UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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, Virginia 23603
________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (757)887-2100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock - Par Value $.71 American Stock Exchange
- ------------------------------ -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
(Title of class)
<PAGE>
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X . No .
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 12, 1997 (based on the closing price of those
shares on the American Stock Exchange).
Common Stock, par value $.71 per share - $40,090,800
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 12, 1997.
Common Stock, par value $.71 - 10,125,721 shares
DOCUMENTS INCORPORATED BY REFERENCE
PART I
Item 1 - BUSINESS Pages 2-11 and Note 16 on page 22 of the
Annual Report to Shareholders for the
year ended December 31, 1996.
Item 2 - PROPERTIES Notes 4 and 7 on pages 18 and 19 of the
Annual Report to Shareholders for the
year ended December 31, 1996.
PART II
Item 5 - MARKET FOR THE REG- Note 12 on page 21 of the Annual Report
ISTRANT'S COMMON to Share-holders for the year ended
STOCK AND RELATED December 31, 1996.
SHAREHOLDER MATTERS
Item 6 - SELECTED FINANCIAL DATA Page 22 of the Annual Report to Share-
holders for the year ended
December 31, 1996.
<PAGE>
Item 7 - MANAGEMENT'S DISCUS Pages 23-24 of the Annual Report to
-SION AND ANALYSIS OF Shareholders for the year ended
FINANCIAL CONDITION December 31, 1996.
AND RESULTS OF OPER-
ATIONS
Item 8 - FINANCIAL STATEMENTS Pages 12-22 of the Annual Report to
AND SUPPLEMENTARY Shareholders for the year ended
DATA December 31, 1996.
PART III
Item 10 - DIRECTORS AND EXECU- Pages 14-16 of the Proxy Statement dated
TIVE OFFICERS OF April 11, 1997, in connection with its
THE REGISTRANT Annual Meeting to be held on
May 20, 1997.
Item 11 - EXECUTIVE COMPENSA Pages 6-14 of the Proxy Statement dated
-TION April 11, 1997, in connection with its
Annual Meeting to be held on
May 20, 1997.
Item 12 - SECURITY OWNERSHIP Pages 2 and 3 of the Proxy Statement
OF CERTAIN dated April 11, 1997, in connection with
BENEFICIAL OWNERS its Annual Meeting to be held on
May 20, 1997.
Item 13 - CERTAIN RELATION- Pages 14-16 of the Proxy Statement dated
SHIPS AND RELATED April 11, 1997, in connection with its
TRANSACTIONS Annual Meeting to be held on
May 20, 1997.
PART IV
Item 14 - EXHIBITS, FINANCIAL Pages 12-22 of the Annual Report to
STATEMENT SCHEDULES Shareholders for the year ended
AND REPORTS ON December 31, 1996.
FORM 8-K
<PAGE>
BLESSINGS CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. BUSINESS......................................... 1
Item 2. PROPERTIES....................................... 4
Item 3. LEGAL PROCEEDINGS................................ 4
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.......................................... 4
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS...................... 8
Item 6. SELECTED FINANCIAL DATA.......................... 8
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...... 8
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES.......... 8
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT....................................... 9
Item 11. EXECUTIVE COMPENSATION........................... 9
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................ 9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS... 9
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.............................. 10
<PAGE>
PART I
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: Except for the historical information contained herein, the matters
discussed in this 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.
Item 1. BUSINESS
(a) General Development of Business
Blessings Corporation (herein referred to as "Blessings" or "Company")
is a diversified manufacturer and supplier of plastic film products oriented
principally towards health care, agricultural, and industrial applications. The
Company's operations can be characterized as one business segment with domestic
and international operations which produces extruded polyethylene and
polypropylene films through the Edison Plastics(R) Division domestically and
through its 60% owned subsidiary, Nacional de Envases Plasticos, N.A. de C.V.,
and its associated companies, collectively known as NEPSA, in Mexico. NEPSA also
has extensive printing operations which print point-of-purchase messages on its
products for a variety of increasingly sophisticated packaging end uses.
(b) Financial Information about Domestic and International Operations
Financial information about domestic and international operations for
each of the three years ended December 31, 1996, December 30, 1995 and December
31, 1994 are set forth in Note 17 of the notes to the Consolidated Financial
Statements in the Annual Report to Shareholders for the year ended December 31,
1996 which is incorporated herein by reference.
(c) Narrative Description of Business
PLASTICS OPERATION
The Edison Plastics Division is the Company's domestic U.S. operation
which extrudes polyethylene and polypropylene films used by major
national-branded producers of feminine hygiene products and disposable baby
diapers, by hospital / surgical product manufacturers requiring impervious
barrier materials, by agri-businesses for crop improvement programs and by
various other industrial consumers.
Internationally, the Company owns 60% of NEPSA which is located in the
Mexico City metropolitan area. The products of NEPSA are similar to those
produced in the United States with several additional value-added processes.
NEPSA is among the technical leaders in high speed multicolor plastic film
printing in the Western Hemisphere, employing state-of-the-art manufacturing
technology obtained on a world-wide basis. NEPSA also converts films through the
application of bag-making technology into finished packaging products.
The following is an analysis of the Plastics Operations domestic and
international sales, and net earnings during the last year:
Year Ended 52 Wks. Ended 52 Wks. Ended
December 31, December 30, December 31,
1996 1995 1994
____________ _____________ ______________
Domestic Sales $109,616,200 $107,877,500 $115,432,400
International Sales 48,518,900 48,431,900 35,453,400
____________ _____________ ______________
Total Sales $158,135,100 $156,309,400 $150,885,800
============ ============= ==============
Domestic Net Earnings $ 2,903,700 $ 5,479,500 $ 12,058,900
International Net
Earnings 2,108,200 405,700 (119,000)
____________ _____________ ______________
Total Net Earnings $ 5,011,900 $ 5,885,200 $ 11,939,900
============ ============= ==============
Sales to Kimberly-Clark Corporation amounted to $70,604,800, or 44.6%
of total Company sales during 1996. The loss of Kimberly-Clark Corporation as a
customer would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
A domestic sales increase of almost $2 million, or 1.6%, represented a
6.0% increase in unit volume over the prior year. Considerable research and
development efforts which have resulted in product redesigns and film
downgauging have enabled Edison Plastics to increase its market share in the
adult incontinent market and to enjoy a growth in the medical/surgical market in
excess of 25% over 1995. At NEPSA, volume continues to be adversely affected by
the economic recession in that country, although, a concentrated focus on
meeting increased customer demands for speed, total cost savings and product
improvements has resulted in a strengthened position in all core accounts.
Domestic earnings have been hindered by competitive pricing pressures,
exacerbated by upward trends in polyolefin raw material prices. Raw material
prices represent a substantial portion of the cost of sales. High raw material
costs have continued into 1997, although most forecasters at this time predict a
softening of polyolefin resin prices as a result of significant new ethylene
capacity scheduled to come on stream during the second half of 1997 and early
1998. The Company cannot offer any assurance that polyolefin or other raw
material costs will decline in the future, or that the Company will be able to
pass increases in raw material costs on to its customers for competitive and
other reasons. At NEPSA, peso declines during the year had a less adverse effect
on earnings in 1996 than in 1995, recording a reduction in consolidated net
earnings of $(96,800) in 1996 compared to a reduction of $(1,188,200) in 1995.
Additional information on the operation of the Company is set forth on
pages 2-11 in the Annual Report to Shareholders for the year ended December 31,
1996 which information is incorporated herein by reference.
Competition and Other Information
Both of the Company's businesses operate in highly-competitive
environments with virtually all activities competing with companies with
long-established operating histories and substantial financial resources. Both
domestic and international operations have developed their competitive niche
around providing high-quality, customer-specific products to customer order at
competitive prices. Strong world-wide demand for polyethylene and polypropylene
tightened resin supplies during 1996 and resulted in price increases. The
Company has not experienced any difficulty in obtaining resins at the higher
prices. Other raw materials and other supplies essential to the business of the
Company are in plentiful supply from several sources in the United States.
Substantially all of the Company's manufacturing and processing operations are
run by electrical energy purchased from local utilities. While energy-related
difficulties are not expected to prevent the Company from achieving desired
production levels, energy shortages of extended duration could have an adverse
impact on the Company's operations. The Company's principal lines of business,
while generally slower during the summer months, are not subject to significant
seasonal variations. Compliance by the Company with federal, state and local
environmental protection laws has not had a material effect upon capital
expenditures, earnings or the competitive position of the Company. Patents,
licenses, franchises and concessions held have not materially influenced the
overall operations of the Company. Export sales of the Company have not been
material.
Order backlog amounted to approximately 6 weeks or $18,000,000 at the
end of both fiscal 1996 and 1995. The Company is constantly seeking to develop
new products and to improve its existing products. In this effort, the Company
spent approximately $2,436,500, $2,160,700, and $1,656,600 on research and
development activities in fiscal 1996, 1995, and 1994 respectively.
The Company employs approximately 475 persons in its domestic
operations consisting of approximately 445 in Edison Plastics and the remainder
in the corporate office. NEPSA employs approximately 725 persons. NEPSA
production, warehouse and maintenance employees are represented by labor unions.
None of the Company's domestic U.S. operations are represented by labor unions.
Group benefit packages are offered to employees in both domestic and
international operations. The Company considers its employee relations to be
good.
Item 2. PROPERTIES
The executive offices of the Company are located at 200 Enterprise
Drive, Newport News, Virginia. Domestic U.S. manufacturing, research and
development, marketing and administrative support facilities are located in
Georgia, Oklahoma and Virginia. The Company owns all of its domestic U.S.
facilities which are modern, air conditioned, and suitable and adequate for the
present activities of the Company. The Company's NEPSA operation leases
manufacturing and office space in several locations in the Mexico City
metropolitan area and a warehouse facility located in Ramos Arispe, Cohauila,
Mexico.
All NEPSA real estate leases have renewal options that carry the leases
to July 1, 2014 with the exception of the warehouse facility which is rented on
a month to month basis. Substantially equivalent warehouse facilities are
readily available in the area at approximately the same terms. Current annual
real estate rentals total approximately $1,449,800.
The Company owns all of its buildings and machinery and equipment free
and clear with the following exceptions:
NEPSA, Mexico, certain machinery and equipment are collateral for
Mexico bank loans of which $1,849,900 was outstanding at year-end.
Additional information regarding the Company's properties is set forth
in Notes 4 and 7 on pages 18 and 19 of the Annual Report to Shareholders for the
year ended December 31, 1996 which is incorporated herein by reference.
Item 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company and its subsidiaries
become involved as defendants in various legal proceedings. It is the opinion of
the Company's management, based upon the advice of counsel to the Company, that
the ultimate disposition of any pending legal proceedings will not be material
in relation to the Company's consolidated financial position or results of
operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
<PAGE>
Executive Officers of Blessings
The following executive officers were elected by the Board of Directors
for the ensuing year and until their respective successors are elected:
<TABLE>
<CAPTION>
Name, Age Year First Office and
and Position Became Officer Business Experiences
____________ ______________ ____________________
<S> <C>
Michael C. Carlson, 49 1996 Mr. Michael C. Carlson joined the Company
President- in October, 1996 as President, Edison
Edison Plastics Plastics. Prior to joining Blessings
Corporation, Mr. Carlson was employed by
James River Corporation from 1987 -1996.
His most recent assignments include the
following positions at James River: Vice
President and General Manager, 1994 -
1996 and Vice President and General
Manager - Riegel Paper Division, 1990 -
1994.
Timothy Collins, 54 1996 Mr. Timothy Collins joined the Company in
Assistant Secretary 1971. Since that time, Mr. Collins has
served the Company in a variety of
increasingly responsible financial
positions, most recently as Manager of
Accounting and Taxation from 1984 - 1996.
Wayne A. Durboraw, 52 1978 Mr. Wayne A. Durboraw has been Controller
Controller of the Company since joining Blessings
Corporation in June, 1978.
<PAGE>
Joseph Fernandes, 37 1995 Mr. Joseph Fernandes joined the Company
Treasurer in August, 1995 as Assistant Treasurer.
Mr. Fernandes was promoted to Treasurer
in September, 1996. Prior to joining
Blessings Corporation, Mr. Fernandes was
employed in commercial banking serving as
a Vice President for First Fidelity Bank,
N.A. from 1993 - 1995 and Chemical Bank
from 1982 - 1993.
Kenneth J. Hudson, 46 1995 Mr. Kenneth J. Hudson joined the Company
Vice President in January, 1994 as Director of Human
Human Resources Resources. In Dec-ember, 1995, Mr.
Hudson was promoted to Vice President,
Human Re-sources. Prior to joining
Blessings Corporation, Mr. Hudson had
been employed by General Electric
Company since 1973 serving as Human
Resources Manager for GE Plastics since
1991.
Joseph J. Lesnowski, 54 1996 Mr. Joseph J. Lesnowski joined the
Vice President Company in 1974. Since that time, Mr.
Sourcing / Purchasing Lesnowski has served the Company in a
variety of increasingly responsible
positions, most recentLy as Director
of Sourcing / Purchasing from 1994 -
1996.
<PAGE>
James P. Luke, 54* 1977 Mr. James P. Luke was elected Vice
Executive Vice President-Finance in August, 1977. In
President - February, 1984, he was elected Secretary.
Finance and Secretary Effective January, 1988, Mr. Luke was
Chief Financial named Executive Vice President of the
Officer Company and a Director and designated
Chief Financial Officer in 1995.
Elwood M. Miller, 52* 1993 Dr. Elwood M. Miller joined the Company
President and Chief in July, 1993 as Chief Operating Officer
Executive Officer and Director. Effective May, 1994, Dr.
Miller was promoted to President and
Chief Executive Officer. Prior to July,
1993, Dr. Miller was employed by General
Electric Company from 1971. His most
recent assignment with General Electric
Plastics was as Director, Environmental
Health and Safety from 1991 - 1993.
Manuel Villarreal, 43* 1994 Sr. Villarreal joined NEPSA in 1976 and
President and Chief has served in a variety of executive
Executive Officer of functions since that time. Mr.
Nacional de Envases Villarreal was promoted to President and
Plasticos, S.A. De Chief Executive Officer of NEPSA upon the
C.V. (NEPSA) Company's acquisition of 60% of that
subsidiary in 1994.
</TABLE>
* Member of the Board of Directors
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
Information regarding the market for the registrant's common stock and
related shareholder matters is set forth in Note 12 on page 21 in the Annual
Report to Shareholders for the year ended December 31, 1996 which is
incorporated herein by reference. The registrant's securities are traded on the
American Stock Exchange.
Item 6. SELECTED FINANCIAL DATA
Selected financial data is set forth on page 22 in the Annual Report to
Shareholders for the year ended December 31, 1996 which is incorporated herein
by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations is set forth on pages 23 and 24 in the Annual Report to Shareholders
for the year ended December 31, 1996 which is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are set forth on pages 12-22 in
the Annual Report to Shareholders for the year ended December 31, 1996 which is
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Not Applicable
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item with respect to directors is
contained on pages 14-16 of the Company's Proxy Statement dated April 11, 1997
in connection with its Annual Meeting to be held on May 20, 1997 which is
incorporated herein by reference.
See also information concerning the Executive Officers of Blessings
aforementioned in Part I.
Item 11. EXECUTIVE COMPENSATION
Executive compensation and compensation of directors is set forth on
pages 6-14 of the Company's Proxy Statement dated April 11, 1997 in connection
with its Annual Meeting to be held on May 20, 1997 which is incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership and Certain Beneficial Owners
Information required under this item is contained on pages 2 and 3 in
the Company's Proxy Statement dated April 11, 1997 in connection with its Annual
Meeting to be held on May 20, 1997 which is incorporated herein by reference.
(b) Security Ownership of Management
Total Company common stock owned by all officers and directors as a
group amounted to 6,116,637 shares. Other information required under this item
is contained on pages 14-16 in the Company's Proxy Statement dated April 11,
1997 in connection with its Annual Meeting to be held on May 20, 1997 which is
incorporated herein by reference.
(c) Changes in Control
The Company knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
set forth on pages 14-16 in the Company's Proxy Statement dated April 11, 1997
in connection with its Annual Meeting to be held on May 20, 1997 which is
incorporated herein by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Blessings
Corporation and its subsidiaries are included on pages 12-22 of the Company's
Annual Report to Shareholders for the year ended December 31, 1996, which is
incorporated herein by reference:
Page (*)
Independent Auditors' Report......................... 12
Consolidated Statements of Earnings - Years
Ended December 31, 1996, December 30, 1995
and December 31,1994............................... 13
Consolidated Statements of Shareholders'
Equity - Years Ended December 31, 1996,
December 30, 1995 and December 31, 1994............ 14
Consolidated Balance Sheets at December 31,
1996 and December 30, 1995......................... 15
Consolidated Statements of Cash Flows -
Years Ended December 31, 1996, December 30,
1995 and December 31, 1994......................... 16
Notes to the Consolidated Financial Statements....... 17-22
(*) Page numbers refer to pages in Annual Report to Shareholders
2. Financial Statement Schedules
Selected quarterly financial data for the years ended December 31, 1996 and
December 30, 1995 are included on page 22 in the Annual Report to Shareholders
for the year ended December 31, 1996 which is incorporated herein by reference.
Independent Auditors' Report........................ 13
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts..... S-1
All other schedules are omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or notes thereto.
<PAGE>
Separate financial statements of 50% or less owned persons accounted
for by the equity method which are not shown herein have been omitted because,
if considered in the aggregate, they would not constitute a significant
subsidiary.
3. Exhibits
Exhibit Number
2 Stock Purchase Agreement by and Among Manuel Villarreal
Castaneda, et al, as Sellers, and Blessings Corporation,
as Purchaser, dated June 30, 1994; filed with the
Commission as an Exhibit to Form 8-K filed July 8, 1994,
such Exhibit is incorporated herein by reference.
