FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-4684
Blessings Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-5566477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Enterprise Drive, Newport News, VA 23603
(Address of principal executive offices)
(Zip Code)
757 887 2100
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of May 1, 1997
Common stock, $.71 par value 10,110,069
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BLESSINGS CORPORATION
INDEX
PAGE NUMBER
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 31, 1997 and December 31, 1996 1
Consolidated Condensed Statements of
Earnings - quarters ended March 31, 1997
and March 31, 1996 2
Consolidated Condensed Statements of
Cash Flows - quarters ended March 31, 1997
and March 31, 1996 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 Accounts 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
-4-
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PART I. FINANCIAL INFORMATION
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1997 December 31, 1996*
------------------------ ----------------------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current Assets:
Cash & cash equivalents $ 5,774,700 $ 5,801,800
Accounts receivable less allowance for
doubtful accounts of $1,630,900 &
$1,541,000 21,949,000 22,832,200
Inventories 14,246,600 12,905,700
Prepaid deferred taxes 1,417,900 1,417,900
Prepaid expenses 1,316,800 1,723,700
-------------------- -------------------
Total Current Assets 44,705,000 44,681,300
-------------------- -------------------
Property, plant and equipment less
accumulated depreciation & amortization
of $39,231,600 & $36,596,200 83,056,500 80,573,600
Goodwill net of accumulated amortization
of $2,924,500 and $2,659,500 23,580,800 23,845,800
Deferred taxes 7,539,800 7,565,400
Other assets 1,462,700 1,410,600
-------------------- -------------------
Total Assets $160,344,800 $158,076,700
==================== ===================
LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses $ 21,551,600 $ 25,025,800
Short-term bank note 2,000,000 --
Income taxes payable 1,868,500 528,700
Current installments on long-term debt 3,601,200 3,744,300
Deferred taxes 1,055,600 1,024,200
-------------------- -------------------
Total Current Liabilities 30,076,900 30,323,000
-------------------- -------------------
Long-term debt 33,471,900 34,253,100
Deferred taxes on income 8,390,900 8,373,800
Deferred supplemental pension liability 2,223,800 1,950,700
Minority interest 12,226,400 11,427,700
Shareholders' Equity:
Common stock 7,252,500 7,252,500
Additional paid in capital 5,990,700 6,012,900
Translation loss (6,255,900) (6,255,900)
Retained earnings 67,928,100 65,631,200
-------------------- -------------------
74,915,400 72,640,700
Common stock in treasury at cost (960,500) (892,300)
-------------------- -------------------
Total Shareholders' Equity 73,954,900 71,748,400
-------------------- -------------------
Total Liabilities and Shareholders'
Equity $160,344,800 $158,076,700
==================== ===================
See accompanying Notes to Consolidated Condensed Financial Statements.
*The balance sheet at December 31, 1996 has been taken from audited Financial
Statements at that date, and condensed.
</TABLE>
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<TABLE>
<CAPTION>
BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
------------------------ ------------------------
<S> <C> <C>
Net sales $ 45,076,700 $ 39,533,300
---------------------- ----------------------
Cost of sales 31,510,300 26,337,600
Selling, general and administrative 7,525,600 6,600,300
Foreign exchange loss 211,500 42,600
Interest & dividends - net 715,000 721,800
---------------------- ----------------------
Total costs and expenses 39,962,400 33,702,300
---------------------- ----------------------
Earnings from operations before provision for taxes on
income and minority interest 5,114,300 5,831,000
---------------------- ----------------------
Taxes on income
Current 1,952,700 2,128,800
Deferred 66,000 590,300
---------------------- ----------------------
Total taxes 2,018,700 2,719,100
---------------------- ----------------------
Minority interest in net income of subsidiary 798,700 875,200
---------------------- ----------------------
Net Earnings $ 2,296,900 $ 2,236,700
====================== ======================
Average number of shares of common
stock outstanding 10,125,386 10,139,754
====================== ======================
Common stock outstanding at close of period 10,125,717 10,171,154
====================== ======================
Net earnings per share $ .23 $ .22
====================== ======================
Dividends per share -- $ .10
====================== ======================
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
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BLESSINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
----------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings from operations $ 2,296,900 $ 2,236,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,644,700 2,302,700
Amortization - goodwill 265,000 265,100
Amortization - other 15,000 5,000
Minority interest in net income of con-
solidated subsidiary 798,700 875,200
Provision for losses on accounts receivable 217,500 90,000
(Gain) loss on sale of assets 1,000 (19,000)
Change in assets and liabilities:
(Increase) decrease in accounts receivable 600,300 (150,500)
(Increase) decrease in inventories (1,360,500) (1,774,500)
(Increase) decrease in prepaid expenses 210,400 (110,400)
Increase (decrease) in accounts payable
& accrued expenses (2,892,500) 701,900
Increase (decrease) in taxes on income 1,208,600 1,313,500
Increase (decrease) in deferred taxes
on income 66,000 556,400
(Increase) decrease in other assets (73,300) (132,700)
Increase (decrease) in other liabilities 264,600 270,400
-------------------- --------------------
Net cash provided by operating activities 4,262,400 6,429,800
-------------------- --------------------
Cash flows from investing activities:
Proceeds from disposition of fixed assets 18,200 23,700
Capital expenditures (5,265,300) (3,466,900)
-------------------- --------------------
Net cash required by investing activities (5,247,100) (3,443,200)
-------------------- --------------------
Cash flows from financing activities:
Reduction of long-term debt (924,400) (11,735,000)
Proceeds from issuance of long-term debt -- 20,000,000
Proceeds from issuance of short-term debt 2,000,000 2,078,200
Issuance and acquisition of treasury stock
- net (90,400) 430,500
Dividends paid -- (1,012,400)
-------------------- --------------------
Net cash required by financing activities 985,200 9,761,300
-------------------- --------------------
Effect of exchange rate changes on cash (27,600) 13,400
-------------------- --------------------
Net incr. (decr.) in cash and cash equivalents (27,100) 12,761,300
Cash and cash equivalents at beginning of year 5,801,800 3,316,900
-------------------- --------------------
Cash and cash equivalents at end of period $ 5,774,700 $ 16,078,200
==================== ====================
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
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BLESSINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(See Independent Accountants' Report)
1. The consolidated condensed balance sheet as of March 31, 1997, the
consolidated condensed statements of earnings for the three months
ended March 31, 1997 and March 31, 1996, 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 60% 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, 1997, 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, 1996.
2. The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share", which is
effective for financial statements for both interim and annual periods
ending after December 15, 1997. Early adoption of the statement is not
permitted. The Company has applied this statement to the 1996 first
quarter and annual results and to the 1997 first quarter results and
determined that the adoption of this statement would not have a
material impact on the earnings per share calculations for these
periods.
3. In 1996 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 quarter.
Due to hyper-inflation in Mexico, the Company changed the functional
currency from the peso to the dollar effective in January, 1997. As a
result of this change, translation gains and losses previously recorded
in shareholders' equity are now recorded in income.
4. The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the ful
year.
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5. Inventories:
March 31, 1997 December 31, 1996
Raw Materials $ 9,560,600 $ 10,050,500
Finished Goods 4,686,000 2,855,200
$ 14,246,600 $ 12,905,700
6. Long-term debt:
March 31, 1997 December 31, 1996
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 16,406,300 17,187,500
Mexico Bank Loans 666,800 809,900
$ 37,073,100 $ 37,997,400
Less installments due
within one year 3,601,200 3,744,300
Due after one year $ 33,471,900 $ 34,253,100
For further details, see Note 6 of the Annual Report to Shareholders
for the fiscal year ended December 31, 1996.
7. Shareholders' Equity
During the three months ended March 31, 1997, shareholders' equity
increased as follows:
Net earnings $ 2,296,900
Issuance and acquisition of treasury
stock - net (90,400)
Total increase in shareholders' equity $ 2,206,500
8. Interest and Dividends - Net
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
Interest expense $ 846,300 $ 988,100
Interest income (131,300) (260,700)
Dividend income -- (5,600)
Total interest and
dividends - net $ 715,000 $ 721,800
9. During the three month period ending March 31, 1997, the effective tax
rate was 39.5% compared to a rate of 46.6% during the same period last
year ending March 31, 1996. Income taxes have been computed based on
the estimated annual effective tax rate.
10. The purchase of NEPSA on July 5, 1994, resulted in $26,505,300 of
goodwill. This amount is being amortized on a straight-line basis over
its estimated life of 25 years.
11. Cash payments for interest and income taxes were:
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
Interest $ 1,245,000 $ 735,600
Income tax $ 544,300 $ 944,200
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REVIEW BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Consolidated Condensed Financial Statements as of March 31, 1997 and for the
three month periods ended March 31, 1997 and 1996 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.
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Independent Accountants' Report
To the Board of Directors
Blessings Corporation
Newport News, Virginia
We have reviewed the accompanying consolidated condensed balance sheet of
Blessings Corporation and subsidiaries as of March 31, 1997, and the related
consolidated condensed statements of earnings and cash flows for the three
months ended March 31, 1997 and 1996. 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, 1996, and the related consolidated statements of
earnings, shareholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated February 21, 1997 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, 1996 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which is has been derived.
Deloitte & Touche LLP
Richmond, Virginia
April 18, 1997
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April 18, 1997
Board of Directors
Blessings Corporation
Newport News, Virginia
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Blessings Corporation and subsidiaries for the three months ended
March 31, 1997 and 1996, as indicated in our report dated April 18, 1997;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, is
incorporated by reference in the following Registration Statements:
Form: Registration Statement No.:
S-8 33-41762
S-8 33-54108
S-8 33-70328
S-8 33-85382
S-8 33-85384
S-8 33-12387
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche, LLP
Richmond, Virginia
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<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)
3 Months Ended 3 Months Ended
March 31, 1997 Percent March 31, 1996 Percent 1997/1996
<S> <C> <C> <C> <C> <C>
Net Sales $45,076,700 100.0 $39,533,300 100.0 14.0
Cost of sales 31,510,300 69.9 26,337,600 66.6 19.6
------------------ -------- ------------------ ---------
Gross margin 13,566,400 30.1 13,195,700 33.4 2.8
Other costs and
expenses 8,452,100 18.8 7,364,700 18.6 14.8
------------------ -------- ------------------ ---------
Earnings from operations
before taxes on income
and minority interest 5,114,300 11.3 5,831,000 14.7 (12.3)
Taxes on income 2,018,700 4.5 2,719,100 6.9 (25.8)
------------------ -------- ------------------ ---------
Minority interest in net
income of subsidiary 798,700 1.8 875,200 2.2 (8.7)
------------------ -------- ------------------ ---------
Net earnings $2,296,900 5.1 $2,236,700 5.7 2.7
================== ======== ================== ========= ===========
</TABLE>
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RESULTS OF OPERATIONS:
Net Sales:
Net sales during the three months ending March 31, 1997 increased by
14.0% over the same period last year. As the first quarter sales results
indicate, sales demand remains strong, fueled by a 15% unit volume growth over
the first quarter of 1996, primarily in the Company's core healthcare markets in
the United States. Comparable unit volume was slightly down at the Company's 60%
owned subsidiary NEPSA due to heightened competitive pressures.
Operating Costs and Expenses:
Gross margins at both the Edison Plastics Division in the United States
and NEPSA in Mexico remain hampered by continued high polyolefin raw material
prices. While it has been broadly predicted within the plastics industry that
raw material prices would begin to soften in 1997, the reality to date has been
a further $.03 per pound increase effected by polyethylene suppliers during the
first quarter. Until the raw material marketplace begins to realize long lasting
price reductions, the margins of the Company, along with those of most other
polyolefin converters, will remain compressed.
The Company remains intensely focused on cost productivity programs
directed at optimizing its manufacturing processes. In this regard, the
installation and start-up of a state-of-the-art flexographic printing and
converting operation at the Company's facility in McAlester, Oklahoma is now
complete and advancing into the product development and customer evaluation
stage.
Taxes on Income:
The effective tax rate for the first quarter ended March 31, 1997 was
39.5% compared to 46.6% for the first quarter of 1996. The decreased rate was
primarily the result of an increase in depreciation expense for tax purposes due
to inflationary indexation of fixed assets in Mexico and the availability of
domestic tax credits.
Liquidity and Capital Resources:
As of March 31, 1997, the Company had working capital of $14,628,100
compared to $14,358,300 at year-end, an increase of $269,800. The ratio of
current assets to current liabilities at the end of the quarter and at year-end
was 1.5 to 1. In support of aforementioned growth, the Company borrowed $2
million against its $25 million revolving credit line leaving $23 million
available. The Company was not utilizing any of its $12 million short-term
credit at the end of the quarter.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K: Registrant filed one Current
Report on Form 8-K, dated February 7, 1997 disclosing
the Board of Directors voted not to declare a
quarterly dividend on its common stock effective with
the quarterly dividend otherwise payable on March 1,
1997.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements which involve
risks and uncertainties, including but not limited to economic, competitive,
governmental, legal and technological factors affecting the Company's
operations, markets, products, services and prices, and other factors discussed
in the Company's filings with the Securities and Exchange Commission.
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S I G N A T U R E S
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the undersigned
thereunto duly authorized.
BLESSINGS CORPORATION
DATED: May 12, 1997 /s/Wayne A. Durboraw
---------------------------------------
Wayne A. Durboraw, Controller
DATED: May 12, 1997 /s/James P. Luke
---------------------------------------
James P. Luke, Executive Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,774,700
<SECURITIES> 0
<RECEIVABLES> 23,579,900
<ALLOWANCES> 1,630,900
<INVENTORY> 14,246,600
<CURRENT-ASSETS> 44,705,000
<PP&E> 122,288,100
<DEPRECIATION> 39,231,600
<TOTAL-ASSETS> 160,344,800
<CURRENT-LIABILITIES> 30,076,900
<BONDS> 33,471,900
0
0
<COMMON> 7,252,500
<OTHER-SE> 66,702,400
<TOTAL-LIABILITY-AND-EQUITY> 160,344,800
<SALES> 45,076,700
<TOTAL-REVENUES> 45,076,700
<CGS> 31,510,300
<TOTAL-COSTS> 39,962,400
<OTHER-EXPENSES> 8,452,100
<LOSS-PROVISION> 1,630,900
<INTEREST-EXPENSE> 846,300
<INCOME-PRETAX> 5,114,300
<INCOME-TAX> 2,018,700
<INCOME-CONTINUING> 2,296,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,296,900
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
