<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 1998
HUNTSMAN PACKAGING CORPORATION
(Exact name of registrant as specified in its charter)
Utah 333-40067 87-0496065
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
500 Huntsman Way
Salt Lake City, Utah 84108
(Address of principal executive offices) (Zip Code)
(801) 532-5200
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
This Amendment No. 1 to Form 8-K is being filed by Huntsman Packaging
Corporation ("Huntsman") to provide the required financial statements and pro
forma financial information related to its acquisition of the common stock of
Blessings Corporation ("Blessings").
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Consolidated financial statements of Blessings Corporation
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Earnings--Years ended December 31, 1997,
1996 and the 52 weeks ended December 30, 1995
Consolidated Statements of Shareholders' Equity--Years ended
December 31, 1997, 1996 and the 52 weeks ended December 30, 1995
Consolidated Statements of Cash Flows--Years ended December 31,
1997, 1996 and the 52 weeks ended December 30, 1995
Notes to Consolidated Financial Statements
Consolidated Condensed Balance Sheets--March 31, 1998 and December
31, 1997 (unaudited)
Consolidated Condensed Statements of Earnings--Three months ended
March 31, 1998 and 1997 (unaudited)
Consolidated Condensed Statements of Cash Flows--Three months ended
March 31, 1998 and 1997 (unaudited)
Notes to Consolidated Condensed Financial Statements (unaudited)
(b) Unaudited pro forma financial statements of Huntsman Packaging
Corporation
Unaudited pro forma condensed consolidated balance sheet as of
March 31, 1998
Notes to unaudited pro forma condensed consolidated balance sheet
Unaudited pro forma condensed consolidated statement of operations
for the year ended December 31, 1997
Unaudited pro forma condensed consolidated statement of operations
for the three months ended March 31, 1998
Notes to unaudited pro forma condensed consolidated statements of
operations
(c) Exhibits--None
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Blessings Corporation
Newport News, Virginia
We have audited the accompanying consolidated balance sheets of Blessings
Corporation and Subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Blessings Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Richmond, Virginia
February 20, 1998
<PAGE>
BLESSINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................... $ 5,106,200 $ 5,801,800
Accounts receivable less allowance for doubtful accounts
of $1,603,200 and $1,541,000 for 1997 and 1996 respectively 21,632,600 22,832,200
Inventories ................................................. 14,309,200 12,905,700
Prepaid deferred taxes ...................................... 1,510,300 1,417,900
Prepaid expenses ............................................ 1,039,900 1,723,700
------------- --------------
Total Current Assets .................................... 43,598,200 44,681,300
------------- --------------
Property, Plant and Equipment - Net ........................... 89,378,200 80,573,600
Goodwill net of accumulated amortization of $3,710,700 and
$2,659,500 for 1997 and 1996 respectively ................... 22,794,600 23,845,800
Deferred Taxes ................................................ 7,267,300 7,565,400
Other Assets .................................................. 2,284,700 1,410,600
------------- --------------
Total Assets ............................................ $ 165,323,000 $ 158,076,700
------------- --------------
------------- --------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses ....................... $ 21,862,400 $ 25,025,800
Taxes on income ............................................. 1,765,400 528,700
Current installments on long-term debt ...................... 3,125,000 3,744,300
Deferred taxes .............................................. 1,397,000 1,024,200
------------- --------------
Total Current Liabilities ............................... 28,149,800 30,323,000
------------- --------------
Long-Term Debt ................................................ 30,937,500 34,253,100
Deferred Taxes ................................................ 9,572,500 8,373,800
Deferred Supplemental Pension Liability ....................... 2,267,100 1,950,700
Minority Interest ............................................. 14,633,900 11,427,700
Commitments and Contingencies ................................. -- --
Shareholders' Equity
4% Cumulative preferred stock, $10 par value
authorized 259 shares, none outstanding ................... -- --
Common stock, $.71 par value; authorized 25,000,000 shares,
issued 10,214,846 for 1997 and 1996 respectively .......... 7,252,500 7,252,500
Additional paid-in capital .................................. 5,968,100 6,012,900
Translation loss ............................................ (6,255,900) (6,255,900)
Retained earnings ........................................... 73,823,200 65,631,200
------------- --------------
80,787,900 72,640,700
Common Stock in Treasury, at cost - 98,046 and 80,342 shares
for 1997 and 1996 respectively ............................ (1,025,700) (892,300)
------------- --------------
Total Shareholders' Equity .............................. 79,762,200 71,748,400
------------- --------------
Total Liabilities and Shareholders' Equity .............. $ 165,323,000 $ 158,076,700
------------- --------------
------------- --------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BLESSINGS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED 52 WEEKS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 30, 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net Sales.................................................... $174,756,100 $ 158,135,100 $ 156,309,400
------------ ------------ ------------
Cost and expenses
Cost of sales.............................................. 124,878,300 115,207,000 111,032,500
Selling, general and administrative........................ 28,659,700 27,948,200 25,242,000
Foreign exchange loss...................................... 383,600 293,300 3,600,600
Interest and other - net................................... 2,575,900 2,466,500 2,464,200
------------ ------------ ------------
Total cost and expenses.................................. 156,497,500 145,915,000 142,339,300
------------ ------------ ------------
Earnings before provision for taxes on income
and minority interest...................................... 18,258,600 12,220,100 13,970,100
------------ ------------ ------------
Taxes on income
Currently payable.......................................... 5,083,100 3,902,400 6,235,600
Deferred................................................... 1,777,200 (632,900) (86,400)
------------ ------------ ------------
Total taxes on income.................................... 6,860,300 3,269,500 6,149,200
------------ ------------ ------------
Minority interest in net income of subsidiary................ 3,206,300 3,938,700 1,935,700
------------ ------------ ------------
Net earnings................................................. $ 8,192,000 $ 5,011,900 $ 5,885,200
------------ ------------ ------------
------------ ------------ ------------
Basic earnings per share on common stock..................... $ 0.81 $ 0.49 $ 0.58
------------ ------------ ------------
------------ ------------ ------------
Diluted earnings per share on common stock................... $ 0.81 $ 0.49 $ 0.58
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BLESSINGS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Additional Foreign Currency
Common stock paid-in Translation
Shares Amount capital Adjustment
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1994 ........................ 10,211,846 $7,250,400 $ 6,196,100 $(2,687,500)
Dividends declared on common stock $.30 per share -- -- -- --
Purchase of company's common stock ............... -- -- -- --
Reissuance of company's common stock under
compensation plans ............................. -- -- (49,900) --
Issuance of company's common stock upon
exercise of options ............................ 3,000 2,100 28,700 --
Translation adjustment ........................... -- -- -- (5,638,800)
Income tax associated with translation adjustment -- -- -- 2,255,500
Net earnings ..................................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 30, 1995 ........................ 10,214,846 $7,252,500 $ 6,174,900 $(6,070,800)
Dividends declared on common stock $.40 per share -- -- -- --
Purchase of company's common stock ............... -- -- -- --
Reissuance of company's common stock under
compensation plans ............................. -- -- (162,000) --
Translation adjustment ........................... -- -- -- (308,500)
Income tax associated with translation adjustment -- -- -- 123,400
Net earnings ..................................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 ........................ 10,214,846 $7,252,500 $ 6,012,900 $(6,255,900)
Purchase of company's common stock ............... -- -- -- --
Reissuance of company's common stock under
compensation plans ............................. -- -- (44,800) --
Net earnings ..................................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 ........................ 10,214,846 $7,252,500 $ 5,968,100 $(6,255,900)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Retained Treasury stock
earnings Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 1994 ........................ $ 61,847,100 13,480 $ (235,900)
Dividends declared on common stock $.30 per share (3,054,000) -- --
Purchase of company's common stock ............... -- 88,650 (1,110,100)
Reissuance of company's common stock under
compensation plans ............................. -- (11,172) 195,500
Issuance of company's common stock upon
exercise of options ............................ -- -- --
Translation adjustment ........................... -- -- --
Income tax associated with translation adjustment -- -- --
Net earnings ..................................... 5,885,200 -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 30, 1995 ........................ $ 64,678,300 90,958 $(1,150,500)
Dividends declared on common stock $.40 per share (4,059,000) -- --
Purchase of company's common stock ............... -- 45,350 (445,600)
Reissuance of company's common stock under
compensation plans ............................. -- (55,966) 703,800
Translation adjustment ........................... -- -- --
Income tax associated with translation adjustment -- -- --
Net earnings ..................................... 5,011,900 -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 ........................ $ 65,631,200 80,342 $ (892,300)
Purchase of company's common stock ............... -- 34,656 (353,000)
Reissuance of company's common stock under
compensation plans ............................. -- (16,952) 219,600
Net earnings ..................................... 8,192,000 -- --
- --------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 ........................ $ 73,823,200 98,046 $(1,025,700)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BLESSINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED Year Ended 52 Weeks Ended
DECEMBER 31, 1997 December 31, 1996 December 30, 1995
----------------- ----------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings ...................................... $ 8,192,000 $ 5,011,900 $ 5,885,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................. 10,298,300 8,539,100 7,977,100
Amortization - goodwill ....................... 1,060,200 1,060,200 1,060,200
Amortization - other .......................... 47,900 466,300 348,200
Minority interest in net income of consolidated
subsidiary .................................. 3,206,300 3,938,700 1,935,700
Provision for losses on accounts receivable ... 394,000 613,700 216,500
(Gain) loss on sale of assets ................. 92,400 (41,800) 800
Change in assets and liabilities:
(Increase) decrease in accounts receivable .... 597,500 (2,543,600) (2,739,300)
(Increase) decrease in inventories ............ (1,466,000) (3,528,700) 5,050,100
(Increase) decrease in prepaid expenses ....... 461,400 (782,600) 466,100
Increase (decrease) in accounts payable
and accrued expenses ........................ (3,114,700) 8,876,100 (2,254,900)
Increase (decrease) in taxes on income ........ 881,500 (769,000) (195,100)
Increase (decrease) in deferred taxes on income 1,777,200 (632,900) (86,400)
(Increase) decrease in other assets ........... (546,100) (33,400) (555,100)
Increase (decrease) in other liabilities ...... 264,800 183,000 237,400
------------ ------------- ------------
Net cash provided by operating activities ........... 22,146,700 20,357,000 17,346,500
------------ ------------- ------------
Cash flows from investing activities:
(Increase) decrease in notes receivable ........... 25,000 25,000 --
Proceeds from disposition of fixed assets ......... 200,600 167,000 13,000
Capital expenditures .............................. (18,867,100) (20,398,200) (10,364,500)
------------ ------------- ------------
Net cash required by investing activities ........... (18,641,500) (20,206,200) (10,351,500)
------------ ------------- ------------
Cash flows from financing activities:
Reduction of long-term debt ....................... (3,934,900) (13,245,500) (10,258,800)
Proceeds from issuance of long-term debt .......... -- 20,000,000 6,357,400
Issuance of common stock under stock option plan .. -- -- 30,800
Issuance and acquisition of treasury stock ........ (178,200) 96,200 (964,600)
Dividends paid .................................... -- (4,059,000) (4,074,600)
Distribution to minority interest ................. -- (400,000) --
------------ ------------- ------------
Net cash provided (required) by financing activities (4,113,100) 2,391,700 (8,909,800)
------------ ------------- ------------
Effect of exchange rate changes on cash ............. (87,700) (57,600) (1,744,100)
------------ ------------- ------------
Net increase (decrease) in cash and cash equivalents (695,600) 2,484,900 (3,658,900)
Cash and cash equivalents at beginning of period .... 5,801,800 3,316,900 6,975,800
------------ ------------- ------------
Cash and cash equivalents at end of period .......... $ 5,106,200 $ 5,801,800 $ 3,316,900
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1997; DECEMBER 31, 1996 AND DECEMBER
30, 1995.
1. ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries, all of which are wholly-owned with the
exception of NEPSA (see notes 2 and 14). All material intercompany profits,
transactions and balances have been eliminated in consolidation. The Company
is approximately 54% owned by the Williamson-Dickie Manufacturing Company.
The Company has no material transactions with the Williamson-Dickie
Manufacturing Company.
B. CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid debt instruments with a maturity
of three months or less when purchased to be cash equivalents.
C. INVENTORIES
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out method (FIFO) and an
average cost method.
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, carried at cost, is depreciated over the
estimated useful life of the assets. Depreciation expense is computed on a
straight-line basis for book purposes. Accelerated methods are used for
income tax purposes. Major improvements are capitalized and ordinary repairs
and maintenance are expensed in the year incurred.
E. ACCOUNTING PERIOD
Effective with the beginning of 1996, the Company changed its accounting
periods from four weeks to one month each with the fiscal year coinciding
with the calendar year. Accordingly, under the new calendar year, the
Company's quarters are each comprised of three calendar months of thirteen
weeks each ending March 31, June 30, September 30, and December 31.
Formerly, the Company's first quarter was comprised of sixteen weeks, and the
remaining three quarters were each comprised of twelve weeks. Therefore, the
year ending December 30, 1995 was comprised of fifty-two weeks, while the
following two years ending December 31, 1997 and 1996 were comprised of
twelve months each. Due to the relative similarity of the year ending
December 30, 1995 with the two following years, 1995 results were not recast.
<PAGE>
F. INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Intangible assets resulting from business acquisitions principally
consist of the excess of the acquisition cost over the fair value of the net
assets of the businesses acquired (goodwill). Goodwill is amortized over
twenty-five years. Other intangible assets are amortized on a straight-line
basis over their estimated useful lives. The carrying value of goodwill and
other intangibles is evaluated if circumstances indicate a possible
impairment in value. If undiscounted cash flows over the remaining
amortization period indicate that goodwill and other intangibles may not be
recoverable, the carrying value of goodwill and other intangibles will be
reduced by the estimated shortfall of cash flows on a discounted basis.
G. TAXES ON INCOME
The company provides deferred taxes to reflect future consequences of
differences between the tax basis of assets and liabilities and their
reported amounts for financial reporting purposes, in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. The significant
components of deferred tax assets and liabilities are principally related to
depreciation, allowance for doubtful accounts, retirement plans, inventory
and accrued expenses not currently deductible.
H. TRANSLATION OF FOREIGN CURRENCIES
In 1997 the functional currency of the Company's Mexican subsidiary
changed from the peso to the dollar. As a result of this change, translation
gains and losses previously recorded in shareholders' equity are recorded in
income. Prior to 1997, the Company translated foreign currency financial
statements by translating balance sheet accounts at the current exchange rate
and income statement accounts at the average exchange rate for the year.
Translation gains and losses were recorded in shareholders' equity, and
transaction gains and losses were reflected in income.
I. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts reflected on those statements.
Actual results could differ from those estimates.
J. FINANCIAL INSTRUMENTS
The carrying amounts of assets and liabilities as reported on the balance
sheet at December 31, 1997, which qualify as financial instruments, approximate
fair value. The fair value of interest rate swap agreements held by the
Company at year end which were not recorded on the financial statements, was
$395,000 and $470,400 which represents the cash requirement to settle these
agreements at December 31, 1997 and 1996, respectively.
K. INTEREST AND DIVIDENDS - NET
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, December 31, December 30,
1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense (net of
capitalized interest) $ 3,138,900 $ 3,405,900 $ 3,122,900
Interest income (563,000) (923,200) (658,700)
Dividend income -- (16,200) --
- ------------------------------------------------------------------------------------
Interest and dividends -
net expense $ 2,575,900 $ 2,466,500 $ 2,464,200
- ------------------------------------------------------------------------------------
</TABLE>
Cash payments for interest were $3,215,600, $2,775,100 and $2,978,600 for the
1997, 1996 and 1995 fiscal years respectively.
L. OTHER
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share". The adoption of this statement did not
have a material impact on the earnings per share calculations for the 1997,
1996 and 1995 fiscal years. During 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes standards for
reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. The effect of adopting the new
standard is not expected to be significant as the Company does not currently
have material items of other comprehensive income disclosed outside the
statement of operations. Also during 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. SFAS Nos. 130 and 131 will be adopted for the Company's 1998
fiscal year.
2. NEPSA ACQUISITION
The Company acquired 60% of the outstanding common stock of Nacional de
Envases Plasticos, S.A. de C.V., and its associated companies, collectively
known as NEPSA, on July 5, 1994. The acquisition of NEPSA was accounted for
using the purchase method of accounting. The allocation of the purchase
price of approximately $46,000,000 resulted in an excess of $26,505,300 in
goodwill which will be amortized on a straight-line basis over its estimated
life of twenty-five years. Amortization of goodwill was $1,060,200 for 1997,
1996, and 1995.
The Company had non-cash investing and financing activities associated
with the NEPSA transaction by issuing 400,000 shares of additional Blessings
Corporation common stock valued at $5,400,000.
<PAGE>
On February 9, 1998 the Company purchased the remaining 40% of NEPSA (see
note 14).
3. INVENTORIES
<TABLE>
<CAPTION>
December 31,
1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Raw materials $10,189,300 $10,050,500
Finished goods 4,119,900 2,855,200
- ----------------------------------------------------------------------------
Total $14,309,200 $12,905,700
- -----------------------------------------------------------------------------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 629,200 $ 629,200
Buildings 15,614,400 15,258,800
Machinery and equipment 107,640,200 88,515,200
Motor vehicles 647,100 621,900
Furniture and fixtures 4,553,800 4,403,100
Leasehold improvements 1,317,500 936,900
Construction in progress 1,688,100 6,804,700
- -------------------------------------------------------------------------------
Gross depreciable assets $131,461,100 $116,540,600
- -------------------------------------------------------------------------------
Less accumulated depreciation and amortization 42,712,100 36,596,200
- -------------------------------------------------------------------------------
Net depreciable assets 88,749,000 79,944,400
- -------------------------------------------------------------------------------
Net assets $ 89,378,200 $ 80,573,600
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 14,764,700 $ 16,887,200
Salaries, wages and commissions 2,790,400 2,263,100
Taxes, other than taxes on income 357,400 841,800
Interest 616,300 716,600
Insurance 619,500 1,019,200
Relocation and restructuring 443,900 791,200
Miscellaneous current liabilities 2,270,200 2,506,700
- -------------------------------------------------------------------------------
Total $ 21,862,400 $ 25,025,800
- -------------------------------------------------------------------------------
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
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 due 2002 14,062,500 17,187,500
Mexico bank loans due 1998
Collateralized by equipment -- 809,900
- -------------------------------------------------------------------------------
$ 34,062,500 3,125,000
Less installments due within one year $ 3,125,000 3,744,300
- -------------------------------------------------------------------------------
Total long-term debt $ 30,937,500 $ 34,253,100
- -------------------------------------------------------------------------------
</TABLE>
During 1996, the Company entered into a $20,000,000 Note Purchase
Agreement with a major insurance company. Under the terms of the Note
Purchase Agreement, the Company issued $10,000,000 of 7.22% senior unsecured
notes due January 30, 2008 and $10,000,000 of 6.55% senior unsecured notes
due January 30, 2002. Interest is payable semi-annually on January 30 and
July 30 of each year. The Company is not obligated to make principal payments
until January 30, 2000. The proceeds were used to repay two secured mortgages
and advances under the revolving credit and to finance major capital projects.
The Company has available a $25,000,000 two year, unsecured revolving
credit agreement with major lending institutions. Borrowings under the
revolving credit agreement bear interest at rates based on the London
Interbank Offered Rates ("LIBOR") or the prime interest lending rate. The
Company had no borrowings outstanding under this agreement at December 31,
1997.
On February 20, 1998, the Company entered into an $18,500,000 unsecured
Term Loan Agreement with a major lending institution. The term loan bears
interest at
<PAGE>
rates based upon either the LIBOR Rates or the Prime Rate and will be payable
quarterly. Principal payments will commence on September 15, 1998 and will
be payable quarterly thereafter with the final payment on June 15, 2006. The
proceeds from the term loan were used to purchase the remaining 40% ownership
of NEPSA (see note 14).
The Company has short-term lines of credit of $12,000,000 available
through its principal lenders. On December 31, 1997, the Company had standby
letters of credit of $997,000 outstanding under the lines of credit.
In December of 1994 and during the first half of 1995, the Company entered
into five interest rate swap agreements to limit its exposure to changes in
interest rates on the NEPSA Credit Agreement. The agreements obligate the
Company to make fixed payments to a counter party which, in turn, is obligated
to make variable payments to the Company. The amount to be paid or received
under the terms of the swaps is measured by applying contractually agreed upon
variable and fixed rates to the notional amounts of principal. The
counterparty to the agreements is a major financial institution which is
expected to fully perform under the terms of the agreement. The notional
amounts, which decrease over the term of the agreements, are used to measure
the contractual amounts to be received or paid and do not represent the amount
of exposure to credit loss. The agreements terminate in 2002 and effectively
convert approximately $13,900,000 of three month LIBOR-based floating rate debt
to 8.21% fixed rate debt. Interest paid on these swaps was recorded as an
adjustment to interest expense.
The long-term debt agreements contain various restrictive covenants
limiting the Company's ability to incur additional indebtedness or to undertake
mergers and acquisitions. The agreements also include quarterly tests relating
to the maintenance of net worth, cash flow and interest coverage ratios.
THE MATURITIES ON LONG-TERM DEBT ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Years Amount
- --------------------------------------------------------------------------
<S> <C>
1998 $ 3,125,000
1999 3,125,000
2000 6,458,300
2001 6,458,300
2002 4,895,900
2003 and after 10,000,000
- --------------------------------------------------------------------------
Total $ 34,062,500
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
7. COMMITMENTS
At December 31, 1997, aggregate rental commitments on long-term real estate
operating leases were as follows:
<TABLE>
<CAPTION>
Fiscal Years Amount
- --------------------------------------------------------------------------
<S> <C>
1998 $ 1,291,300
1999 645,600
2000 --
2001 --
2002 --
2003 and after --
- --------------------------------------------------------------------------
Total $ 1,936,900
- --------------------------------------------------------------------------
</TABLE>
Rent expense for the fiscal years ended December 31, 1997; December 31, 1996;
and December 30, 1995, amounted to $1,362,100, $1,449,800 and $2,024,500
respectively. The Company has commitments to purchase raw materials over the
next two years of approximately $3,800,000 per year.
8. PENSION TRUST PLAN
The Company sponsors a defined benefit pension plan that covers
substantially all employees. The cost of the plan is borne by the Company.
The plan calls for benefits to be paid to eligible employees at retirement,
based primarily upon years of service with the Company and compensation rates
near retirement. Contributions are intended to provide not only for benefits
attributable to service to date but also for those expected to be earned in
the future. Plan assets consist primarily of bonds, mortgages and common
stock.
Pension expense was $806,200, $587,800 and $459,500 in the 1997, 1996
and 1995 fiscal years respectively. Net pension cost for the Company's
qualified and nonqualified defined benefit plans for 1997, 1996 and 1995
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of current period $ 716,200 $ 645,200 $ 597,200
Interest cost on projected
benefit obligation 1,235,700 1,090,300 998,100
Actual return on plan assets (1,951,600) (1,459,700) (1,887,300)
Net amortization and deferral 805,900 312,000 751,500
- -------------------------------------------------------------------------------
Net periodic pension cost $ 806,200 $ 587,800 $ 459,500
- -------------------------------------------------------------------------------
</TABLE>
The following table sets forth the plan's funded status and amounts recognized
in the Company's statement of cash flows at year-end.
<PAGE>
Actuarial present value of benefit obligations:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Vested benefits $ 15,173,600 $ 13,075,000
Non-vested benefits 225,200 351,100
- -------------------------------------------------------------------------------
Accumulated benefit obligation $ 15,398,800 $ 13,426,100
- -------------------------------------------------------------------------------
Fair value of assets held in the plan $ 16,143,000 $ 14,316,000
Projected benefit obligation for services
rendered to date (18,028,400) (15,865,200)
- -------------------------------------------------------------------------------
Projected benefit obligation in excess of
plan assets $ (1,885,400) $ (1,549,200)
Unrecognized net loss 1,194,500 924,100
Unrecognized prior service cost (85,000) (92,800)
Unrecognized net asset at January 1, 1988,
being amortized over 17 years (213,200) (248,700)
Unrecognized net obligation at December 31,
1994, being amortized over 15 years 740,900 808,300
- -------------------------------------------------------------------------------
Accrued pension cost included in other
liabilities $ (248,200) $ (158,300)
- -------------------------------------------------------------------------------
</TABLE>
The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.5% and 5.0%, respectively, for 1997 and
1996. The expected long-term rate of return on assets was 10% for 1997 and
1996.
During 1994 the Company adopted a Supplemental Restoration plan designed
to restore pension benefits which have been limited as a result of changes in
the Internal Revenue Service code of 1993 (OBRA '93).
In December, 1990, and November, 1992, FASB issued SFAS No. 106,
"Employers' Accounting for Post Retirement Benefits Other Than Pensions" and
SFAS No. 112, "Employers' Accounting for Post Employment Benefits"
respectively. These pronouncements do not have an effect on the Company's
financial statements as the cost to the Company of providing the benefits
covered in these pronouncements is not significant.
9. PENSION SAVINGS PLAN (401K)
The Company initiated a pension savings plan in 1988 designed to comply
with Section 401(k) of the Internal Revenue Service code. Under the terms of
the plan, the Company matches 50% of the employees' contribution up to a
maximum of 3% of salary. The Company's matching contribution to the plan was
$436,000, $378,200 and $337,900 for the 1997, 1996 and 1995 fiscal years
respectively.
<PAGE>
10. STOCK OPTION PLAN
Under the Company's stock option plans, officers, directors and key
employees may be granted options to purchase the Company's common stock at no
less than 100% of the market price on the date the option is granted. The
plans provide options to become exercisable either immediately upon grant or
one year from date of grant and can be issued with or without stock
appreciation rights with terms of 5 to 10 years. The Company has authorized
443,000 shares for issuance under the plans. At December 31, 1997, there
were 130,750 shares available under the plans. As permitted by SFAS No. 123,
"Accounting for Stock Based Compensation," the Company has elected to follow
APB Opinion No. 25 "Accounting for Stock Issued to Employees," for the
measurement and recognition of employee stock-based compensation.
Accordingly, no compensation cost has been recognized for the Company's
plans. The pro forma effect of applying SFAS 123 fair value method of
measuring compensation costs to the Company's stock-based awards was not
significant to reported net income and earnings per share. A summary of
stock option transactions in fiscal 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 30, 1995
------------------ ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- --------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of the year 159,200 $12.64 134,200 $12.98 98,200 $12.85
Granted 67,500 10.48 79,000 9.99 46,000 13.20
Exercised (6,000) 10.42 (50,000) 9.25 (3,000) 8.81
Canceled (3,250) 11.93 (4,000) 14.11 (7,000) 14.38
-------- --------- --------
Outstanding, end
of the year 217,450 $12.06 159,200 $12.64 134,200 $12.98
-------- --------- --------
Options exercisable
at year end 217,450 $12.06 134,700 $12.97 92,700 $12.89
-------- --------- --------
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------
Number Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price
--------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
$ 8.81 - 10.88 103,450 5.3 Years $10.29
$12.00 - 14.38 114,000 6.5 Years $12.69
</TABLE>
Using the Black-Scholes model, the weighted average fair value of options
granted and significant weighted-average assumptions used were as follows:
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Fair market value of options granted $ 4.20 $ 3.51
Risk-free interest rate 6.5% 6.5%
Expected life (years) 5.0 9.0
Expected dividends 0.0% 3.0%
Volatility 32.0% 31.8%
</TABLE>
<PAGE>
11. TAXES ON INCOME
The components of income before taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 December 31, 1996 December 30, 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $ 8,573,600 $ 4,850,000 $ 8,398,800
Foreign 9,685,000 7,370,100 5,571,300
- ------------------------------------------------------------------------------------
$ 18,258,600 $ 12,220,100 $ 13,970,100
- ------------------------------------------------------------------------------------
</TABLE>
Income tax expense from continuing operations consisted of the following
components in the fiscal year ended on:
<TABLE>
<CAPTION>
DECEMBER 31, December 31, December 30,
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes estimated to be payable currently
U.S. $ 1,759,600 $ 1,174,400 $ 2,553,700
Foreign 3,135,500 2,689,900 3,383,500
State 188,000 38,100 298,400
- ----------------------------------------------------------------------------------------
Total $ 5,083,100 $ 3,902,400 $ 6,235,600
- ----------------------------------------------------------------------------------------
Taxes deferred - net
U.S. $ 886,300 $ 587,800 $ 6,500
Foreign 670,700 (1,366,700) (153,700)
State 220,200 146,000 60,800
- ----------------------------------------------------------------------------------------
Total 1,777,200 (632,900) (86,400)
- ----------------------------------------------------------------------------------------
$ 6,860,300 $ 3,269,500 $ 6,149,200
- ----------------------------------------------------------------------------------------
</TABLE>
Temporary differences which give rise to deferred tax assets and liabilities
at December 31, 1997, December 31, 1996, and December 30, 1995, are as
follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED Deferred Deferred Deferred Deferred
TAX TAX Tax Tax Tax Tax
ASSETS LIABILITIES Assets Liabilities Assets Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current
Allowance for
doubtful accounts $562,400 -- $554,900 -- $ 427,100 --
Compensated absences 444,900 -- 361,600 -- 312,500 --
Restricted stock 138,400 -- 111,700 -- 138,600 --
Other 364,600 1,397,000 389,700 1,024,200 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total current 1,510,300 1,397,000 1,417,900 1,024,200 878,200 --
- ------------------------------------------------------------------------------------------------------------------------------
Non-current
Tax deductible exp-
enses not charged
against book income
(primarily depreciation) -- 9,245,900 -- 8,038,900 -- $6,210,800
Income tax benefit of fixed asset
indexation 1,902,200 -- 2,316,700 -- -- --
Loss on foreign
Currency translation 4,170,600 -- 4,170,600 -- 4,047,200 --
Other 1,194,500 326,600 1,078,100 334,900 382,000 923,900
- ------------------------------------------------------------------------------------------------------------------------------
Total non-current 7,267,300 9,572,500 7,565,400 8,373,800 4,429,200 7,134,700
- ------------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $8,777,600 $10,969,500 $8,983,300 $9,398,000 $5,307,400 $ 7,134,700
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the differences between income taxes computed at the U.S.
income tax rate and the consolidated tax provision is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, December 31, December 30,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount % Amount % Amount %
Tax at statutory
U.S. tax rate $ 6,390,500 35.0 $ 4,277,000 35.0 $ 4,889,500 35.0
Differential due
to operations
outside U.S. 45,500 .3 (1,540,000) (12.6) 892,600 6.4
State and local
taxes net of
federal tax
benefit 265,300 1.5 184,100 1.5 237,100 1.6
Nondeductible
goodwill
amortization 371,100 2.0 371,100 3.0 371,100 2.7
Other - Net (212,100) (1.2) (22,700) (.1) (241,100) (1.7)
Total Provision
for income taxes $ 6,860,300 37.6 $ 3,269,500 26.8 $ 6,149,200 44.0
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Cash payments for taxes were $2,994,800, $3,128,200 and $6,442,000 for the
1997, 1996 and 1995 fiscal years respectively.
<PAGE>
12. NET EARNINGS PER SHARE
Net earnings per share for all periods presented have been computed based
upon the weighted average number of shares outstanding during the year. The
following schedule represents a reconciliation of the numerator and the
denominator used to calculate basic and diluted earnings per share for 1997,
1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ----------------------------- ----------------------------
Per- Per- Per-
Income Shares Share Income Shares Share Income Shares Share
(Num.) (Denom.) Amount (Num.) (Denom.) Amount (Num.) (Denom.) Amount
---------- ---------- ------ ---------- --------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS $8,192,000 10,117,965 $.810 $5,011,900 10,149,692 $.494 $5,885,200 10,159,088 $.579
Effect of Dilutive Options -- 30,497 -- 20,406 -- 44,211
---------- ---------- ---------- ---------- ---------- ----------
Diluted EPS $8,192,000 10,148,462 $.807 $5,011,900 10,170,098 $.493 $5,885,200 10,203,299 $.577
---------- ---------- ------ ---------- --------- ------- ---------- --------- --------
---------- ---------- ------ ---------- --------- ------- ---------- --------- --------
</TABLE>
13. QUARTERLY FINANCIAL DATA, MARKET AND DIVIDEND INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
Fiscal Year Ended December 31, 1997 3 Months 3 Months 3 Months 3 Months Total Year
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $45,076,700 $43,185,000 $43,707,700 $42,786,700 $174,756,100
- ---------------------------------------------------------------------------------------------------------------------
Cost of sales $31,510,300 $30,617,400 $31,946,100 $30,804,500 $124,878,300
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,296,900 $ 1,619,800 $ 1,962,000 $ 2,313,300 $ 8,192,000
- ---------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 10,125,386 10,114,869 10,114,803 10,116,800 10,117,965
- ---------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.23 $ 0.16 $ 0.19 $ 0.23 $ 0.81
- ---------------------------------------------------------------------------------------------------------------------
Dividends paid per share -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Market price of common stock
HIGH $ 11.25 $ 10.75 $ 15.38 $ 15.88 $ 15.88
LOW $ 9.25 $ 9.31 $ 10.13 $ 13.75 $ 9.25
- ---------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
Net Sales $39,533,300 $36,253,400 $40,008,000 $42,340,400 $158,135,100
- ---------------------------------------------------------------------------------------------------------------------
Cost of sales $26,337,600 $26,355,000 $30,162,600 $32,351,800 $115,207,000
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,236,700 $ 1,015,600 $ 1,177,300 $ 582,300 $ 5,011,900
- ---------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 10,139,754 10,164,637 10,159,871 10,134,504 10,149,692
- ---------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.22 $ 0.10 $ 0.12 $ 0.05 $ 0.49
- ---------------------------------------------------------------------------------------------------------------------
Dividends paid per share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.40
- ---------------------------------------------------------------------------------------------------------------------
Market price of common stock
HIGH $ 12.00 $ 14.25 $ 11.00 $ 11.88 $ 14.25
LOW $ 8.50 $ 9.25 $ 8.63 $ 8.75 $ 8.50
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
14. SUBSEQUENT EVENT
On February 9, 1998, the Company purchased the remaining 40% of its 60%
owned subsidiary in Mexico, NEPSA for $18,500,000. Pro forma results assuming
consolidation of 100% of NEPSA's earnings would have been net earnings of
$10,455,300 or $1.03 per share for 1997, $7,885,600 or $.78 per share for 1996
and $6,671,900 or $.66 per share for 1995.
15. MAJOR CUSTOMER
A customer of the Company accounted for 44.9%, 44.6% and 46.6% of total
sales in the 1997, 1996, and 1995 fiscal years respectively.
16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture and sale of specialty plastics for use in a variety of disposable
healthcare products, as well as in numerous industrial, agricultural and
packaging end uses. The Company operates in two primary geographic areas: the
United States and Mexico.
Geographic financial information is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net Sales to unaffiliated
customers:
United States $ 120,160,100 $ 109,616,200 $ 107,877,500
Mexico 54,596,000 48,518,900 48,431,900
------------- ------------- -------------
Total sales $ 174,756,100 $ 158,135,100 $ 156,309,400
------------- ------------- -------------
------------- ------------- -------------
Net Earnings:
United States $ 5,519,500 $ 2,903,700 $ 5,479,500
Mexico 2,672,500 2,108,200 405,700
------------- ------------- -------------
Total earnings $ 8,192,000 $ 5,011,900 $ 5,885,200
------------- ------------- -------------
------------- ------------- -------------
Identifiable assets:
United States (Including Goodwill) $ 132,652,600 $ 127,292,800 $ 116,976,300
Mexico 32,670,400 30,783,900 19,117,900
------------- ------------- -------------
Total assets $ 165,323,000 $ 158,076,700 $ 136,094,200
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<PAGE>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997*
------------------------ ----------------------------
(Unaudited) (Audited)
<S> <C> <C>
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
-------------------- -------------------
-------------------- -------------------
</TABLE>
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.
<PAGE>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
---------------------------------------------------
March 31, 1998 March 31, 1997
------------------------ ------------------------
<S> <C> <C>
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
---------------------- ----------------------
---------------------- ----------------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
3 Months Ended
------------------------------------------------
March 31, 1998 March 31, 1997
----------------------- ----------------------
<S> <C> <C>
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
-------------------- --------------------
-------------------- --------------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
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,
results 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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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
------------- -------------
------------- -------------
</TABLE>
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:
<TABLE>
<CAPTION>
1998 1997
-------------------------------- -------------------------------
Per-
Income Shares Share Income Shares Per-Share
(Num.) (Denom.) Amount (Num.) (Denom.) Amount
---------- ---------- ------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
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
---------- ---------- ----- ---------- ---------- -----
---------- ---------- ----- ---------- ---------- -----
</TABLE>
<PAGE>
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
<TABLE>
<CAPTION>
3 Months Ended
--------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Interest expense $ 985,200 $ 846,300
Interest income (155,800) (131,300)
----------- -----------
Total interest and
dividends - net $ 829,400 $ 715,000
----------- -----------
----------- -----------
</TABLE>
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:
<TABLE>
<CAPTION>
3 Months Ended
--------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Interest $ 1,173,300 $ 1,245,000
Income tax $ 39,400 $ 544,300
</TABLE>
<PAGE>
HUNTSMAN PACKAGING CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial
statements are presented to give effect to the acquisition of all of the
outstanding common stock of Blessings which occurred on May 19, 1998. The
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998
has been adjusted to give pro forma effect to the Blessings acquisition as if
it had occurred on March 31, 1998. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended December 31, 1997
and for the three months ended March 31, 1998 have been adjusted to give pro
forma effect to (i) the Blessings acquisition and (ii) the acquisition by
Blessings of the remaining 40% of its previously 60%-owned subsidiary, NEPSA,
which occurred on February 9, 1998, in each case as if they had occurred on
January 1, 1997.
The unaudited pro forma condensed consolidated financial information does not
purport to be indicative of the financial position or results of operations
of future periods or indicative of results that would have occurred had the
transactions referred to above been consummated on the dates indicated. The
unaudited pro forma adjustments are based on available information and
certain assumptions that management of Huntsman believes are reasonable. The
total purchase price for Blessings has been allocated to the tangible and
intangible assets and liabilities based on the results of a preliminary
valuation of their estimated respective fair values. Huntsman is in the
process of completing the valuation of the acquired assets and liabilities,
and as result, the allocation of the purchase price may change.
The pro forma financial information should be read in conjunction with
Huntsman's consolidated financial statements and notes thereto included in
Huntsman's Annual Report on Form 10-K and Quarterly Report on Form 10-Q and
Blessings' consolidated financial statements and notes thereto included
herein.
<PAGE>
HUNTSMAN PACKAGING CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA CONSOLIDATED
HUNTSMAN BLESSINGS ADJUSTMENTS PRO FORMA
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents $ 23,289 $ 4,753 $ (1,500)(2) $ 26,542
Receivables, net 76,051 22,022 - 98,073
Inventories 69,938 13,164 - 83,102
Prepaid expenses and other 3,052 2,460 - 5,512
Deferred income taxes 1,271 1,510 - 2,781
---------------- ---------------- ---------- ------------
Total current assets 173,601 43,909 (1,500) 216,010
Plant and Equipment, net 178,993 91,616 11,384 (1) 281,993
Intangible Assets, net 49,598 25,964 152,745 (1) 228,307
Other Assets 21,165 9,265 (821)(1) 29,609
---------------- ---------------- ---------- ------------
Total $ 423,357 $ 170,754 $ 161,808 $ 755,919
---------------- ---------------- ---------- ------------
---------------- ---------------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable and accrued expenses $ 69,656 $ 19,377 $ (428)(2) $ 88,605
Due to affiliates 9,744 - 9,744
Income taxes payable 3,371 2,576 5,947
Current portion of long-term debt - 4,281 (4,281)(2) -
Deferred income taxes - 1,498 1,498
---------------- ---------------- ---------- ------------
Total current liabilities 82,771 27,732 (4,709) 105,794
Long-Term Debt 256,000 47,500 (47,500)(2) 541,000
285,000 (2)
Other Liabilities 8,901 2,587 4,500 (1) 15,988
Deferred Income Tax Liabilities 10,640 10,099 7,353 (1) 28,092
Stockholders' Equity 65,045 82,836 (82,836)(1) 65,045
---------------- ---------------- ---------- ------------
Total $ 423,357 $ 170,754 $ 161,808 $ 755,919
---------------- ---------------- ---------- ------------
---------------- ---------------- ---------- ------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
balance sheet.
<PAGE>
HUNTSMAN PACKAGING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(1) Reflects the estimated goodwill and net asset fair values to be recorded
as a result of: (i) allocating the Blessings purchase price of
approximately $230,406 (consisting of the stock purchase price of
$212,669, acquisition fees of $10,248 and stock option repurchase and
severance obligations of $7,489), (ii) the payment of loan origination
fees of $3,885 and (iii) the elimination of Blessings' stockholders'
equity. For purposes of allocating the purchase price among the various
assets and liabilities acquired, Huntsman has estimated the respective
asset and liability fair values pending completion of a final valuation.
As a result of a preliminary valuation, intangibles assets of $178,709
were recorded which consisted of approximately $167,209 of goodwill and
approximately $11,500 of patents and technology. The allocation of the
purchase price to the net assets acquired is as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 43,909
Plant and equipment 103,000
Intangible assets (goodwill and other) 178,709
Other assets (including loan origination fees) 8,444
------------
Total assets 334,062
------------
Current liabilities (23,451)
Other liabilities and deferred income taxes (24,539)
Long-term debt, including current portion (51,781)
------------
Total liabilities (99,771)
------------
$ 234,291
------------
------------
</TABLE>
The components of the pro forma adjustments to balance sheet captions are
more specifically described as follows:
<TABLE>
<CAPTION>
<S> <C>
Increase plant and equipment, net, to estimated fair value $ 11,384
------------
------------
Intangible assets, net:
Remove Blessings' intangible assets $ (25,964)
Record goodwill and other intangibles 178,709
------------
Net adjustment $ 152,745
------------
------------
Other assets:
Decrease other assets to estimated fair value $ (4,706)
Record loan origination fees 3,885
------------
Net adjustment $ (821)
------------
------------
Increase pension plan liabilities to estimated fair value $ 4,500
------------
Increase deferred income tax liabilities for the effect of
allocating the purchase price $ 7,353
------------
</TABLE>
(2) Reflects the borrowing by Huntsman of $285,000 of long-term debt to
finance the purchase price of approximately $230,406, repay Blessings'
debt of approximately $51,781, pay loan origination fees of approximately
$3,885 and pay accrued interest of approximately $428 outstanding at
March 31, 1998.
The following sets forth the components of the adjustment to cash and cash
equivalents as of March 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Proceeds from issuance of long-term debt $ 285,000
Payment of stock purchase price (212,669)
Payment of estimated acquisition fees (10,248)
Payment of stock option repurchase and severance obligations for certain
Blessings' employees (7,489)
Payment of loan origination fees (3,885)
Repayment of Blessings' debt ($4,281 current and $47,500 long-term)(a) (51,781)
Payment of accrued interest on Blessings' debt (a) (428)
------------
Net reduction in cash and cash equivalents $ (1,500)
------------
------------
(a) Blessings' total debt balance at the closing of the transaction
on May 19, 1998 was approximately $57,181 and related accrued
interest was approximately $733.
</TABLE>
<PAGE>
HUNTSMAN PACKAGING CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA CONSOLIDATED
HUNTSMAN BLESSINGS ADJUSTMENTS PRO FORMA
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS:
Sales, net $ 491,163 $ 174,756 $ 665,919
Cost of sales 424,868 124,878 $ 759 (1) 550,505
---------------- ---------------- ---------------- -----------------
Gross profit 66,295 49,878 (759) 115,414
Total operating expenses 49,209 28,660 5,664 (2) 83,533
---------------- ---------------- ---------------- -----------------
Operating income 17,086 21,218 (6,423) 31,881
Interest expense, net (16,402) (3,139) (19,754)(3) (39,295)
Other income 530 179 709
---------------- ---------------- ---------------- -----------------
Income (loss) before income taxes 1,214 18,258 (26,177) (6,705)
Income tax provision (benefit) 839 6,860 (8,665)(4) (966)
Minority interest in net income of subsidiary - 3,206 (3,206)(5) -
---------------- ---------------- ---------------- -----------------
Net income (loss) $ 375 $ 8,192 $ (14,306) $ (5,739)
---------------- ---------------- ---------------- -----------------
---------------- ---------------- ---------------- -----------------
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated statements of operations.
<PAGE>
HUNTSMAN PACKAGING CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA CONSOLIDATED
HUNTSMAN BLESSINGS ADJUSTMENTS PRO FORMA
------------- -------------- --------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales, net $ 147,803 $ 44,900 $ 192,703
Cost of sales 124,761 30,970 $ 190 (1) 155,921
--------------- ---------------- ---------------- -----------------
Gross profit 23,042 13,930 (190) 36,782
Total operating expenses 13,062 7,274 1,393 (2) 21,729
--------------- ---------------- ---------------- -----------------
Operating income 9,980 6,656 (1,583) 15,053
Interest expense, net (5,577) (985) (4,738) (3) (11,300)
Other income (expense) 118 (405) (287)
--------------- ---------------- ---------------- -----------------
Income before income taxes 4,521 5,266 (6,321) 3,466
Income tax provision 2,084 2,098 (2,086) (4) 2,096
Minority interest in net income of subsidiary - 240 (240) (5) -
--------------- ---------------- ---------------- -----------------
Net income $ 2,437 $ 2,928 $ (3,995) $ 1,370
--------------- ---------------- ---------------- -----------------
--------------- ---------------- ---------------- -----------------
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated statements of operations.
<PAGE>
HUNTSMAN PACKAGING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(1) Reflects additional depreciation expense resulting from the increase in
property and equipment to estimated fair values. The average estimated
depreciable lives for the acquired assets is 15 years.
(2) Reflects the net increase in goodwill and intangibles amortization. The
goodwill is amortized over 30 years and the other intangibles are amortized
over ten years.
(3) Reflects additional interest expense on borrowings made to finance the
Blessings acquisition assuming an estimated weighted average rate of
7.84%, (net of interest expense on Blessings' debt being refinanced in
connection therewith) and the amortization of loan origination fees
incurred on the additional borrowings assumed to be amortized over a
seven-year period.
(4) Represents the tax effect of pro forma adjustments, excluding
non-deductible goodwill amortization, at a 40% effective tax rate.
(5) Reflects the reduction of minority interest income as a result of
Blessings' acquisition of the minority interest in NEPSA which occurred
on February 9, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
HUNTSMAN PACKAGING CORPORATION
By: /s/ Ronald G. Moffitt
--------------------------------
Ronald G. Moffitt
Senior Vice President
July 31, 1998
