EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
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CONTACTS: |
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Blair Corporation
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Carl Hymans |
Larry Pitorak, Senior Vice President & CFO
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G.S. Schwartz & Co |
814-723-3600
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212-725-4500 |
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carlh@schwartz.com |
BLAIR CORPORATION REPORTS FOURTH QUARTER RESULTS
WARREN,
Pa., (February 16, 2007) — Blair Corporation (Amex: BL),
(www.blair.com), a national
multi-channel direct marketer of women’s and men’s apparel and home products, today announced
results for the fourth quarter and year ended December 31, 2006.
Net sales for the fourth quarter ended December 31, 2006 were $119.2 million, a decrease of $10.9
million or 8.4%, compared to the $130.1 million recorded for the fourth quarter of 2005. The
decline in net sales is attributable to a 4.5% decrease in average selling prices along with a 4.1%
reduction in unit volume. Average selling prices declined as the Company experienced higher than
normal sales of products at lower price points and corresponding margins.
The Company reported net income of $5.9 million, or $1.56 per basic and $1.52 per diluted share,
for the fourth quarter of 2006, compared to net income of $23.4 million or $6.02 per basic and
$5.87 per diluted share reported for the fourth quarter of 2005.
In November, 2005, Blair sold its credit portfolio to a third party provider. Net income and
earnings per share results for the fourth quarter and twelve months of 2006 reflect the impact of
the transition from the Company managing its proprietary credit program to having a third party
administer the Blair Credit program. Excluding the net results generated by the sale of the
portfolio net income for the fourth quarter of 2005 would have been $5.8 million, or $1.49 per
basic and $1.45 per diluted share.
Fourth quarter 2006 results reflect a decrease in general and administrative expenses of $7.4
million compared to fourth quarter 2005 levels, a 21.1% reduction. The reduction in expenses is
primarily attributable to operational efficiencies, the elimination of prior
year costs associated with Blair’s in-house credit program, and adjustments to several compensation plans that are based
on reported results.
Fourth quarter 2006 results were adversely impacted by a 1.5% increase in cost of goods sold as a
percentage of net sales over fourth quarter 2005 levels. This increase
is due to an unfavorable change in sales mix and resulting lower average selling prices. Higher
outbound freight expenses also contributed to the cost of goods increase. Advertising expenses for
the fourth quarter of 2006 declined by $873,000 or 2.5% from the comparable quarter in 2005.
However, advertising costs as a percent of net sales rose from 26.7% to 28.5% as a result of
changes in the Company’s circulation program and lower than expected sales.
Interest expense for the fourth quarter was $819,000 lower than the fourth quarter of 2005. In
2005, the Company incurred higher interest expense which was associated with the financing of its
$185 million tender offer.
Net sales for the year ended December 31, 2006 were $426.4 million, compared to $456.6 million
reported for the year ended December 31, 2005. This $30.2 million decrease in net sales is
primarily attributable to a 6% decline in average selling prices. In 2006, the Company’s
merchandising program included an assortment that was not as balanced with the historical variety
of fashions, styles and price points that our customers were accustomed to expect. This imbalance
reduced response rates and adversely impacted 2006 sales and profitability. 2006 sales were also
adversely impacted by lower proprietary credit sales and the mid-year termination of Blair’s
traditional letter mailing channel. Unit sales volume for 2006 approximated 2005 levels.
Net income and earnings per share for the year ended December 31, 2006, were $216,000, or $0.06 per
basic and diluted share, compared to $31.5 million, or $4.79 per basic share and $4.71 per diluted
share, reported for the year ended December 31, 2005. Excluding the net results generated by the
November 2005 sale of the credit portfolio, net income for the year ended 2005 would have been $7.5
million, or $1.14 per basic and $1.12 per diluted share.
General and administrative expenses for 2006 decreased by $18.7 million from $135.6 million to
$116.9 million compared to 2005. This reduction is primarily due to restructuring efforts to
generate operational efficiencies, elimination of prior year costs associated with Blair’s in-house
credit program, costs incurred in August of 2005 for the tender offer, and adjustments to several
compensation plans that are based on reported results.
Results were also adversely affected by an increase in advertising costs of $6.8 million or 5.7%
for 2006 compared to 2005. The increase in these costs reflects higher levels of circulation and
higher postage costs associated with the delivery of catalogs to customers.
Blair’s e-commerce channel generated $19.9 million and $93.7 million in net sales for the fourth
quarter and twelve months of 2006 respectively, compared to $21.9 million and $86.1 million for the
fourth quarter and twelve months of 2005.
Web site traffic for full-year 2006 increased 18.6% over 2005 levels, while web site conversion
rates and average order values remained steady. Revenue resulting from
investments in keyword searches rose over 60% above 2005 levels and revenue from natural search has
nearly doubled following an intensive web site optimization project.
The year-over-year increase reflects our customer’s interest in migrating to Blair.com and the
impact of user experience and technology initiatives designed to improve site functionality and
increase conversion rates.
Al Lopez, President and Chief Executive Officer of Blair, said, “2006 was a difficult year with
significant changes in the areas of merchandising, circulation, credit and staffing. The results
for the fourth quarter reflect actions taken earlier in the year to improve operational
efficiency.”
On Tuesday, January 23, 2007 Blair announced it had entered into a definitive merger agreement by
which Appleseed’s Topco, Inc. a portfolio company of Golden Gate Capital, will acquire all of the
outstanding shares of Blair Corporation common stock in an all cash transaction of $42.50 per
share, or approximately $171.5 million. The Board of Directors of the Company has unanimously
determined that the merger agreement is advisable and in the best interests of the Company’s
stockholders and recommends that stockholders vote for the adoption of the merger agreement. The
transaction, which is anticipated to close in the Spring of 2007, is subject to the approval of
Blair’s shareholders and other closing conditions, including regulatory review. Under the
agreement, Blair may solicit additional proposals for 30 days following January 23, 2007. The Board
of Directors of Blair, with the assistance of its independent advisors, is soliciting proposals
during this period. The agreement also includes provisions whereby Blair will not pay any dividends
during the interim period from the signing of the agreement and its closing.
ABOUT BLAIR
Headquartered in Warren, Pennsylvania, Blair Corporation sells a broad range of women’s and men’s
apparel and home products through direct mail marketing and its Web
site www.blair.com. Blair
Corporation employs approximately 1,900 associates (worldwide) and operates facilities and retail
outlets in Northwestern Pennsylvania as well as a catalog outlet in Wilmington, Delaware. The
Company, which has annual sales of approximately $425 million, is publicly traded on the American
Stock Exchange (Amex: BL). For additional information, please visit http://www.blair.com.
This release contains certain statements, including without limitation, statements containing the
words “believe,” “plan,” “expect,” “anticipate,” “strive,” and words of similar import relating to
future results of the Company (including certain projections and business trends) that are
“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected as a result of certain risks and
uncertainties, including but not limited to, changes in political and economic conditions, demand
for and market acceptance of new and existing products, as well as other risks and uncertainties
detailed in the most recent periodic filings of the Company with the Securities and Exchange
Commission.
—Financial table follows—
Blair Corporation and Subsidiaries
Consolidated Statements of Income
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(Unaudited) |
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(Unaudited) |
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Three Months Ended |
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Twelve Months Ended |
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December 31 |
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December 31 |
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2006 |
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2005 |
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2006 |
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2005 |
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Net sales |
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$ |
119,178,875 |
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$ |
130,125,987 |
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$ |
426,425,708 |
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$ |
456,625,397 |
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Other revenue |
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2,156,883 |
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4,258,580 |
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6,849,913 |
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36,072,657 |
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121,335,758 |
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134,384,567 |
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433,275,621 |
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492,698,054 |
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Cost and expenses: |
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Cost of goods sold |
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51,202,099 |
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54,008,149 |
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190,831,333 |
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204,121,644 |
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Advertising |
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33,925,394 |
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34,798,740 |
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126,119,487 |
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119,321,916 |
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General and administrative |
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27,552,425 |
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34,931,452 |
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116,901,838 |
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135,588,219 |
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Provision for doubtful accounts |
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330,583 |
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1,473,463 |
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687,399 |
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11,669,552 |
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Gain on sale of receivables |
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-0- |
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(27,747,513 |
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-0- |
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(27,747,513 |
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Interest (income) expense, net |
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(426,220 |
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463,987 |
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(1,292,447 |
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568,466 |
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Other expense, net |
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308,097 |
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236,233 |
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477,801 |
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46,833 |
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112,892,378 |
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98,164,511 |
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433,725,411 |
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443,569,117 |
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Income (loss) before income taxes |
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8,443,380 |
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36,220,056 |
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(449,790 |
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49,128,937 |
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Income taxes provision (benefit) |
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2,518,000 |
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12,804,000 |
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(666,000 |
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17,583,000 |
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Net income (loss) |
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$ |
5,925,380 |
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$ |
23,416,056 |
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$ |
216,210 |
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$ |
31,545,937 |
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Basic earnings (loss) per share based on
weighted average shares outstanding* |
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$ |
1.56 |
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$ |
6.02 |
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$ |
0.06 |
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$ |
4.79 |
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Diluted earnings (loss) per share based on
weighted average shares outstanding
and assumed conversions* |
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$ |
1.52 |
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$ |
5.87 |
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$ |
0.06 |
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$ |
4.71 |
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Weighted average basic shares outstanding* |
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3,795,530 |
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3,891,139 |
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3,855,686 |
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6,579,876 |
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Weighted average diluted shares outstanding* |
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3,886,817 |
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3,992,317 |
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3,944,792 |
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6,699,406 |
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*The per share results for the fourth quarter and twelve months ended December 2005 reflect
the reduction of weighted average shares outstanding resulting from Blair’s tender offer for the
repurchase of 4.4 million outstanding shares on August 16, 2005.
Blair Corporation and Subsidiaries
Consolidated Balance Sheets
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(Unaudited) |
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December 31 |
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December 31 |
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2006 |
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2005 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
36,927,303 |
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$ |
53,099,129 |
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Receivables, less allowances for doubtful accounts of $592,645
in 2006 and $158,471 in 2005 |
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2,995,973 |
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2,987,832 |
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Inventories: |
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Merchandise |
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61,317,388 |
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71,217,282 |
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Advertising and shipping supplies |
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6,947,037 |
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12,146,732 |
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68,264,425 |
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83,364,014 |
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Deferred income taxes |
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1,643,000 |
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731,000 |
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Prepaid expenses |
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2,575,795 |
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2,781,777 |
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Assets held for sale |
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700,000 |
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1,236,071 |
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Total current assets |
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113,106,496 |
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144,199,823 |
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Property, plant and equipment: |
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Land |
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548,817 |
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998,817 |
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Buildings and leasehold improvements |
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64,090,428 |
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64,374,228 |
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Equipment |
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75,408,270 |
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75,001,965 |
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Construction in progress |
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7,163,389 |
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3,961,206 |
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147,210,904 |
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144,336,216 |
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Less allowances for depreciation |
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100,409,796 |
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96,889,333 |
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46,801,108 |
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47,446,883 |
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Trademark |
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271,434 |
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343,678 |
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Other long-term assets |
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1,066,354 |
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1,103,903 |
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Total assets |
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$ |
161,245,392 |
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$ |
193,094,287 |
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Blair Corporation and Subsidiaries
Consolidated Balance Sheets — Continued
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(Unaudited) |
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December 31 |
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December 31 |
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2006 |
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2005 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Trade accounts payable |
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$ |
17,826,858 |
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$ |
29,137,285 |
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Advance payments from customers |
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1,113,744 |
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1,873,803 |
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Reserve for sales returns |
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5,974,000 |
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4,602,000 |
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Accrued expenses |
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11,083,565 |
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20,994,747 |
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Accrued federal and state taxes |
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3,674,168 |
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6,782,444 |
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Current portion of capital lease obligations |
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10,453 |
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19,198 |
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Total current liabilities |
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39,682,788 |
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63,409,477 |
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Capital lease obligations, less current portion |
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4,242 |
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14,695 |
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Deferred income taxes |
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1,676,000 |
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2,582,000 |
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Other long-term liability |
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-0- |
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679,720 |
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Stockholders’ equity: |
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Common stock without par value: |
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Authorized 12,000,000 shares
issued 10,075,440 shares (including shares
held in treasury) — stated value |
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419,810 |
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419,810 |
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Additional paid-in capital |
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13,435,835 |
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13,553,937 |
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Retained earnings |
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329,745,101 |
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334,023,925 |
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Accumulated other comprehensive loss |
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(121,711 |
) |
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(48,579 |
) |
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343,479,035 |
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347,949,093 |
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Less 6,228,623 shares in 2006 and 6,124,818
shares in 2005 of common stock
in treasury — at cost |
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224,061,659 |
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221,381,619 |
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Less receivable and deferred compensation
from stock plans |
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(464,986 |
) |
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|
159,079 |
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Total stockholders’ equity |
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119,882,362 |
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|
126,408,395 |
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Total liabilities and stockholders’ equity |
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$ |
161,245,392 |
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$ |
193,094,287 |
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