3(i) Certificate of Incorporation of Blessings Corporation with
all Amendments through Amendment dated December 15, 1994;
filed with the commission as an Exhibit to Form 10K for
the year ended December 31, 1994, such Exhibit is
incorporated herein by reference.
3(ii) Bylaws of Blessings Corporation as amended through July 8,
1993; filed with the Commission as an Exhibit to Form S-8
Registration Statement filed October 15, 1993, such
Exhibit is incorporated herein by reference.
4 Not applicable
9 Not applicable
10(a) Blessings Corporation Cost Recovery Supplemental
Retirement Income Plan; filed with the commission as an
Exhibit to Form 10K for the year ended December 31, 1994,
such Exhibit is incorporated herein by reference.
10(b) Blessings Corporation 1991 Stock Option Plan; filed with
the Commission as an Exhibit to Form S-8 Registration
Statement filed July 15,1991, such Exhibit is incorporated
herein by reference.
10(c) Blessings Corporation 1993 Incentive Plan; filed with the
Commission as an Exhibit to Form S-8 Registration
Statement filed October 15, 1993, such Exhibit is
incorporated herein by reference.
10(d) 1993 Restricted Stock Plan for Non-Employee and Certain
Other Directors of Blessings Corporation; filed with the
Commission as an Exhibit to Form S-8 Registration
Statement filed October 17, 1994, such Exhibit is
incorporated herein by reference.
10(e) Blessings Corporation 1993 Restricted Stock Plan for Key
Employee; filed with the Commission as an Exhibit to Form
S-8 Registration Statement filed October 17, 1994, such
Exhibit is incorporated herein by reference.
<PAGE>
10(f) Term Loan Agreement dated August 18, 1994, between Chase
Manhattan Bank, N.A. and First Fidelity Bank, N.A., filed
with the commission as an Exhibit to Form 10K for the year
ended December 31, 1994, such Exhibit is incorporated
herein by reference.
10(g) Revolving Credit Agreement dated October 16, 1995, between
Wachovia Bank of Georgia, N.A. and First Fidelity Bank,
N.A.; filed with the commission as an Exhibit to Form 10K
for the year ended December 30, 1995, such Exhibit is
incorporated herein by reference.
10(h) Note Purchase Agreement dated February 2, 1996, between
Principal Mutual Life Insurance Company; filed with the
commission as an Exhibit to Form 10Q for the quarter ended
March 31, 1996, such Exhibit is incorporated herein by
reference.
10(i) 1995 Non-Employee Directors Stock Option Plan; filed with
the commission as an Exhibit to Form S-8 Registration
Statement filed September 20, 1996, such Exhibit is
incorporated herein by reference.
10(j) Key Executive Severance Agreement and Stock, Pension and
SERP Supplements, filed herein.
10(k) 1996 Executive Stock Loan Purchase Program, filed herein.
11 Not required - explanation of earnings per share compu-
tation is contained in Notes to Consolidated Financial
Statements
12 Not applicable
13 Blessings Corporation Annual Report to Shareholders for
the year ended December 31, 1996 - filed herewith
16 Not applicable
18 Not applicable
21 Subsidiaries of Blessings Corporation - filed herewith
22 Not applicable
23 Consent of Deloitte & Touche LLP
99 Proxy Statement for 1997 Annual Meeting of Shareholders -
filed herewith
(b) Reports on Form 8-K
Registrant filed one Current Report on Form 8-K, Dated December 12,
1996, relating to a press release regarding the Company's projected earnings for
the fourth quarter.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Blessings Corporation
Newport News, Virginia
We have audited the consolidated financial statements of Blessings Corporation
and subsidiaries as of December 31, 1996 and December 30, 1995, and for each of
the three years in the period ended December 31, 1996 and have issued our report
thereon dated February 21, 1997; such consolidated financial statements and
report are included in your December 31, 1996 Annual Report to Shareholders and
are incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of Blessings Corporation listed in Item 14. These
consolidated financial statement schedules are the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Deloitte & Touche LLP
Richmond, VA
February 21, 1997
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BLESSINGS CORPORATION
(Registrant)
DATED: March 27, 1997
By /s/Elwood M. Miller
Elwood M. Miller
President and Chief Executive
Officer, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been executed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President and Chief
Executive Officer
/s/Elwood M. Miller Director March 27, 1997
- ------------------------
Elwood M. Miller
Chairman of the Board
/s/John W. McMackin Director March 27, 1997
- ------------------------
John W. McMackin
Executive Vice President
Secretary and Chief
Financial Officer
/s/James P. Luke Director March 27, 1997
- ------------------------
James P. