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 April 22, 1995
-------------------------
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)
804 887 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 26, 1995
----- ------------------------------
Common stock, $.71 par value 10,206,338
<PAGE>
BLESSINGS CORPORATION
INDEX
PAGE NUMBER
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
April 22, 1995 and December 31, 1994 1
Consolidated Condensed Statements of
Earnings - sixteen weeks ended
April 22, 1995 and April 23, 1994 2
Consolidated Condensed Statements of
Cash Flows - sixteen weeks ended
April 22, 1995 and April 23, 1994 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 2. Changes in Securities 12
Item 4. Submission of Matters to A Vote by
Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
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<CAPTION>
PART I. FINANCIAL INFORMATION
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
April 22, 1995 December 31, 1994*
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents $3,743,300 $6,975,800
Accounts receivable less allowance for
doubtful accounts of $1,202,200 &
$1,170,700 16,696,700 21,253,500
Inventories 14,358,200 15,865,600
Prepaid deferred taxes 760,800 760,800
Prepaid expenses 1,046,200 1,425,400
------------ ------------
Total Current Assets 36,605,200 46,281,100
------------ ------------
Property, plant and equipment (less
accumulated depreciation & amortization
of $34,528,200 & $33,271,400) 67,517,200 75,021,700
Goodwill 25,701,200 25,966,200
Deferred taxes 4,165,700 2,173,700
Other assets 1,974,200 2,113,600
------------ ------------
Total Assets $135,963,500 $151,556,300
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses $17,229,200 $23,504,800
Income taxes payable 2,041,900 1,960,200
Current installments on long-term debt 6,751,400 8,650,400
------------ ------------
Total Current Liabilities 26,022,500 34,115,400
------------ ------------
Long-term debt 24,386,300 26,475,800
Deferred taxes on income 6,947,300 7,103,700
Deferred supplemental pension liability 1,533,500 1,573,100
Minority interest 6,693,900 9,918,100
Shareholders' Equity:
Common stock 7,252,500 7,250,400
Additional paid in capital 6,204,300 6,196,100
Translation loss (5,675,600) (2,687,500)
Retained earnings 62,747,700 61,847,100
------------ ------------
70,528,900 72,606,100
Common stock in treasury at cost (148,900) (235,900)
------------ ------------
Total Shareholders' Equity 70,380,000 72,370,200
Total Liabilities and Shareholders' ------------ ------------
Equity $135,963,500 $151,556,300
============ ============
See Independent Accountants' Review Report and Notes to Consolidated Condensed
Financial Statements.
*The balance sheet at December 31, 1994 has been taken from audited Financial
Statements at that date, and condensed.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
16 Weeks Ended 16 Weeks Ended
April 22, 1995 April 23, 1994
<S> <C> <C>
Continuing Operations:
Net sales $45,056,600 $36,047,100
----------- -----------
Cost of sales 30,940,400 22,833,600
Selling, general and administrative 6,913,700 6,519,500
Foreign exchange loss 2,962,700 --
Interest & dividends - net 631,900 198,300
----------- -----------
Total costs and expenses 41,448,700 29,551,400
----------- -----------
Earnings from continuing operations before provision for taxes
on income and minority interest 3,607,900 6,495,700
----------- -----------
Taxes on income
Current 1,563,600 2,529,000
Deferred 27,200 32,900
----------- -----------
Total taxes 1,590,800 2,561,900
Minority interest in net income of subsidiary 95,900 --
----------- -----------
Net earnings from continuing operations 1,921,200 3,933,800
----------- -----------
Discontinued Operations:
Earnings from operation of discontinued Geri-
Care Products Division less applicable
taxes on income -- 138,600
----------- -----------
Net earnings from discontinued operations -- 138,600
----------- -----------
Net Earnings $1,921,200 $4,072,400
=========== ===========
Average number of shares of common
stock outstanding 10,205,588 9,769,418
=========== ===========
Common stock outstanding at close of period 10,206,338 9,770,318
=========== ===========
Earnings per share on common stock:
From continuing operations $ .19 $ .41
From operations of discontinued Geri-Care
Products Division - .01
----------- -----------
Net earnings per share $ .19 $ .42
=========== ===========
Dividends per share $ .10 $ .08
=========== ===========
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
16 Weeks Ended 16 Weeks Ended
April 22, 1995 April 23, 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings from continuing operations $1,921,200 $3,933,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Earnings from discontinued operations -- 138,600
Depreciation and amortization 2,373,500 1,985,200
Amortization - Goodwill 265,000 --
Amortization - other 7,900 15,300
Minority interest in net income of con-
solidated subsidiary 95,900 --
Provision for losses on accounts receivable 117,800 290,500
(Gain) loss on sale of assets (5,900) --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 2,294,700 (1,771,300)
(Increase) decrease in inventories 390,200 (1,093,200)
(Increase) decrease in prepaid expenses 346,200 (140,100)
Increase (decrease) in accounts payable
& accrued expenses (3,074,000) 1,105,500
Increase (decrease) in taxes on income 339,300 1,062,300
Increase (decrease) in deferred taxes
on income 27,200 32,900
(Increase) decrease in other assets (207,700) (155,900)
Increase (decrease) in other liabilities (6,500) 245,400
---------- ----------
Net cash provided by operating activities 4,884,800 5,649,000
---------- ----------
Cash flows from investing activities:
Proceeds from disposition of fixed assets 25,200 --
Capital expenditures (2,861,000) (4,116,400)
---------- ----------
Net cash required by investing activities (2,835,800) (4,116,400)
---------- ----------
Cash flows from financing activities:
Reduction of long term debt (2,942,600) (1,516,700)
Issuance of common stock under stock
option plan 30,800 94,400
Issuance and acquisition of treasury stock
- net 66,500 133,600
Dividends paid (1,020,600) (781,400)
---------- ----------
Net cash required by financing activities (3,865,900) (2,070,100)
---------- ----------
Effect of exchange rate changes on cash (1,415,600) --
---------- ----------
Net incr. (decr.) in cash and cash equivalents (3,232,500) (537,500)
Cash and cash equivalents at beginning of year 6,975,800 10,264,800
---------- ----------
Cash and cash equivalents at end of period $3,743,300 $9,727,300
========== ==========
See Independent Accountants' Review Report and Notes to Consolidated Condensed
Financial Statements.
</TABLE>
<PAGE>
BLESSINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(See Independent Accountants' Report)
1. The consolidated condensed balance sheet as of April 22, 1995,
the consolidated condensed statements of earnings for the sixteen
week periods ended April 22, 1995, and April 23, 1994, and the
consolidated condensed statements of cash flows for the sixteen
week periods then ended have been prepared by the company without
audit. Nacional de Envases, S.A. de C.V. (NEPSA), the company's
60% owned Mexican subsidiary, prepares its financial statements
monthly. Consequently, NEPSA's first quarter ended March 31,1995.
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 April 22, 1995,
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, 1994.
2. The company translates 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 quarter.
Translation gains and losses are recorded in shareholders' equity, and
transaction gains and losses are reflected in income.
3. The results of operations for the sixteen weeks ended April 22, 1995
are not necessarily indicative of the results to be expected for the
full year.
4. Inventories April 22, 1995 December 31, 1994
-------------- -----------------
Raw Materials $ 10,163,000 $ 12,464,900
Finished Goods 4,195,200 3,400,700
------------ ------------
$ 14,358,200 $ 15,865,600
============ ============
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out method (FIFO).
<PAGE>
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<CAPTION>
5. Long-term debt:
April 22, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Long-term debt consists of the following:
Georgia Loan $ 2,750,000 $ 3,250,000
Virginia Loan 3,300,000 3,900,000
6% Term Loan 625,000 1,041,700
NEPSA Credit Agreement 22,656,300 23,437,500
Mexico Bank Loans 1,806,400 3,497,000
------------ ------------
$ 31,137,700 $ 35,126,200
Less installments due within one year
6,751,400 8,650,400
------------ ------------
Due after one year $ 24,386,300 $ 26,475,800
============ ============
For further details, see Note 6 of the Annual Report to Shareholders
for the fiscal year ended December 31, 1994.
</TABLE>
<TABLE>
<CAPTION>
6. Shareholders' Equity
During the sixteen weeks ended April 22, 1995, shareholders' equity
decreased as follows:
<S> <C> <C>
Net earnings $ 1,921,200
Dividends declared (1,020,600)
Issuance of common stock under stock option plan
30,800
Issuance and acquisition of treasury stock - net
66,500
Translation loss (2,988,100)
-----------
Total decrease in shareholders' equity $(1,990,200)
===========
7. Interest and Dividends - Net
16 Weeks Ended 16 Weeks Ended
April 22, 1995 April 23, 1994
-------------- --------------
Interest expense $ 811,400 $ 331,200
Interest income (179,500) (121,300)
Dividend income -- (11,600)
---------- -----------
Total interest and dividends - net
$ 631,900 $ 198,300
========== ===========
</TABLE>
<PAGE>
8. During the sixteen week period ending April 22, 1995, the effective tax
rate was 44.0% compared to a rate of 39.4% during the sixteen week
period ending April 23, 1994. Income taxes have been computed based on
the estimated annual effective tax rate.
9. The purchase of NEPSA on July 5, 1994, resulted in $26,505,300 of
goodwill. This amount will be amortized on a straight-line basis over
its estimated life of 25 years.
10. On August 5, 1994 the company sold the assets of the Geri-Care Products
Division. Geri-Care's net results for the first quarter of 1994 are
reflected under Discontinued Operations. During the first quarter of
1994 the division reported net sales of $4,411,400 and pre-tax earnings
of $226,800.
11. Cash payments for interest and income taxes were:
16 Weeks Ended 16 Weeks Ended
April 22, 1995 April 23, 1994
-------------- --------------
Interest $ 868,900 $ 320,800
Income tax $ 1,358,000 $ 1,541,600
<PAGE>
REVIEW BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Consolidated Condensed Financial Statements as of April 22, 1995 and for the
sixteen week periods ended April 22, 1995 and April 23, 1994 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.
<PAGE>
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 April 22, 1995, and the related
consolidated condensed statements of earnings and cash flows for the sixteen
weeks ended April 22, 1995 and April 23, 1994. 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, 1994, 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 March 1, 1995, 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, 1994 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
Richmond, Virginia
May 12, 1995
<PAGE>
May 12, 1995
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 sixteen week
periods ended April 22, 1995 and April 23, 1994, as indicated in our report
dated May 12, 1995; 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 April 22, 1995, is
incorporated by reference in the Registration Statement (Post-Effective
Amendment Number 11 to Form S-8 on Form S-3).
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act, 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
<PAGE>
<TABLE>
<CAPTION>
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
Period Ended Increase/(Decrease)
---------------------------------------------------------------- -------------------
16 Weeks Ended 16 Weeks Ended
April 22, 1995 Percent April 23, 1994 Percent 1995/1994
-------------- ------- -------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $45,056,600 100.0 $36,047,100 100.0 25.0
Cost of sales 30,940,400 68.7 22,833,600 63.3 35.5
----------- ----- ----------- -----
Gross margin 14,116,200 31.3 13,213,500 36.7 6.8
Other costs and
expenses 10,508,300 23.3 6,717,800 18.6 56.4
----------- ----- ----------- -----
Earnings from continu-
ing operations before
taxes on income and
minority interest 3,607,900 8.0 6,495,700 18.0 (44.5)
Taxes on income 1,590,800 3.5 2,561,900 7.1 (37.9)
----------- ----- ---------- -----
Minority interest in net
income of subsidiary 95,900 .2 -- -- N/A
----------- ----- ---------- -----
Net earnings from contin-
uing operations 1,921,200 4.3 3,933,800 10.9 (51.2)
Profit from discontinued
operations -- -- 138,600 .4 (100.0)
----------- ----- ---------- -----
Net earnings $1,921,200 4.3 $4,072,400 11.3 (52.8)
=========== ===== ========== ===== =======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS:
Net Sales:
Net sales increased by 25% over the same quarter last year. The
increase was the result of the consolidation of net sales from Nacional de
Envases, S.A. de C.V. (NEPSA). The purchase of 60% of NEPSA was effective on
July 5, 1994. Consequently there were no sales incorporated into the company's
results during the first half of 1994. Domestic sales were down by 9% from the
prior year's first quarter due primarily to a general trend by diaper
manufacturers to purchase thinner gauge diaper backsheet materials. In addition,
demand in Mexico was lower than expected due to the peso devaluation and the
resulting recession.
Improvements are anticipated from the first quarter's results as new
product applications currently in the development stages come to market and
stability returns to the Mexican economy.
Operating Costs and Expenses:
Gross margin declined from the unusually high 1994 first quarter
results by 5.4 percentage points. This decline was the result of the company's
inability to pass through all the polyolefin price increases which have occurred
since the first quarter last year and the weaker demand for film products
discussed above. The company has instituted rigid cost controls in an effort to
recapture some of this margin erosion. In addition, other costs and expenses
have increased due to a foreign exchange transaction loss of $2,962,700
associated with the decline of the peso against the dollar and increased
interest expense associated with the purchase of NEPSA being reflected in the
first quarter of 1995.
Taxes on Income:
The effective tax rate for the first quarter ended April 22, 1995 was
44.0%, up from the 39.4% for the first quarter of 1994. The increase was
primarily the result of a higher effective tax rate associated with NEPSA and
the related non-deductible goodwill amortization.
Liquidity and Capital Resources:
As of April 22, 1995, the company had working capital of $10,582,700
compared to $12,165,700 at year-end, a decrease of $(1,583,000). The ratio of
current assets to current liabilities at the end of the quarter and at year-end
was 1.4 to 1. The company was not utilizing any of its $6 million revolving
credit line or $7 million short-term credit at the end of the quarter.
<PAGE>
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
Long-term debt agreements contain various restrictive
covenants limiting the incurrence of additional indebtedness,
mergers and acquisitions. The agreements also include
quarterly tests relating to the maintenance of working
capital, equity, and fixed charge and interest coverage
ratios.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Blessings Corporation's annual meeting of security
holders was held on May 16, 1995.
(b) Proxies were solicited by Blessings' management
pursuant to Regulation 14 under the Securities
Exchange Act of 1934. There was no solicitation in
opposition to management's twelve (12) nominees for
directors as listed in the proxy statement and all
such nominees were elected.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: A report by Independent Certified Public
Accountants filed in Part I.
(b) Reports on Form 8-K: Registrant filed one Current
Report on Form 8-K, dated April 18, 1995, relating to
a press release regarding the company's projected
earnings for the first quarter.
<PAGE>
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: June 1, 1995 /s/Wayne A. Durboraw
------------ ---------------------------------------
Wayne A. Durboraw, Controller
DATED: June 1, 1995 /s/James P. Luke
------------ ---------------------------------------
James P. Luke, Executive Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-22-1995
<CASH> 3,743,300
<SECURITIES> 0
<RECEIVABLES> 17,898,900
<ALLOWANCES> 1,202,200
<INVENTORY> 14,358,200
<CURRENT-ASSETS> 36,605,200
<PP&E> 102,045,400
<DEPRECIATION> 34,528,200
<TOTAL-ASSETS> 135,963,500
<CURRENT-LIABILITIES> 26,022,500
<BONDS> 24,386,300
<COMMON> 7,252,500
0
0
<OTHER-SE> 63,127,500
<TOTAL-LIABILITY-AND-EQUITY> 135,963,500
<SALES> 45,056,600
<TOTAL-REVENUES> 45,056,600
<CGS> 30,940,400
<TOTAL-COSTS> 41,448,700
<OTHER-EXPENSES> 10,508,300
<LOSS-PROVISION> 1,202,200
<INTEREST-EXPENSE> 811,400
<INCOME-PRETAX> 3,607,900
<INCOME-TAX> 1,590,800
<INCOME-CONTINUING> 1,921,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,921,200
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
