-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KS0lbaWRwyQPY4WZ7d4uQdGOzRbxMLM208DyPfvi4vZ3HA3e5V/YArHDMtsCxeRt zNz4roCsrleCbBefkPD/GQ== 0000012614-98-000012.txt : 19980515 0000012614-98-000012.hdr.sgml : 19980515 ACCESSION NUMBER: 0000012614-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLESSINGS CORP CENTRAL INDEX KEY: 0000012614 STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081] IRS NUMBER: 135566477 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04684 FILM NUMBER: 98619319 BUSINESS ADDRESS: STREET 1: 200 ENTERPRISE DRIVE CITY: NEWPORT NEWS STATE: VA ZIP: 23603 BUSINESS PHONE: 7578872100 MAIL ADDRESS: STREET 1: 200 ENTERPRISE DRIVE CITY: NEWPROT NEWS STATE: VA ZIP: 23603 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED BABY SERVICES INC DATE OF NAME CHANGE: 19720828 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 1-4684 Blessings Corporation (Exact name of registrant as specified in its charter) Delaware 13-5566477 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Enterprise Drive, Newport News, VA 23603 (Address of principal executive offices) (Zip Code) 757 887 2100 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of May 1, 1998 Common stock, $.71 par value 10,127,107 BLESSINGS CORPORATION INDEX PAGE NUMBER PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets March 31, 1998 and December 31, 1997 1 Consolidated Condensed Statements of Earnings - quarters ended March 31, 1998 and March 31, 1997 2 Consolidated Condensed Statements of Cash Flows - quarters ended March 31, 1998 and March 31, 1997 3 Notes to Consolidated Condensed Financial Statements 4 Review by Independent Certified Public Accountants 7 Independent Accountants' Report 8 Letter in Lieu of Consent of Independent Public Accountants 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 PART I. FINANCIAL INFORMATION BLESSINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS March 31, 1998 December 31, 1997* -------------- ----------------- (Unaudited) (Audited) ASSETS Current Assets: Cash & cash equivalents $ 4,753,100 $ 5,106,200 Accounts receivable less allowance for doubtful accounts of $809,600 & $1,603,200 22,021,500 21,632,600 Inventories 13,164,000 14,309,200 Prepaid deferred taxes 1,510,300 1,510,300 Prepaid expenses 2,459,500 1,039,900 ------------ ------------- Total Current Assets 43,908,400 43,598,200 ------------ ------------- Property, plant and equipment less accumulated depreciation & amortization of $45,408,400 & $42,712,100 91,616,000 89,378,200 Goodwill net of accumulated amortization of $3,998,800 and $3,710,700 25,964,100 22,794,600 Deferred taxes 7,088,300 7,267,300 Other assets 2,177,300 2,284,700 ------------ ------------- Total Assets $170,754,100 $165,323,000 ============ ============ LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 19,377,300 $ 21,862,400 Taxes on income 2,576,000 1,765,400 Current installments on long-term debt 4,281,300 3,125,000 Deferred taxes 1,497,700 1,397,000 ------------ ------------ Total Current Liabilities 27,732,300 28,149,800 ------------ ------------ Long-term debt 47,500,000 30,937,500 Deferred taxes on income 10,098,500 9,572,500 Deferred supplemental pension liability 2,587,300 2,267,100 Minority interest -- 14,633,900 Shareholders' Equity: Common stock 7,252,500 7,252,500 Additional paid in capital 5,987,100 5,968,100 Translation loss (6,255,900) (6,255,900) Retained earnings 76,751,300 73,823,200 ------------ ------------ 83,735,000 80,787,900 Common stock in treasury at cost (899,000) (1,025,700) ------------ ------------ Total Shareholders' Equity 82,836,000 79,762,200 ------------ ------------ Total Liabilities and Shareholders' Equity $170,754,100 $165,323,000 ============ ============ See accompanying Notes to Consolidated Condensed Financial Statements. *The balance sheet at December 31, 1997 has been taken from audited Financial Statements at that date, and condensed. BLESSINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) 3 Months Ended ---------------------------------------- March 31, 1998 March 31, 1997 -------------- -------------- Net sales $ 44,900,500 $ 45,076,700 ------------- ------------- Cost of sales 30,970,200 31,510,300 Selling, general and administrative 7,273,700 7,525,600 Foreign exchange loss 561,000 211,500 Interest & dividends - net 829,400 715,000 ------------- ------------- Total costs and expenses 39,634,300 39,962,400 ------------- ------------- Earnings from operations before provision for taxes on income and minority interest 5,266,200 5,114,300 ------------- ------------- Taxes on income Current 1,514,000 1,952,700 Deferred 584,400 66,000 ------------- ------------- Total taxes 2,098,400 2,018,700 ------------- ------------- Minority interest in net income of subsidiary 239,700 798,700 ------------- ------------- Net Earnings $ 2,928,100 $ 2,296,900 ============= ============= Average number of shares of common stock outstanding 10,126,857 10,125,386 ============= ============= Diluted shares of common stock 10,169,720 10,148,583 ============= ============= Basic earnings per share $ .29 $ .23 ============= ============= Diluted earnings per share $ .29 $ .23 ============= ============= See accompanying Notes to Consolidated Condensed Financial Statements. BLESSINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 3 Months Ended ------------------------------ March 31, 1998 March 31, 1997 -------------- -------------- Cash flows from operating activities: Net earnings from operations $ 2,928,100 $ 2,296,900 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,728,500 2,644,700 Amortization - goodwill 288,100 265,000 Amortization - other 15,000 15,000 Minority interest in net income of con- solidated subsidiary 239,700 798,700 Provision for losses on accounts receivable 80,000 217,500 (Gain) loss on sale of assets (10,500) 1,000 Change in assets and liabilities: (Increase) decrease in accounts receivable (898,300) 600,300 (Increase) decrease in inventories 976,800 (1,360,500) (Increase) decrease in prepaid expenses (1,136,700) 210,400 Increase (decrease) in accounts payable & accrued expenses (1,919,000) (2,892,500) Increase (decrease) in taxes on income 541,100 1,208,600 Increase (decrease) in deferred taxes on income 584,400 66,000 (Increase) decrease in other assets (347,400) (73,300) Increase (decrease) in other liabilities 800,300 264,600 ----------- ------------ Net cash provided by operating activities 4,870,100 4,262,400 ----------- ------------ Cash flows from investing activities: Proceeds from disposition of fixed assets 36,200 18,200 Capital expenditures (4,369,500) (5,265,300) Payment made for Mexican subsidiary (18,500,000) -- ----------- ------------ Net cash required by investing activities (22,833,300) (5,247,100) ----------- ------------ Cash flows from financing activities: Reduction of long-term debt (781,300) (924,400) Proceeds from issuance of long-term debt 18,500,000 -- Proceeds from issuance of short-term debt -- 2,000,000 Issuance and acquisition of treasury stock - net 145,700 (90,400) ----------- ------------ Net cash provided by financing activities 17,864,400 985,200 ----------- ------------ Effect of exchange rate changes on cash (254,300) (27,600) ----------- ------------ Net incr. (decr.) in cash and cash equivalents (353,100) (27,100) Cash and cash equivalents at beginning of year 5,106,200 5,801,800 ----------- ------------ Cash and cash equivalents at end of period $ 4,753,100 $ 5,774,700 =========== ============ See accompanying Notes to Consolidated Condensed Financial Statements. BLESSINGS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (See Independent Accountants' Report) 1. The consolidated condensed balance sheet as of March 31, 1998, the consolidated condensed statements of earnings for the three months ended March 31, 1998 and 1997, and the consolidated condensed statements of cash flows for the same periods then ended have been prepared by the Company without audit. The consolidated financial statements include Nacional de Envases, S.A. de C.V. (NEPSA), the Company's 100% owned Mexican subsidiary. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position, result of operations and cash flows at March 31, 1998, and for all periods presented have been made. The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. For accounting policies, see Notes to Consolidated Financial Statements in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1997. 2. In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income". The Company adopted this standard effective at the beginning of the year and it had no effect on the Company's financial statements for the first quarter. Also in June, 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information". The statement requires enterprises to report financial and descriptive information about its operating segments, products and services, countries and major customers, as well as reconciliations of segment financial information to corresponding amounts in the general-purpose financial statements. In February, 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". This statement revises employers' disclosures about pension and other postretirement benefit plans. SFAS No. 131 and 132 will be adopted for the Company's 1998 fiscal year. 3. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results to be expected for the full year. 4. Inventories: March 31, 1998 December 31, 1997 Raw Materials $ 8,766,400 $ 10,189,300 Finished Goods 4,397,600 4,119,900 ------------ ------------ $ 13,164,000 $ 14,309,200 ============ ============ 5. Long-term debt: March 31, 1998 December 31, 1997 Long-term debt consists of the following: 6.55% Note due 2002 $ 10,000,000 $ 10,000,000 7.22% Note due 2008 10,000,000 10,000,000 NEPSA Credit Agreement 13,281,300 14,062,500 NEPSA Term Loan 18,500,000 -- ------------- ------------- $ 51,781,300 $ 34,062,500 Less installments due within one year 4,281,300 3,125,000 ------------- ------------- Due after one year $ 47,500,000 $ 30,937,500 ============= ============= For further details, see Note 6 of the Annual Report to Shareholders for the fiscal year ended December 31, 1997. 6. Net earnings per share for the periods presented have been computed based upon the weighted average number of shares outstanding during the period. The following schedule represents a reconciliation of the numerator and the denominator used to calculate basic and diluted earnings per share for the quarters ending March 31, 1998 and 1997: 1998 1997 -------------------------------- ---------------------------- Income Shares Per-Share Income Shares Per-Share (Num.) (Denom.) Amount (Num.) (Denom.) Amount ---------- ---------- ----- ---------- ---------- ----- Basic EPS $2,928,100 10,126,857 $.289 $2,296,900 10,125,386 $.227 Effect of Dilutive Options -- 42,863 -- 23,197 ---------- ---------- ---------- ---------- Diluted EPS $2,928,100 10,169,720 $.288 $2,296,900 10,148,583 $.226 ========== ========== ===== ========== ========== ===== 7. Shareholders' Equity During the three months ended March 31, 1998, shareholders' equity increased as follows: Net earnings $ 2,928,100 Issuance and acquisition of treasury stock - net 145,700 ----------- Total increase in shareholders' equity $ 3,073,800 =========== 8. Interest and Dividends - Net 3 Months Ended March 31, 1998 March 31, 1997 Interest expense $ 985,200 $ 846,300 Interest income (155,800) (131,300) ----------- ----------- Total interest and dividends - net $ 829,400 $ 715,000 =========== =========== 9. During the three month period ending March 31, 1998, the effective tax rate was 39.8% compared to a rate of 39.5% during the same period last year ending March 31, 1997. Income taxes have been computed based on the estimated annual effective tax rate. 10. The purchase of 60% of NEPSA in July, 1994 and the remaining 40% in February, 1998 resulted in $26,505,300 and $3,457,600 of goodwill, respectively. These amounts are being amortized on a straight-line basis over its estimated life of 25 years. 11. Cash payments for interest and income taxes were: 3 Months Ended March 31, 1998 March 31, 1997 Interest $ 1,173,300 $ 1,245,000 Income tax $ 39,400 $ 544,300 REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Consolidated Condensed Financial Statements as of March 31, 1998 and for the three month periods ended March 31, 1998 and 1997 have been reviewed prior to filing by Deloitte & Touche LLP, Independent Certified Public Accountants, in accordance with established professional standards and procedures for such a review. The report of Deloitte & Touche LLP commenting upon their review is included as Part I - Exhibit 1. Independent Accountants' Report To the Board of Directors Blessings Corporation Newport News, Virginia We have reviewed the accompanying consolidated condensed balance sheet of Blessings Corporation and subsidiaries as of March 31, 1998, and the related consolidated condensed statements of earnings and cash flows for the three months ended March 31, 1998 and 1997. These financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated condensed financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Blessings Corporation and subsidiaries as of December 31, 1997, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated February 20, 1998 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which is has been derived. Deloitte & Touche LLP Richmond, Virginia April 17, 1998 April 17, 1998 Board of Directors Blessings Corporation Newport News, Virginia We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Blessings Corporation and subsidiaries for the three months ended March 31, 1998 and 1997, as indicated in our report dated April 17, 1998; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, is incorporated by reference in the following Registration Statements: Form: Registration Statement No.: S-8 33-41762 S-8 33-54108 S-8 33-70328 S-8 33-85382 S-8 33-85384 S-8 33-12387 S-8 33-31303 S-8 33-35611 We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. Deloitte & Touche, LLP Richmond, Virginia MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY: The following table set forth for the period indicated 1) the amounts and percentages which Certain items reflected in the financial data bear to net sales of the Company and 2) the percentage Increase (decrease) of such items as compared to the indicated prior period: Relationship to Net Sales Percent 3 Months Ended Increase/ (Decrease) ------------------------------------------ March 31, Percent March 31, Percent 1998/1997 1998 1997 Net Sales $44,900,500 100.0 $45,076,700 100.0 (.4) Cost of sales 30,970,200 69.0 31,510,300 69.9 (1.7) ----------- ----- ------------ ----- Gross margin 13,930,300 31.0 13,566,400 30.1 2.7 Other costs and Expenses 8,664,100 19.3 8,452,100 18.8 2.5 ----------- ----- ------------ ----- Earnings from operations before taxes on income and minority interest 5,266,200 11.7 5,114,300 11.3 3.0 Taxes on income 2,098,400 4.7 2,018,700 4.5 3.9 ----------- ----- ----------- ----- Minority interest in net income of subsidiary 239,700 .5 798,700 1.8 (70.0) ----------- ----- ----------- ----- Net earnings $2,928,100 6.5 $2,296,900 5.1 27.5 =========== ===== =========== ===== ====== RESULTS OF OPERATIONS: Cautionary Statement under the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995: Included in this Report and other written and oral information presented by management from time to time, including, but not limited to, annual reports to shareholders, quarterly shareholder letters, filings with the Securities and Exchange Commission, news releases and investor presentations, are forward-looking statements about business strategies, market potential, future financial performance and other matters which reflect management's expectations as of the date made. Without limiting the foregoing, the words "believes," "anticipates," "expects," "predicts," "seeks" and similar expressions are intended to identify forward-looking statements. Future events and the Company's actual results could differ materially from the results reflected in these forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation: economic, competitive, governmental regulation, legal, currency valuations and technological factors affecting the Company's operations, markets, products, services and prices, and other factors discussed in the Company's filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. Net Sales: Net sales, both dollars and units, were relatively constant during the first quarter of 1998 with those reported for the first quarter of 1997. Domestic demand remains strong with the United states operations reporting a 3% increase in unit volume over last year. This increase, however, was offset with the Company's Mexican operations reporting lower results due to a generally sluggish economy and production problems. The Company is addressing these issues and expects improved results in Mexico during the second quarter. Operating Costs and Expenses: Gross margins improved by almost one percentage point over the same quarter last year primarily due to reductions in polyolefin prices during the quarter and a higher margin domestic sales mix. NEPSA's production difficulties had an adverse effect on margins in Mexico. Taxes on Income: The effective tax rate for the first quarter ended March 31, 1998 was 39.8% comparable to the 39.5% reported for the first quarter of 1997. Liquidity and Capital Resources: As of March 31, 1998, the Company had working capital of $16,176,100 compared to $15,448,400 at year-end, an increase of $727,700. The ratio of current assets to current liabilities at the end of the quarter was 1.6 to 1 compared to 1.5 to 1 at year-end. During the quarter the Company entered into an $18,500,000 unsecured Term Loan Agreement with a major lending institution for the purchase of the remaining 40% ownership of NEPSA. The Company was not utilizing any of its $25 million revolving credit nor its $12 million short-term credit at the end of the quarter. For further details, see Note 6 of the Annual Report to Shareholders for the fiscal year ended December 31, 1997. Year 2000: During 1996 and 1997 the Company updated computer hardware and implemented an integrated manufacturing, sales and financial system in both the United States and Mexico. While the primary purpose of the system upgrades was to enhance customer service and improve information reporting, the upgrades were "year 2000 compliant". Accordingly, the Company does not anticipate additional material expenditures related to the year 2000. The Company does not use its systems extensively in dealing with suppliers, customers and financial institutions. The year 2000 problem arises when computer programs cannot process data for the year 2000 and beyond. Other: In a joint news release issued on April 8, 1998 Blessings and Huntsman Packaging Corporation announced that they had entered into a Definitive Merger Agreement in which Huntsman had agreed to acquire all of the issued and outstanding shares of Blessings for $21.00 per share. A tender offer was made to all Blessings shareholders by Huntsman on April 14, 1998 and is scheduled to expire on Monday, May 11, 1998. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27. Financial Data Schedule (b) Reports on Form 8-K: Registrant filed two Current Reports on Form 8-K, dated February 20, 1998 relating to the acquisition of the remaining 40% ownership of NEPSA and the engagement of Bowles Hollowell Conner and Company to advise the Company's Board in an evaluation of strategic alternatives to optimize shareholder value. S I G N A T U R E S Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this to be signed on its behalf by the undersigned thereunto duly authorized. BLESSINGS CORPORATION DATED: May 12, 1998 /s/Wayne A. Durboraw __________________________________________ Wayne A. Durboraw, Controller DATED: May 12, 1998 /s/James P. Luke __________________________________________ James P. Luke, Executive Vice President (Principal Financial Officer) EX-27 2
5 3-mos DEC-31-1998 MAR-31-1998 4,753,100 0 22,831,100 809,600 13,164,000 43,908,400 137,024,400 45,408,400 170,754,100 27,732,300 47,500,000 0 0 7,252,500 75,583,500 170,754,100 44,900,500 44,900,500 30,970,200 39,634,300 8,664,100 809,600 985,200 5,266,200 2,098,400 2,928,100 0 0 0 2,928,100 .29 .29
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