 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(18)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit (b) (i)&nbsp;to the Company&#146;s Schedule
TO filed with the SEC on July&nbsp;20, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(19)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit (b) (ii)&nbsp;to the Company&#146;s Schedule
TO filed with the SEC on July&nbsp;20, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(20)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K filed with
the SEC on October&nbsp;24, 2006 (SEC File No.&nbsp;1-878).</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(21)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(22)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.2 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(23)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.3 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(24)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K filed with
the SEC on January&nbsp;25, 2007 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(25)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.2 to the Company&#146;s Form 8-K filed with
the SEC on January&nbsp;25, 2007 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(26)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Note 5 of the financial statements included
herein.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(27)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;14 to the 2003 Annual Report on Form 10-K
of the Company filed with the SEC on March&nbsp;15, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "SIGNATURES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of Section&nbsp;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.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>BLAIR CORPORATION (Registrant)</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ ADELMO S. LOPEZ
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">ADELMO S. LOPEZ&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ LARRY J. PITORAK
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">LARRY J. PITORAK&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Senior Vice President, Chief Financial Officer
and Chief Administrative Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ MICHAEL R. DELPRINCE
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">MICHAEL R. DELPRINCE&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Controller&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ CRAIG N. JOHNSON
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">CRAIG N. JOHNSON&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chairman of the Board of Directors&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ JOHN E. ZAWACKI
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">JOHN E. ZAWACKI&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice Chairman of the Board&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ HARRIET EDELMAN
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">HARRIET EDELMAN&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ JOHN O. HANNA
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">JOHN O. HANNA&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ MICHAEL A. SCHULER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">MICHAEL A. SCHULER&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ RONALD L. RAMSEYER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">RONALD L. RAMSEYER&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ CYNTHIA A. FIELDS
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">CYNTHIA A. FIELDS&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ JEREL G. HOLLENS
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">JEREL G. HOLLENS&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ SHELLEY J. SEIFERT
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">SHELLEY J. SEIFERT&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:      March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ MURRAY K. MCCOMAS
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">MURRAY K. MCCOMAS&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify">
<A name="300"></A>
</DIV>

<DIV align="center" style="font-size: 10pt">Management&#146;s Annual Report on Internal Control Over Financial Reporting
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 15pt">The management of Blair Corporation and Subsidiaries is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company&#146;s management utilizes
the <I>Internal Control &#151; Integrated Framework </I>issued by the Committee of Sponsoring Organizations
of the Treadway Commission to evaluate the effectiveness of the Company&#146;s internal control over
financial reporting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, based on management&#146;s evaluation of the effectiveness of the Company&#146;s
internal control over financial reporting, the Company has concluded that its internal control over
financial reporting is effective for the purpose of providing reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, a system of internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect misstatements. In addition,
because of changes in conditions, effectiveness of internal controls over financial reporting may
vary over time.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Ernst &#038; Young, the registered public accounting firm that audited the financial statements included
in this annual report, has issued an attestation report on management&#146;s assessment of the Company&#146;s
internal control over financial reporting.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="center" style="font-size: 10pt">Report of Independent Registered Public Accounting Firm
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 15pt">The Board of Directors and Stockholders of Blair Corporation and Subsidiaries
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Blair Corporation and Subsidiaries
as of December&nbsp;31, 2006 and 2005, and the related consolidated statements of income, stockholders&#146;
equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2006. Our
audits also included the financial statement schedule listed in the Index at Item&nbsp;15(a). These
financial statements and schedule are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements and schedule based on our
audits.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Blair Corporation and Subsidiaries at December&nbsp;31,
2006 and 2005, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended December&nbsp;31, 2006, in conformity with United States generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Blair Corporation and Subsidiaries&#146; internal control
over financial reporting as of December&nbsp;31, 2006, based on criteria established in <I>Internal
Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March&nbsp;15, 2007 expressed an unqualified opinion thereon.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">                                                  /s/ Ernst &#038; Young LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Buffalo, New York<BR>
March&nbsp;15, 2007
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="center" style="font-size: 10pt">Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 15pt">The Board of Directors and Stockholders of Blair Corporation and Subsidiaries
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have audited management&#146;s assessment, included in the accompanying Management&#146;s Annual Report on
Internal Control Over Financial Reporting, that Blair Corporation and Subsidiaries maintained
effective internal control over financial reporting as of December&nbsp;31, 2006, based on criteria
established in <I>Internal Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Blair Corporation and Subsidiaries&#146;
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management&#146;s assessment and an opinion on the
effectiveness of the company&#146;s internal control over financial reporting based on our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management&#146;s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, management&#146;s assessment that Blair Corporation and Subsidiaries maintained
effective internal control over financial reporting as of December&nbsp;31, 2006, is fairly stated, in
all material respects, based on the COSO criteria. Also, in our opinion, Blair Corporation and
Subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December&nbsp;31, 2006, based on the COSO criteria.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Blair Corporation and Subsidiaries as of
December&nbsp;31, 2006 and 2005, and the related consolidated statements of income, stockholders&#146;
equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2006 and our
report dated March&nbsp;15, 2007 expressed an unqualified opinion thereon.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">     /s/ Ernst &#038; Young LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Buffalo, New York<BR>
March&nbsp;15, 2007
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>36,927,303</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53,099,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Receivables, less allowances for doubtful accounts of
$592,645 in 2006 and $158,471 in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,995,973</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,987,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Merchandise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>61,317,388</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,217,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advertising and shipping supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,947,037</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,146,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68,264,425</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,364,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,643,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">731,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,575,795</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,781,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>700,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,236,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>113,106,496</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,199,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant, and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>548,817</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64,090,428</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,374,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>75,408,270</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,001,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,163,389</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,961,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>147,210,904</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,336,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less allowances for depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100,409,796</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,889,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,801,108</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,446,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>271,434</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,066,354</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,103,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>161,245,392</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">193,094,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>See accompanying notes.</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>17,826,858</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,137,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advance payments from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,113,744</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,873,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
   <TD><DIV style="margin-left:45px; text-indent:-15px">Reserve for sales returns and allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,974,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,602,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,083,565</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,994,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued federal and state taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,674,168</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,782,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Current portion of capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,453</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,682,788</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,409,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,242</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,676,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,582,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock without par value:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized 12,000,000 shares
issued 10,075,440 shares (including shares
held in treasury) &#151; stated value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>419,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,354,608</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,553,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>329,745,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,023,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(121,711</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48,579</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>344,397,808</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,949,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less 6,228,623 shares in 2006 and 6,124,818
shares in 2005 of common stock
in treasury &#151; at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>224,061,659</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,381,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less receivable and deferred compensation from stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>453,787</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119,882,362</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,408,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>161,245,392</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">193,094,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>See accompanying notes.</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">
Consolidated Statements of Income
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>426,425,708</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">456,625,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">496,120,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,849,913</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,072,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,714,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>433,275,621</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492,698,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540,835,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>190,831,333</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,121,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,972,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>126,119,487</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,321,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,324,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116,901,838</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,588,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,408,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>687,399</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,669,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,664,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on sale of receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,747,513</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,292,447</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">568,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(122,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>477,801</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>433,725,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">443,569,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,468,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(449,790</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,128,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,366,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax (benefit)&nbsp;provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(666,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,583,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>216,210</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share based on
weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.06</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share based on
weighted average shares outstanding
and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.06</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><I>See accompanying notes.</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff"><b>Years
ended December 31</b></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><b>2006</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><b>2005</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><b>2004</b></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common Stock</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>$</b></TD>
    <TD align="right"><b>419,810</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Additional Paid-in Capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>13,553,937</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,238,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,134,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reclassification upon adoption of SFAS 123(R)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>555,575</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 7,225 shares in 2006, 5,550 shares in 2005
and 4,050 shares in 2004 of common stock to
non-employee directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>2,858</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24,358</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 32,900 shares in 2006, 22,373 shares in 2005
and 3,000 shares in 2004 of common stock under Omnibus
Stock Plan &#151; Executive Officer Stock Awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(32,529</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38,074</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,509</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures of 3,450 shares in 2006, 9,400 shares in 2005
and 19,700 shares in 2004 of common stock under Omnibus
Stock and Employee Stock Purchase Plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>524</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,645</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107,644</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of 17,020 shares in 2006, 103,201 shares in 2005
and 128,547 shares in 2004 of common stock under Omnibus
Stock Plan &#151; Non-Qualified Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(279,123</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(306,699</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,157,161</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of Non-Qualified Stock Options
and executive officer awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>27,110</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock Compensation Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>163,058</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of restricted stock awards, net of forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>199,465</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of Executive Officer Stock Awards, net of
vesting and forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>163,733</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>14,354,608</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,553,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,238,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained Earnings:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>334,023,925</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,544,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,397,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>216,210</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per share &#151; $1.20 in 2006, $.75 in 2005,
and $.60 in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(4,495,034</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,066,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,722,362</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>329,745,101</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,023,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,544,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated Other Comprehensive (Loss) Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(48,579</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,634</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,016</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(73,132</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98,618</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(121,711</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48,579</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,634</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Treasury Stock:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(221,381,619</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35,955,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39,514,841</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of 157,500 in 2006, 4,400,000 in 2005,
and 0 shares in 2004 of common stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(4,629,875</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188,976,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 7,225 shares in 2006, 5,550 shares in 2005,
and 4,050 shares in 2004 of common stock to
non-employee directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>300,078</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,509</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 32,900 shares in 2006, 22,373 shares in 2005, and
3,000 shares in 2004 of common stock under Omnibus Stock
Plan &#151;Executive Officer Stock Awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>1,063,519</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures of 3,450 shares in 2006, 9,400 shares in 2005,
and 19,700 shares in 2004 of common stock under Omnibus
Stock and Employee Stock Purchase Plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(80,294</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(222,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(332,770</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of 17,020 shares in 2006, 103,201 shares in 2005,
and 128,547 shares in 2004 of common stock under Omnibus
Stock Plan &#151; Non-Qualified Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><b>666,532</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,957,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,679,645</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><b>(224,061,659</b></TD>
    <TD nowrap><b>)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(221,381,619</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35,955,582</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->F-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff"><B>Years ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Receivable and Deferred Compensation from Stock Plans:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(159,079</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,560,915</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,616,826</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reclassification upon adoption of SFAS 123(R)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(555,575</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures of common stock under Omnibus Stock Plan &#151;
Restricted Stock Awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,260</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,263</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Applications of dividends and cash repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>246,607</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of restricted stock awards, net of forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,575</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of Executive Officer Stock Awards, net of
vesting and forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">685,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(453,787</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(159,079</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,560,915</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>119,882,362</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">126,408,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">282,567,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Comprehensive Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>216,210</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment from foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(73,132</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98,618</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>143,078</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,615,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,770,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Cash Flows

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff"><B>Years ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>216,210</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>Adjustments to reconcile net income to net cash
(used in) provided by operating<br>&nbsp;&nbsp;activities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,421,326</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,937,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,825,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>337,956</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment of assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>441,155</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss (gain)&nbsp;on disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>541,105</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,780,579</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>687,399</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,669,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,664,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,818,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax benefit on exercise of non-qualified stock
options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Compensation expense (net of forfeitures)
for stock awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,989,826</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in operating assets and liabilities
(using)&nbsp;providing cash:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(694,330</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,149,914</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,099,589</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">930,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,306,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(20,463</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(698,886</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,234</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loan origination fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,438,947</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(172,972</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(11,310,322</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,306,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,297,653</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advance payments from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(760,059</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(431,969</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,372,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(496,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,025,151</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,595,916</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,267,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,326,843</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Federal and state taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,110,363</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(307,895</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(202,887</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,824,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,342,668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,527,645</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,025,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,623,552</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,307,405</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,862,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,220,240</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,836,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,623,552</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net proceeds/(repayments) from bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,000,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Principal repayments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(19,198</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(89,631</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(356,891</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,495,034</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,066,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,722,362</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of common stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,629,875</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188,976,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of non-qualified stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>387,409</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,650,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,522,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayments of notes receivable from stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>51,452</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,215</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of non-qualified stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,678,136</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(205,192,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,436,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(70,563</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102,616</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(16,171,826</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,179,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,099,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,559,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,380,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>36,927,303</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53,099,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,559,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /Folio -->
</DIV>

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<DIV align="left">
<A name="307"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>1. Significant Accounting Policies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Organization</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of Blair Corporation and its wholly
owned subsidiaries. All significant intercompany accounts are eliminated upon consolidation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Significant Transactions</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;25, 2005, the Company decided to phase out its Allegheny Trail wholesale business by
April&nbsp;30, 2005. Certain products were transferred to other existing product lines. The Company&#146;s
intention is to more fully focus new business development efforts on the core Blair brand and its
proven appeal to significant market segments. The decision to focus on core operations is based in
part on the historical success of the Blair brand and an extensive consumer and brand strategy
study undertaken by the Company as part of its efforts to enhance profitability and shareholder
value. The Company has evaluated the impact of phasing out the Allegheny Trail business on all
assets associated with this operation. All appropriate reserves have been recorded. This decision
did not have a negative effect on 2005 profitability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;26, 2005, the Company, Blair Factoring Company, Blair Credit Services Corporation, and JLB
Service Bank, each a wholly-owned subsidiary of the Company, entered into a Purchase, Sale and
Servicing Transfer Agreement (the &#147;Purchase Agreement&#148;) with World Financial Capital Bank (&#147;World
Financial&#148;), a wholly-owned subsidiary of Alliance Data Systems Corporation (&#147;Alliance&#148;). Pursuant
to the Purchase Agreement, the Company&#146;s credit portfolio was sold at par plus a premium.
Additionally, on April&nbsp;26, 2005, the Company and World Financial entered into an agreement to form
a long-term marketing and servicing alliance under a Private Label Credit Program Agreement (the
&#147;Program Agreement&#148;) having a term of ten (10)&nbsp;years. The agreement has renewal provisions that
require the mutual consent of the Company and World Financial.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;20, 2005, the Company commenced a tender offer at $42.00 per share, for the purchase of 4.4
million shares of its outstanding common stock, or approximately 53% at an aggregate price of
$184.8&nbsp;million. The total purchase price of the stock of $184.8&nbsp;million, plus related expenses of
$4.2&nbsp;million, was recorded as treasury stock effective August&nbsp;16, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;4, 2005, the Company closed the sales transaction of its credit portfolio to World
Financial. Gross sale proceeds were $166.2&nbsp;million. The Company used $143&nbsp;million of the proceeds
to repay debt primarily incurred in association with its August&nbsp;2005 tender offer for 4.4&nbsp;million
shares. The Company had reserved $750,000 to provide for any adjustments, which may occur under the
purchase price adjustments provisions of the Purchase Agreement. Subsequent to December&nbsp;31, 2005,
the Company received final settlement for purchase price adjustments totaling $2.1&nbsp;million. The
difference between the $750,000 estimated reserve and actual adjustment of $2.1&nbsp;million was
recorded as an additional reduction to the gain. The final accounting treatment for this
transaction resulted in a gain on the sale of $27.7&nbsp;million. The gain on the sale included the
reversal of the allowance for doubtful accounts of $23.2&nbsp;million. The gain was reduced by legal,
professional and severance costs associated with closing the transaction. The total of these costs
was $2.8&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Sales (cash, Blair credit, or third-party credit card) are recorded when the merchandise is shipped
to the customer, in accordance with the provisions of Staff Accounting Bulletin No.&nbsp;101, <I>Revenue
Recognition in Financial Statements </I>and Staff Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition, </I>as
issued by the Securities &#038; Exchange Commission. Prior to the sale of the Company&#146;s credit portfolio
in November&nbsp;2005, Blair credit sales were made under Easy Payment Plan sales arrangements. Monthly,
a provision for potentially doubtful accounts was historically charged against income based on
management&#146;s estimate of realization. Any recoveries of bad debts previously written-off were
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 Blair credit sales approximates fair value. Subsequent to the sale
of the Company&#146;s credit portfolio in November&nbsp;2005, and prior to the third quarter of 2006, the
Company did not recognize provisions for doubtful accounts.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the third quarter of 2006, the Company and Alliance Data Systems (ADS)&nbsp;executed Amendment Number
2 to the ADS Credit Program Agreement whereby credit is granted to customers with credit scores
below the originally established FICO level. Customers granted credit in this new FICO scoring
range are deemed &#147;Full Recourse Accounts&#148; and the Company assumes the bad debt risk. The recourse
program is an annual program that either party may discontinue with 60&nbsp;days notice.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Shipping and processing revenue is included in net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Finance charges on time payment accounts were historically recognized as other revenue on an
accrual basis of accounting. The decrease in finance charges compared to the prior year is the
result the sale of the Company&#146;s credit portfolio in November&nbsp;2005. Subsequent to the sale, and
prior to the third quarter of 2006, the Company did not recognize finance charges on time payment
accounts. As a result of Amendment Number 2 to the ADS Credit Program Agreement, the Company
receives 50% percent of finance charges and late payment fees assessed on Full Recourse Accounts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Accounts receivable from employees were $428,000 and $610,000 at December&nbsp;31, 2006 and 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Costs and Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company includes the following costs in the line items listed below in its Consolidated
Statements of Income:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><I>Cost of Goods Sold</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold consists of merchandise costs and inbound freight costs. In addition, cost of
goods sold includes writedowns, shipping cartons, shipping supplies, merchandise samples and
outbound shipping costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><I>General and Administrative Expenses</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Occupancy and warehousing costs consist of compensation, employee benefit expenses and related
building costs. Examples of building costs include depreciation, repairs and maintenance,
utilities, rent, real estate taxes and maintenance contracts. Occupancy and warehousing costs
incurred in support of the Company&#146;s order fulfillment process were $35,456,946, $38,499,317 and
$37,345,543 for the years ended December&nbsp;31, 2006, 2005 and 2004 respectively. The Company does
not separately track purchasing and related costs which are also included in general and
administrative expenses. In addition, the general and administrative costs incurred to support the
Company&#146;s product development; circulation planning and customer file maintenance efforts are also
included in general and administrative expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Interest (Income) Expense, Net</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Interest (income)&nbsp;expense, net, consists of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #FFFFFF"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,979</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,909,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">370,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,295,426</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,341,513</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(493,231</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1,292,447</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">568,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(122,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Subsequent to the sale of the Company&#146;s proprietary credit portfolio in 2005, the Company utilized
a portion of the proceeds from the sale to pay off its outstanding debt incurred in connection with
the August&nbsp;2005 tender offer to purchase 4,400,000 shares, or approximately 53% of its outstanding
common stock, at $42 per share. Interest expense decreased as a result of no borrowings outstanding
during 2006. Interest income results from the Company&#146;s investment of surplus cash into money
market securities.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with U.S. 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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Cash and Cash Equivalents</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents consist of available cash and money market securities with a maturity of
three months or less when purchased. Amounts reported in the Consolidated Balance Sheets
approximate fair values.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Returns</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 recorded as a current liability in the balance sheet. The provision
for returns charged against income in 2006, 2005 and 2004 amounted to $61,311,241, $61,402,712 and
$71,666,391, respectively. Management believes these provisions are adequate based upon the
relevant information presently available. However, changes in facts or circumstances could result
in additional adjustment to the Company&#146;s provisions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Doubtful Accounts</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Prior to the sale of the Company&#146;s credit portfolio in November&nbsp;2005, a provision for doubtful
accounts was recorded monthly as a percentage of gross credit sales based upon experience of
delinquencies (accounts over 30&nbsp;days past due) and charge-offs (accounts removed from accounts
receivable for non-payment) and current credit market conditions. Subsequent to the sale of the
Company&#146;s credit portfolio, and prior to the third quarter of 2006, the Company did not recognize
provisions for doubtful accounts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the third quarter of 2006, the Company and Alliance Data Systems (ADS)&nbsp;executed Amendment Number
2 to the ADS Credit Program Agreement whereby credit is granted to customers with credit scores
below the originally established FICO level. Customers granted credit in this new FICO scoring
range are deemed &#147;Full Recourse Accounts&#148; and the Company assumes the bad debt risk. Accordingly,
a monthly provision for doubtful Full Recourse Accounts is recorded as a percentage of gross Full
Recourse sales and finance charges based upon experience of delinquencies (accounts over 30&nbsp;days
past due) and charge-offs (accounts removed from accounts receivable for non-payment) and current
credit market conditions. Management believes these provisions are adequate based upon the
relevant information presently available. However, changes in facts or circumstances could result
in additional adjustment to the Company&#146;s provisions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Inventories</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Inventories are valued at the lower of cost or market. Cost of merchandise inventories is
determined principally on the last-in, first-out (LIFO)&nbsp;method. If the FIFO method had been used,
merchandise inventories would have increased by approximately $605,000 and $1,160,000 at December
31, 2006 and 2005, respectively. Cost of advertising and shipping supplies is determined on the
first-in, first-out (FIFO)&nbsp;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. Direct response publications and related materials inventory were
$5,349,000 and $9,782,000 at December&nbsp;31, 2006 and 2005. These direct response advertising costs
are then expensed over the period of expected future benefit, based on buying patterns, generally
nine weeks or less and amounted to $64,735,000, $63,211,000 and $69,975,000 for the years ended
December&nbsp;31, 2006, 2005 and 2004. The Company has a reserve for slow moving and obsolete inventory
amounting to $1,000,000 and $1,500,000 at December&nbsp;31, 2006 and 2005, respectively. A monthly
provision for obsolete inventory is added to the reserve and expensed to cost of goods sold, based
on the levels of merchandise inventory and merchandise purchases. The obsolescence reserve at
December&nbsp;31, 2006 is lower than the reserve at December&nbsp;31, 2005 due to the combination of enhanced
internet clearance activity and improved merchandise purchasing strategies resulting in less
liquidation inventory on hand and greater recovery rates above of cost for that inventory which did
require liquidation.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Property, Plant and Equipment</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are 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
depreciate the cost of the assets over their period of usefulness. Amortization of assets recorded
under capital lease obligations is included with depreciation expense. Estimated useful lives of
buildings and leasehold improvements range from 15 to 39&nbsp;years. Estimated useful lives of
equipment range from 3 to 7&nbsp;years. Maintenance and repairs are charged to expense as incurred.
Computer software development costs are accounted for under AICPA Statement of Position 98-1.
Unamortized computer software costs were $12,037,649 and $9,124,808 at December&nbsp;31, 2006 and
December&nbsp;31, 2005, respectively. The total amount charged to expense for amortization of
capitalized computer software costs for the years ended December&nbsp;31, 2006, 2005 and 2004 amounted
to $2,290,170, $2,322,416 and $2,521,670, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Trademark</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Trademark, net of accumulated amortization of $812,215 at December&nbsp;31, 2006 and $739,971 at
December&nbsp;31, 2005, is stated on the basis of cost. The Company has one trademark which is being
amortized by the straight-line method for a period of 15&nbsp;years. Amortization expense amounted to
$72,244 in 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Asset Impairment</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company analyzes its long-lived and intangible assets for events and circumstances that might
indicate that the assets may be impaired and determines if the estimated net undiscounted cash
flows expected to be generated by those assets are less than their carrying amounts. Currently,
the Company is not using the Blair Warehouse Outlet building in Starbrick, Pennsylvania. The
Company intends to sell the building and believes that the sale will be completed in 2007. The
outlet building is a sheet metal warehouse design and the Company has considered the possible
impairment of the facility. A $150,000 impairment charge was taken on this property in 2005 as a
result of an independent appraisal. An additional $441,000 impairment charge was taken in 2006 to
reduce the value of this asset to its estimated fair value less costs to sell.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Employee Benefits</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;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 2006, 2005 and
2004 amounted to $-0-, $2,363,969, and $1,525,408, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As part of the same benefit plan, the Company has a contributory savings feature whereby all
eligible employees may contribute up to 25% of their annual base salaries. The Company&#146;s matching
contribution to the plan is based upon a percentage formula as set forth in the plan agreement. The
Company&#146;s matching contributions to the plan charged against income in 2006, 2005 and 2004 amounted
to $1,752,780, $2,001,224 and $1,826,706, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Annually, the Compensation Committee of the Board of Directors approves an incentive award
schedule. Payout of the award is based on the Company achieving a threshold income before income
taxes level. The financial performance for 2006 did not meet the threshold income before income
taxes level. In 2005, in accordance with the provisions of the incentive award plan, the Board of
Directors used its discretion to adjust income before income taxes for unusual and/or non-recurring
items under a Plan amendment made in 2005. In 2005, income and expenses associated with the sale
of the Company&#146;s credit portfolio and the tender offer were not included in calculating the
Company&#146;s income before taxes. Incentive awards charged against income in 2006, 2005 and 2004
amounted to $-0-, $3.8&nbsp;million and $2.4&nbsp;million, respectively.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Employee Benefits &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2006, 2005 and 2004, under the provisions of certain stock awards granted to executive officers
and other associates, shares vest at the rate of 20% per year over the five-year vesting period.
The Company records equity and expense during the vesting periods of the awards based on the number
of eligible shares and the market value of the shares on the grant date. Upon vesting, shares are
issued out of treasury stock. The Company recorded expense of $1,194,723, $1,313,632 and $489,232
in 2006, 2005 and 2004, respectively. When the awards vest, the Company also pays a cash bonus to
the recipient to assist in the income tax obligation related to the awards. Total compensation
expense recognized in income was $1,608,820, $2,434,392 and $977,967 in 2006, 2005 and 2004,
respectively. The decrease in compensation expense was due to the lack of immediate vesting of
stock awards for certain executive officers who separated from the Company in 2005. Accordingly,
no corresponding expense was realized in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2006, under the provisions of certain stock awards granted to non-executive officers, shares
vest at the rate of 100% at the end of the two-year vesting period. The Company records equity and
expense during the vesting periods of the awards based on the number of eligible shares and the
market value of the shares on the grant date. Upon vesting, shares are issued out of treasury
stock. The Company recorded expense of $-0- in 2006. These awards were granted on December&nbsp;22,
2006. Using a mid-month convention for amortization of these awards, no expense was recorded in
2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As part of the Company&#146;s long term incentive program, executive officers are awarded performance
share opportunities based on the achievement of incentive goals over a three year period. Each
year a new three year plan and targeted performance levels are adopted. The Compensation Committee
will determine whether the officers receive shares, cash or a combination thereof based on the
initial award value. The award is a fixed dollar value award based on the annual award date. The
actual performance shares to be issued will be based on the market price of the stock at the date
of issuance (at the end of the three year plan). Total compensation (income)&nbsp;expense recognized
was ($679,720), $823,397 and $-0- in 2006, 2005 and 2004, respectively. After considering finacial
results for the respective three year periods, the plans were not on pace to achieve the threshold
payout based on income before income taxes. Therefore, the liability for this award was reduced to
zero at December&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Financial Instruments</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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&#146;s securitized and revolving credit facilities are
adjusted regularly to reflect current market rates. Accordingly, the carrying amounts of the
Company&#146;s borrowings also approximate fair value.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>New Accounting Pronouncements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, <I>&#147;Accounting for Uncertainty in Income
Taxes &#151; an interpretation of FASB Statement No.&nbsp;109&#148; </I>(FIN 48), to create a single model to address
accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after December&nbsp;15, 2006. The Company
will adopt FIN 48 as of January&nbsp;1, 2007, as required. The cumulative effect of adopting FIN 48 will
be recorded in retained earnings. While the company is still evaluating the impact of adoption of
FIN 48 on its consolidated financial statements, it believes that adoption of FIN 48 will increase
the liabilities accrued for uncertainty in income taxes at December&nbsp;31, 2006 by $0 to $1.3&nbsp;million
with a corresponding decrease in retained earnings at January&nbsp;1, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued Statement of Financial Accounting Standards No.&nbsp;157, &#147;Fair Value
Measurements&#148; (&#147;SFAS No.&nbsp;157&#148;), which defines fair value, established a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair value
measurements. SFAS No.&nbsp;157 does not require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit fair value measurements. SFAS No.&nbsp;157
emphasizes that fair value is a market-based measurement that should be determined based on the
assumptions that market participants would use in pricing an asset or liability. Companies will be
required to disclose the extent to which fair value is used to measure assets and liabilities, the
inputs used to develop the measurements, and the effect for fiscal years beginning after November
15, 2007. The Company has not determined the effect, if any, the adoption of SFAS No.&nbsp;157 will have
on the Company&#146;s financial position and results of operations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Stock Compensation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;16, 2004, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;123 (R) (revised 2004), <I>Share-Based Payment, </I>which is a revision of
SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation. </I>SFAS No.&nbsp;123(R) supersedes Accounting
Principles Board (APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees </I>(&#147;Opinion No.&nbsp;25&#148;),
and amends SFAS No.&nbsp;95, <I>Statement of Cash Flows. </I>Generally, the approach in SFAS No.&nbsp;123(R) is
similar to the approach described in SFAS No.&nbsp;123. However, SFAS No.&nbsp;123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized on
the income statement as an expense based on fair values. Pro forma disclosure is no longer an
alternative. The Company adopted SFAS No.&nbsp;123(R) on January&nbsp;1, 2006 using the modified-prospective
method. As allowed under the modified-prospective method, the financial results for prior periods
have not been restated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Prior to January&nbsp;1, 2006, the Company accounted for its share-based payments to employees using
Opinion No.&nbsp;25&#146;s intrinsic value method and, as such, generally recognized no compensation cost for
employee stock options, as permitted by SFAS No.&nbsp;123. As a result of adopting SFAS 123(R) for the
year ended December&nbsp;31, 2006, the Company recognized an additional $218,000 of compensation expense
than had we continued to account for share-based compensation under SFAS 123. The impact on
earnings was $140,000, net of taxes, or $.04 per basic and diluted share. Prior to the adoption of
SFAS No.&nbsp;123(R), the Company presented all tax benefits resulting from the exercise of stock
options as operating cash inflows in the consolidated statements of cash flows, in accordance with
the provisions of the Emerging Issues Task Force (&#147;EITF&#148;) Issue No.&nbsp;00-15, &#147;Classification in the
Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a
Non-qualified Employee Stock Option.&#148; SFAS No.&nbsp;123(R) requires the benefits of tax deductions in
excess of the recognized compensation cost for those options to be classified as financing cash
inflows rather than operating cash inflows, on a prospective basis. This excess amount was $27,110,
$660,000 and $411,000 for the years ended December&nbsp;31, 2006, 2005 and 2004, respectively. In
accordance with the accounting treatment of SFAS No.&nbsp;123(R), the 2006 amount is shown as &#147;Tax
benefit on exercise of non-qualified stock options&#148; in the consolidated statement of cash flows as
a financing activity. The 2005 amount is included in the operating section of the consolidated
statement of cash flows as &#147;Tax benefit on exercise of non-qualified stock options.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Stock activity in 2006 generally includes transactions pertaining to stock awarded to non-employee
directors as well as stock awarded and forfeited via the Company&#146;s Omnibus Stock and Employee Stock
Purchase Plans. Activity is accounted for by comparing the market value of the awards, as required
by the Plans, to the cost of the treasury shares used for these transactions. The difference is
recorded to additional paid-in capital. The stock awarded to non-employee directors is expensed
immediately as there are no vesting requirements. The remaining stock awards have two different
vesting periods. One version of the award vests at the rate of 20% per year over a five year
vesting period. The other version vests at the rate of 100% at the end of a two year vesting
period. The Company records the expense during the vesting periods of the awards based on the
number of eligible shares and the market value of the shares on the grant date. Stock
compensation expense is included in general and administrative expense. The following table
presents the pro forma net earnings and net earnings per share for the years ended December&nbsp;31,
2005 and 2004, as if the Company had applied the provisions of SFAS No.&nbsp;123(R) during that period:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Pro Forma</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Total stock-based employee compensation expense
recorded for all awards, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,057,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards, net of
related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,488,999</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,243,583</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,114,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,157,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Stock Compensation &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has not issued any options since 2003.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Reclassifications</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Certain amounts in the prior year financial statements have been reclassified to conform with the
current year presentation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Contingencies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;24, 2007, Mr.&nbsp;Richard P. Pogozelski, a purported stockholder of the Company, filed a
complaint styled Pogozelski v. Blair Corporation, (Civil Action No.&nbsp;2695-N) in the Court of
Chancery of the State of Delaware in New Castle County against the Company, certain members of our
board of directors and Appleseed&#146;s. The complaint alleged, among other things, that the Company&#146;s
directors have not acted reasonably and breached their fiduciary duties by failing to maximize
stockholder value with regard to the proposed acquisition by Appleseed&#146;s. Among other things, the
complaint sought class action status, a court order enjoining the Company and our directors from
proceeding with or consummating the proposed acquisition of the Company by Appleseed&#146;s,
compensatory damages, costs and expenses and the payment of attorneys&#146; and experts&#146; fees. The
Company believes that the complaint is without merit and intends to defend this lawsuit vigorously.
On March&nbsp;1, 2007, we and the other defendants filed a motion to dismiss the class action complaint
for failure to state a claim upon which relief can be granted. As of the date of these financial
statements, the court has not ruled on this motion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is not involved in any other pending legal proceedings other than legal proceedings
occurring in the ordinary course of business. Management believes that none of these legal
proceedings, individually or in the aggregate, will have a material adverse impact on the results
of operations or financial condition of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>2. Financing Arrangements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Effective September&nbsp;30, 2006 the Company entered into a Second Amendment to its $75&nbsp;million credit
facility. The Second Amendment modified certain provisions in the credit facility which included
the fixed charge coverage ratio and borrowing base limitations on the usage of the facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has access to a $75&nbsp;million credit facility pursuant to the terms of an amended and
restated credit agreement dated as of July&nbsp;15, 2005 by, between and amongst the Company, and PNC
Capital Markets, Inc. as lead arranger and PNC Bank, N.A. and three other lending institutions. The
amended and restated credit agreement provides a senior secured first lien revolving credit
facility not to exceed $75&nbsp;million, subject to an asset based borrowing formula, which matures in
July&nbsp;2010. Upon the occurrence of an Event of Default (as such term is defined in the amended and
restated credit agreement), PNC and/or the other lending institutions may declare a default of the
credit agreement and accelerate the loan pursuant to the terms of the credit agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The collateral for the revolving credit facility consists of certain of the Company&#146;s and its
subsidiaries&#146; assets, including, but not limited to, inventory, equipment, furniture, general
intangibles, intellectual property, fixtures, certain real property and improvements, the common
stock of the Company&#146;s domestic subsidiaries, as well as a negative and double negative pledge on
the assets of the Company&#146;s direct and indirect foreign subsidiaries. At the Company&#146;s option, any
loan under the revolving credit facility shall bear interest at the Euro-Rate (calculated with
reference to a LIBOR-based formula in accordance with the amended and restated credit agreement) or
a Base Rate (as that term is defined in the amended and restated credit agreement), plus a margin,
such margin to be calculated in accordance with a performance based pricing grid. The Company is
also required to pay a commitment fee and reasonable out-of-pocket expenses pursuant to the amended
and restated credit agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had no borrowings outstanding under its $75&nbsp;million credit
facility. The Company had letters of credit totaling $2.7&nbsp;million outstanding, which reduces the
amount of borrowings available under the credit facility. Outstanding letters of credit totaled
$19.6&nbsp;million at December&nbsp;31, 2005. Letters of credit are comprised mainly of two categories. One
such category is comprised of commercial letters of credit used for the purpose of purchasing goods
from non-U.S. suppliers. The other category is comprised of performance guarantees for insurance
bonding purposes. All letters of credit have a term of one year or less.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>2. Financing Arrangements &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, the Company was in compliance with all debt covenants associated with the
Second Amendment to its credit facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Interest paid during 2006, 2005 and 2004 was approximately $0, $1,903,000 and $339,000,
respectively. The Company had no borrowings outstanding during 2006. The higher level of interest
in 2005 is primarily due to outstanding borrowings during the third and fourth quarters as the
Company partially funded its August&nbsp;2005 stock tender offer with debt. The debt was repaid with
the proceeds from the sale of the Company&#146;s credit portfolio in November&nbsp;2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>3. Accrued Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Accrued expenses consist of:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #FFFFFF"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>7,262,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,382,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contribution to profit sharing and retirement plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>682,683</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,095,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voluntary Separation Program</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes, other than taxes on income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>741,353</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,397,229</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,339,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>11,083,565</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,994,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The decrease in accrued employee compensation is primarily the result of reductions in accruals for
vacation, incentive and severance. In December&nbsp;2006, the Company changed its vacation policy
whereby associates are no longer permitted to carryover unused vacation from year to year. This
change resulted in a one time payout of $2.4&nbsp;million. The prior year accrued employee
compensation included an incentive accrual of $3.9&nbsp;million. Earnings in 2006 did not reach the
threshold payout level for an incentive to be paid; therefore the current year accrued employee
compensation has a zero liability for this component.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>4. Leases</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Capital Leases</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company leases certain data processing equipment under agreements that expire in various years
through 2008. The following is a schedule by year of future minimum capital lease payments required
under capital leases that have initial or remaining noncancelable lease terms in excess of one year
as of December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,694</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less amount representing interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(999</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value of minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term portion of capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company entered into capital lease obligations amounting to $0 and $27,843 in 2006 and
2005, respectively. Capital leases are amortized over the life of the underlying leases, generally
3 to 5&nbsp;years, and the related expense is included with depreciation expense. Amortization expense
was $11,413, $57,263 and $278,906 for the years ended December&nbsp;31, 2006, 2005 and 2004.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Leases</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company leases certain data processing, office and telephone equipment under agreements that
expire in various years through 2010. The Company has also entered into several lease agreements
for buildings, expiring in various years through 2012. Rent expense for the Company for 2006, 2005
and 2004 was $3,521,906, $3,522,071 and $3,474,281, respectively. The following is a schedule by
years of future minimum rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,582,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,813,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,333,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,066,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,237,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Stockholders&#146; Equity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Earnings Per Share and Weighted Average Shares Outstanding</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;20, 2005, the Company commenced a tender offer at $42.00 per share, for the purchase of
4.4&nbsp;million shares of its outstanding common stock, or approximately 53% at an aggregate price of
$184.8&nbsp;million. The tender offer expired on August&nbsp;16, 2005. The total cost of $184.8&nbsp;million,
plus related expenses of $4.2&nbsp;million, were recorded as treasury stock effective August&nbsp;16, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following per share results reflect the reduction of weighted average shares outstanding for
2006 and 2005 resulting from the tender offer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table sets forth the computations of basic and diluted earnings per share as required
by Statement of Financial Accounting Standards No.&nbsp;128:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Numerator:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>216,210</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,902,522</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,172,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Contingently issueable shares &#151; Omnibus
Stock Purchase Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(46,836</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,286</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65,136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,855,686</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,579,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,107,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee stock options and stock grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89,106</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,944,792</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,699,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,241,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.06</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.06</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company declared dividends of $1.20 per share or $4,690,188, of which $4,495,034 was
paid directly to shareholders and charged to retained earnings. In 2005 the Company declared
dividends of $.75 per share and in 2004 the Company declared dividends of $.60 per share or
$4,246,109 and $4,904,606 respectively, of which $4,066,297 and $4,722,362 was paid directly to
shareholders and charged to retained earnings. The remaining dividends declared, $195,154 in 2006,
$179,812 in 2005 and $182,244 in 2004 were associated with the shares of stock held by the Company
according to the provisions of the restricted stock awards. These remaining dividends were applied
against the receivable from stock plans and were charged to compensation in the financial
statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restricted Stock Awards</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">During 2000, the Company adopted, with stockholder approval, an Omnibus Stock Plan (Omnibus Plan)
that provided for 750,000 shares of the Company&#146;s treasury stock to be reserved for sale and
issuance to employees at a price to be established by the Omnibus Stock Plan Committee. In April
2003, the Company reserved, with stockholder approval, 400,000 additional shares. At December&nbsp;31,
2006, 2005 and 2004, 469,728, 530,278 and 562,914 shares were available to be issued under the
Plan, respectively. The difference between the purchase price and the market price of the shares
awarded is recorded as compensation expense over a vesting period of 7&nbsp;years. Under the Omnibus
Plan, no awards were granted in 2006, 2005 or 2004. Approximately one third of the award amount
is set up as a receivable (which is netted against shareholders&#146; equity) and is paid off with the
application of dividends on such stock or by cash payment from the employee after seven years from
the date of the award. The related receivable was $453,787 and $714,654 as of December&nbsp;31, 2006
and 2005. Amortization expense of prior awards was $160,770, $133,210 and $147,145 in 2006, 2005
and 2004, respectively. Total compensation expense including the application of dividends to
receivable for restricted stock awards recognized for 2006, 2005 and 2004 was $317,230, $222,830
and $135,107, respectively. The total income tax benefit recognized in the income statement for
restricted stock awards was $107,858, $79,773 and $49,179 for 2006, 2005 and 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table represents a summary of the status of the Company&#146;s restricted stock activity
under the Omnibus Plan as of December&nbsp;31, 2005, and changes during the twelve months ended December
31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">Nonvested Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Grant-Date Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,150</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.47</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, there was approximately $373,235 of unrecognized compensation cost related
to nonvested restricted stock awards granted under the plan. The cost is expected to be recognized
over a weighted average period of 2.88&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Five Year Vesting Stock Awards</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2006, 2005 and 2004, under the provisions of certain awards granted to executive officers and
other associates, shares vest at the rate of 20% per year over the five-year vesting period. The
Company records equity and expense during the vesting periods of the awards based on the number of
eligible shares and the market value of the shares on the grant date. Upon vesting, shares are
issued out of treasury stock. The Company recorded expense of $1,194,723, $1,303,387 and $489,232
in 2006, 2005 and 2004, respectively. When the awards vest, the Company also pays a cash bonus to
the recipient to assist in the income tax obligation related to the awards. Total compensation
expense recognized in income was $1,608,820, $2,434,392 and $977,967 in 2006, 2005 and 2004,
respectively. The decrease in compensation expense was due to the immediate vesting of stock
awards for certain executive officers who separated from the Company in 2005. No corresponding
expense was recorded in 2006. The total income tax benefit recognized in the income statement for
five year vesting stock awards was $546,999, $871,269 and $362,961 for 2006, 2005 and 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table represents a summary of the status of the Company&#146;s five-year vesting stock
award activity under the Omnibus Plan as of December&nbsp;31, 2005, and changes during the twelve months
ended December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nonvested Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Grant-Date Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,814</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32.73</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Five
Year Vesting Stock Awards &#151; (Continued)</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, there was approximately $1,970,288 of unrecognized compensation cost
related to nonvested five-year vesting stock awards granted under the plan. In addition,
unrecognized compensation cost associated with the cash bonus to the recipient to assist in the
income tax obligation related to the awards was $490,265 at December&nbsp;31, 2006. The cost is
expected to be recognized over a weighted average period of 4.0&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the five-year vesting award stock activity under the Omnibus Plan is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>18,400, 5,000 and 30,000</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">18,575, 5,000, 15,350, 5,000 and 7,821</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">27,275, 15,000 and 13,925</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Market value per share at date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$40.95, $24.64 and $29.24</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$36.50, $30.35, $39.79, $39.79 and $39.79</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">$24.20, $26.74 and $36.50</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average market value per share at date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$32.84</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$37.70</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$27.93</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares canceled and forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>12,530</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4,660</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,525</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Original price per share of cancelled shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$30.35, $39.79, and $40.95</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$21.44, $24.58, $24.20, and $36.50</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">$21.44, and $24.20</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average price per share of cancelled shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$37.52</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$28.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$23.29</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Two Year Vesting Stock Awards</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2006, under the provisions of certain stock awards granted to non-executive officers, a new type
of cliff-vesting award was granted. The provisions of this award note that shares vest at the rate
of 100% at the end of the two-year vesting period. The Company records equity and expense during
the vesting periods of the awards based on the number of eligible shares and the market value of
the shares on the grant date. Upon vesting, shares are issued out of treasury stock. These awards
were granted on December&nbsp;22, 2006. Using a mid-month convention for amortization of these awards,
no expense or corresponding income tax benefit was recognized in the income statement for 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table represents a summary of the status of the Company&#146;s two-year vesting stock
award activity under the Omnibus Plan as of December&nbsp;31, 2005, and changes during the twelve months
ended December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nonvested Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Grant-Date Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested shares at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32.60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, there was approximately $301,550 of unrecognized compensation cost related
to nonvested two-year vesting stock awards granted under the plan. The cost is expected to be
recognized over a weighted average period of 2&nbsp;years.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Non-Qualified Stock Options</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Under the Omnibus Plan, the Company also may provide non-qualified stock options. The price of
option shares granted under the Omnibus Plan shall not be less than the fair market value of common
stock on the date of grant, and the term of the stock option shall not exceed ten years from date
of grant. Options vest over a three-year period. The Company has not issued options since 2003.
All remaining unvested share options as of the beginning of the year
became vested in 2006. The total fair value of shares vested during three years ended December&nbsp;31, 2006, 2005 and 2004,
was $10.63, $8.83, and $7.40, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the stock options activity in the Company&#146;s Omnibus Plan is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Intrinsic</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at January&nbsp;1, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">356,993</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">21.05</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Granted in 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exercised in 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(128,547</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19.62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forfeited in 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7,637</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at December&nbsp;31, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">220,809</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21.85</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3,049,372</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Granted in 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>&#151;</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>&#151;</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exercised in 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(103,201</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21.55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forfeited in 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(6,000</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at December&nbsp;31, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">111,608</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22.02</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1,888,407</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Granted in 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>&#151;</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>-</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exercised in 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>(17,020</B></TD>
    <TD nowrap valign="top"><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>22.76</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forfeited in 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>&#151;</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>&#151;</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at December&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>94,588</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top"><B>$</B></TD>
    <TD align="right" valign="top"><B>21.89</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top"><B>$</B></TD>
    <TD align="right" valign="top"><B>1,027,226</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The exercise price of options outstanding ranged from $17.10 to $23.60, with a weighted-average
remaining contractual life of 5.87&nbsp;years at December&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The intrinsic value of options exercised in the plan during 2006, 2005 and 2004 was $284,779,
$1,887,253 and $1,078,972, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The aggregate intrinsic value of options outstanding in the preceding table represents the total
pre-tax intrinsic value, based on the closing stock prices of $32.75, $38.94 and $35.66 as of
December&nbsp;31, 2006, 2005 and 2004 respectively, which would have been received by the option holders
had all option holders exercised their options as of that date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Intrinsic</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Exercisable at the end of the year:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">December&nbsp;31, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">69,041</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">20.58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1,041,138</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">December&nbsp;31, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">72,167</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">21.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1,283,129</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>December&nbsp;31, 2006</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>94,588</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top"><B>$</B></TD>
    <TD align="right" valign="top"><B>21.89</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top"><B>$</B></TD>
    <TD align="right" valign="top"><B>1,027,226</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Long Term Compensation Program</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As part of the Company&#146;s long-term incentive program, executive officers are awarded performance
share opportunities based on the achievement of incentive goals over a three-year period. Each
year a new three-year plan and targeted performance levels are adopted. The Compensation Committee
will determine whether the officers receive shares, cash or combination thereof based on the
initial award value. The award is a fixed dollar value award based on the annual award date. The
actual performance shares to be issued will be based on the market price of the stock at the date
of issuance (at the end of the three-year plan). Total compensation is based on the projected
achievement of predetermined target levels, which is recognized ratably over the three year period.
After considering finacial results for the respective three year periods, the plans were not on
pace to achieve the threshold payout based on income before income taxes. Therefore, the liability
for this award of $679,720 was reduced to zero at December&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>6. Income Taxes</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The liability method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial statement and
tax basis of assets and liabilities using the enacted tax rate(s) expected to apply to taxable
income in the periods in which the deferred tax liability or asset is expected to be settled or
realized.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company accounts for the tax benefit from the exercise of non-qualified stock options by
reducing its accrued income tax liability and increasing additional paid-in capital.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The components of income tax (benefit)&nbsp;expense are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #FFFFFF"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currently payable:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,156,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,914,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(37,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,152,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,743,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,818,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(666,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,583,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The differences between total tax expense and the amount computed by applying the statutory Federal
income tax rate of 34% for 2006 and 35% for 2005 and 2004 to income before income taxes are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #FFFFFF"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory rate applied to pretax (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(153,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,178,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of Federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(157,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax impact of deferred tax rate change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(49,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prior years foreign tax credit/WOTC credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(116,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(286,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Permanent differences &#151; tax exempt interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(176,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(371,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(135,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(15,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">848,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(101,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(666,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,583,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has approximately $10.1&nbsp;million of Pennsylvania net operating loss carryforwards that
can be used to offset future Pennsylvania taxable income. A deferred tax asset has been established
based on the $10.1&nbsp;million net operating loss available to be carried forward. The deferred tax
asset is offset by a valuation allowance because it is uncertain as to whether the Company will
generate sufficient income in the state of Pennsylvania in the future to absorb the net operating
losses before they expire. Of the total Pennsylvania net operating loss, $3.4&nbsp;million will expire
in 2021 with the balance of $6.7&nbsp;million expiring in 2025.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Income
taxes paid during 2006, 2005 and 2004 amounted to $4,270,853, $3,956,175 and $6,703,349,
respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>6. Income Taxes &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Components of the deferred tax assets and liabilities under the liability method are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #FFFFFF"><B>December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current deferred tax assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Doubtful Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>201,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Returns allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,570,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,334,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>364,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State net operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>364,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vacation pay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>354,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Group insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>424,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">543,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued severance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>990,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,125,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Gross current deferred tax assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,392,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,003,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(364,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(110,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,028,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,893,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current deferred tax liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2,205,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,462,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,080,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Gross current deferred tax liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,385,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,162,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net current deferred tax asset</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,643,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">731,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Long-term deferred tax liability:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,676,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,582,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>7.&nbsp;Other Revenue</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Other revenue consists of:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #FFFFFF"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance charges on time payment accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>192,639</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,550,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,165,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,270,652</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,247,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,732,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,386,622</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,274,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,817,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,849,913</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,072,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,714,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The decrease in finance charges in 2006 compared to 2005 and 2004 is directly related to the sale
of the credit portfolio in November&nbsp;2005. Subsequent to the sale, and prior to the third quarter
of 2006, the Company did not recognize finance charges on time payment accounts. As a result of
Amendment Number 2 to the ADS Credit Program Agreement, the Company receives 50% percent of finance
charges and late payment fees assessed on Full Recourse Accounts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As part of the marketing and servicing alliance under the 10&nbsp;year Program Agreement, the Company
receives certain monetary benefits arising from credit sales, which are included in this
commissions line item. In addition, commissions earned result from an arrangement under which a
third party sells jewelry to the Company&#146;s customers and all related significant activities are
conducted by, and are the responsibility of, the third party. The Company receives payments from
the customer and makes remittances, net of commissions, to the third party.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Other items are comprised of items such as customer list rentals, return shipping charges, and
package insert income.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>8. Business Segment and Concentration of Business Risk</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company operates as one segment in the business of selling women&#146;s and men&#146;s fashion wearing
apparel and accessories and home furnishing items. Specifically, the segment includes the
Womenswear, Menswear, Home, and Stores product lines.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s segment reporting is consistent with the presentation made to the Company&#146;s chief
operating decision-maker. The Company&#146;s customer base is comprised of individuals throughout the
United States and is diverse in both geographic and demographic terms. Advertising is done mainly
by means of catalogs, direct mail letters and the internet, which offer the Company&#146;s merchandise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>9. Long-Lived Assets Classified as Held for Sale</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2006, the Company made the decision to sell its facility located in
Starbrick, Pennsylvania. The Company believes that the sale will be completed in 2007. Assets
Held for Sale of $700,000 and $1,236,071 at December&nbsp;31, 2006 and 2005 approximate fair value.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>10. Gain on sale of Long-Lived Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;21, 2006, the Company sold its liquidation outlet store located in Erie, Pennsylvania.
Proceeds from the sale amounted to $1.3&nbsp;million. After considering the net book value of the asset
and costs to sell the property, the transaction resulted in a gain of approximately $10,000. The
gain is recorded in Other (income)&nbsp;expense, net in the Consolidated Statement of Income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>11. Separation Programs</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2001, the Company accrued and charged to expense $2.5&nbsp;million in separation
costs. The costs were charged to General and Administrative Expense in the income statement. The
$2.5&nbsp;million charge represents severance pay, related payroll taxes and medical benefits due to 56
eligible employees who accepted a voluntary separation program rather than relocate or accept other
positions in the Company. The program was offered to eligible employees of the Blair Mailing Center
from which the merchandise returns operations have been relocated and the mailing operations have
been outsourced. As of the end of the second quarter of 2006, all of the $2.5&nbsp;million has been
paid. This liability is considered satisfied.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2005, the Company accrued and charged to expense $933,000 in separation costs. The costs were
charged against the gain on the sale of the credit portfolio in the income statement. The $933,000
charge represents severance pay, related payroll taxes and medical benefits for personnel whose
services were no longer required after the sale of the credit portfolio. As of December&nbsp;31, 2006,
$131,000 of the $933,000 remains unpaid and recognized as an accrued liability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In 2005, in addition to the $933,000 of separation costs related to the sale of the credit
portfolio, the Company accrued and charged to expense an additional $2.6&nbsp;million in separation
costs. These charges are in connection with the previously announced changes to the Company&#146;s
organizational structure and leadership team. Going forward, the Company&#146;s business operations will
consist of three principal groups: Merchandising and Design, Merchandise Procurement and Marketing
Services. The Company has been refocusing its energies on its core businesses in an effort to
better position itself for long-term growth and increase shareholder value. In 2006, the Company
accrued and charged to expense $4.5&nbsp;million in separation costs. The costs were charged to General
and Administrative Expense in the Consolidated Statement of Income. The aggregate $7.1&nbsp;million
charge represents severance pay, related payroll taxes and medical benefits due to former employees
who have separated from the Company. As of December&nbsp;31, 2006, $2.5&nbsp;million of the $7.1&nbsp;million
remains unpaid and recognized as an accrued liability.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>11. Separation Programs &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2006, the Company announced that it will close its leased Returns Center
in Erie, Pennsylvania, and move all returns operations to the Blair Distribution Complex in Irvine,
Pennsylvania, located approximately seven miles from its Warren headquarters. The move is expected
to be completed by March&nbsp;31, 2007. Technological improvements and productivity enhancements at its
Distribution Complex have made the transfer possible and will enable the Company to process returns
and redistribute merchandise to its inventory more efficiently. The Company accrued and charged to
expense $91,000 in separation costs during the fourth quarter. This amount represents a pro-rata
share of the estimated total liability which will be recorded over the period from the date of
announcement to the date the move is completed. The costs were charged to General and
Administrative Expense in the income statement. The $91,000 charge represents severance pay,
related payroll taxes and medical benefits for those associates who do not elect to relocate, but
stay with the Company until the move is complete. As of December&nbsp;31, 2006, all of the $91,000
remains unpaid and recognized as an accrued liability. The Company will record a provision related
to the lease of the Erie Returns Center of approximately $525,000 as of the March&nbsp;31, 2007 cease
use date.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the charges to income and related accruals as of December&nbsp;31, 2006,
2005 and 2004 pertaining to the separation programs described above. The total liability is
recognized in the balance sheet as accrued expenses.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Credit Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Organizational</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Blair Mailing Center</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Structure</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Erie Returns Center</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at January
1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">762,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December
31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">538,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,184,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,482,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,166,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December
31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">131,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>12. Quarterly Results of Operations (Unaudited)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following is a summary of unaudited quarterly results of operations for the years
ended December&nbsp;31, 2006 and 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15">Quarter Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15">Quarter Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">March 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">June 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">March 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">June 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December 31</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">102,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">115,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">119,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">107,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">120,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">98,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">130,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic (loss)
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted (loss)
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.87</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>

</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements &#151; (Continued)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>12. Quarterly Results of Operations (Unaudited) &#151; Continued</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Quarter ended December&nbsp;31, 2006 includes additional net loss of $76,000, $.02 per basic and diluted
share. The additional net loss and decrease in basic and diluted earnings per share in the quarter
was due to increases in the provisions for returns resulting from actual returns experience
exceeding prior estimates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The per share results for the first and second quarters of 2005 do not reflect the reduction of
weighted average shares outstanding resulting from Blair&#146;s tender offer for the repurchase of 4.4
million outstanding shares on August&nbsp;16, 2005. The Company had 3.9&nbsp;million shares of common stock
outstanding at December&nbsp;31, 2006 and December&nbsp;31, 2005, compared to 8.2&nbsp;million shares prior to
completion of the tender offer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net income and earnings per share results for the fourth quarter of 2005 were favorably affected by
the one-time gain of $27.7&nbsp;million (pre-tax) from the sale of Blair&#146;s credit portfolio or $4.61 per
basic share and $4.49 per diluted share.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Net income for the third and fourth quarters of 2005 was negatively impacted by expenses of $3.8
million (pre-tax) and $1.1&nbsp;million (pre-tax), respectively, associated with the Company&#146;s tender
offer and severance costs. Expenses associated with the tender offer include the amortization of
loan origination fees and interest expense related to a lending facility utilized to finance the
tender offer. Basic and diluted earnings per share for the third quarter of 2005 were negatively
affected by $.32. Basic and diluted earnings per share for the fourth quarter were negatively
affected by $.19 and $.18, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>13. Subsequent Event</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;23, 2007, Blair Corporation, a Delaware corporation (the &#147;Company&#148;), BLR Acquisition
Corp., a Delaware corporation (&#147;Merger Sub&#148;), and Appleseed&#146;s Topco, Inc., a Delaware corporation
and portfolio company of Golden Gate Capital (&#147;Appleseed&#146;s&#148;), entered into an Agreement and Plan of
Merger (the &#147;Merger Agreement&#148;) pursuant to which Appleseed&#146;s will acquire all of the outstanding
shares of Company common stock for $42.50 per share in cash, without interest (&#147;Merger
Consideration&#148;), or approximately $173.6&nbsp;million in the aggregate. In addition, each outstanding
unvested restricted share of the Company will be converted into the right to receive cash in an
amount equal to the Merger Consideration, and the holders of all outstanding options to acquire
shares of Company common stock will receive an amount in cash equal to the excess, if any, of the
Merger Consideration over the per share exercise price of the option. Under the terms of the Merger
Agreement, the Company is to be acquired by Appleseed&#146;s through a merger of Merger Sub and the
Company, with the Company as the surviving corporation (the &#147;Merger&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The parties currently anticipate consummating the Merger in the Spring of 2007. Upon the closing of
the Merger, shares of the Company&#146;s common stock would no longer be listed on the AMEX. The
consummation of the Merger is subject to the approval of the Company&#146;s stockholders, and
satisfaction of other customary closing conditions. Pursuant to the terms of the Merger Agreement,
the Company was permitted to solicit additional proposals to acquire the Company for a period of 30&nbsp;days
following the date of the Merger Agreement. The Board of Directors of the Company, with assistance
of its independent advisors, solicited proposals during this period,
but did not receive any proposals.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Schedule&nbsp;II</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Valuation and Qualifying Accounts<BR>
December&nbsp;31, 2006</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">COLUMN A</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">COLUMN B</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">COLUMN C</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">COLUMN D</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">COLUMN E</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">ADDITIONS-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">BALANCE</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">BALANCE AT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">CHARGED TO COSTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">AT END</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">BEGINNING OF PERIOD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">AND EXPENSES</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">DEDUCTIONS- DESCRIBE</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">OF PERIOD</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2006:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(customer accounts receivable):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">544,000 </TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">25,199 </TD>
    <TD nowrap>(B1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">542,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For gift cards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,009,355 </TD>
    <TD nowrap>(E)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,211,355 </TD>
    <TD nowrap>(F)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">798,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For estimated loss on returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,602,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,138,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60,564,605 </TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,176,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,625,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,691,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,801,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,516,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(merchandise inventories)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">For obsolete inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">770,535 </TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,125,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,962,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,571,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,516,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(customer accounts receivable):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,826,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">11,669,552</TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">45,472,955</TD>
    <TD nowrap>(B2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For estimated loss on returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,098,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,593,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62,089,402</TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,602,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,924,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,262,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,562,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,625,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(merchandise inventories)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">For obsolete inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,584,222</TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,524,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">73,747,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,146,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,125,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(customer accounts receivable):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,349,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">22,664,048</TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">29,187,091</TD>
    <TD nowrap>(B2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,826,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">For estimated loss on returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,123,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,666,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">73,691,543</TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,098,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,473,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,330,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,878,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,924,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account
(merchandise inventories)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">For obsolete inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,329,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6,329,398</TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,073,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">100,659,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">109,208,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,524,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (A) &#151; Current year provision for doubtful accounts, charged against income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (B1) &#151; Full Recourse Accounts charged off, net of recoveries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 3pt">Note (B2) &#151; Accounts charged off, net of recoveries. On November&nbsp;4, 2005, the Company sold
its proprietary credit program to an industrial bank subsidiary of Alliance Data Systems
Corporation. The proceeds of the sale were for par plus a premium. The sales transaction
resulted in reversing the then allowance for doubtful accounts of $23.2&nbsp;million. The
balance of the amount in this column ($22.3&nbsp;million) relates to accounts charged off, net of
recoveries, prior to the sale of the credit portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (C) &#151; Sales value of merchandise returned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (D) &#151; Inventory liquidated, net of proceeds received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (E) &#151; Current year provision for gift cards, charged against income
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note (F) &#151; Gift cards redeemed.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-27<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>2
<FILENAME>l24091aexv21.htm
<DESCRIPTION>EX-21
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-21</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 21</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SUBSIDIARIES OF BLAIR CORPORATION</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Blair Holdings Incorporated (a Delaware corporation); Blair Factoring Company (a Delaware
corporation); Blair Payroll LLC (a Delaware limited liability company); Blair Credit Services Corp.
(a Delaware corporation); Blair International Holding, Inc. (a Delaware corporation); Blair
International Limited (a Hong Kong corporation); Blair International Singapore Pte. Ltd. (a
Singapore corporation); JLB Service Bank (a Delaware corporation); Allegheny Trail Corporation (a
Delaware corporation).
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>l24091aexv23.htm
<DESCRIPTION>EX-23
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-23</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 23</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the Registration Statement on Form&nbsp;S-8 (No.
333-41770) dated July&nbsp;19, 2000 pertaining to the Blair Corporation Employee Stock Purchase Plan and
in the Registration Statement on Form&nbsp;S-8 (No.&nbsp;333-41772) dated July&nbsp;19, 2000 pertaining to the
Blair Corporation 2000 Omnibus Stock Plan and in the Registration Statement on Form&nbsp;S-8 (No.
333-118195) dated August&nbsp;8, 2004 pertaining to the Blair Corporation 2000 Omnibus Stock Plan of our
reports dated March&nbsp;15, 2007, with respect to the consolidated financial statements and schedule of
Blair Corporation and Subsidiaries, Blair Corporation and Subsidiaries management&#146;s assessment of
the effectiveness of internal control over financial reporting, and the effectiveness of internal
control over financial reporting of Blair Corporation and Subsidiaries, included in the Annual
Report (Form 10-K) for the year ended December&nbsp;31, 2006.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">     /s/ Ernst &#038; Young LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Buffalo, New York<BR>
March&nbsp;15, 2007

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>l24091aexv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 31.1</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Adelmo S. Lopez, certify that:
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this annual report on Form 10-K of Blair Corporation;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, this annual report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record, process, summarize and report
financial information; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal control over
financial reporting.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="center">/s/ ADELMO S. LOPEZ
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="2" align="center">&nbsp;&nbsp;&nbsp; ADELMO S. LOPEZ&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">President and Chief Executive Officer<br>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>l24091aexv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 31.2</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Larry J. Pitorak, certify that:
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this annual report on Form 10-K of Blair Corporation;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, this annual report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record, process, summarize and report
financial information; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal control over
financial reporting.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16,  2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="center">
/s/ LARRY J. PITORAK</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">&nbsp;&nbsp;&nbsp; LARRY J. PITORAK</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">Senior Vice President, Chief Financial Officer<br>
and Chief Administrative Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
</div>

<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>l24091aexv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In connection with the Annual Report of Blair Corporation (the &#147;Company&#148;) on Form 10-K for the
period ending December&nbsp;31, 2006 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Adelmo S. Lopez, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</DIV></TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="center">/s/ ADELMO S. LOPEZ</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">&nbsp;&nbsp;&nbsp;&nbsp; ADELMO S. LOPEZ</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906, or other document
authentication, acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement required by section 906, has been provided
to Blair Corporation and will be retained by Blair Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>7
<FILENAME>l24091aexv32w2.htm
<DESCRIPTION>EX-32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 32.2</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In connection with the Annual Report of Blair Corporation (the &#147;Company&#148;) on Form 10-K for the
period ending December&nbsp;31, 2006 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Larry J. Pitorak, Senior Vice President, Chief Financial Officer and
Chief Administrative Officer of the Company, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as
adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</DIV></TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 16, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="center">/s/ LARRY J. PITORAK</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">&nbsp;&nbsp;&nbsp;&nbsp; LARRY J. PITORAK&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">Senior Vice President, Chief Financial Officer
and Chief Administrative Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906, or other document
authentication, acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement required by section 906, has been provided
to Blair Corporation and will be retained by Blair Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
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<TYPE>GRAPHIC
<SEQUENCE>8
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#0``[
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
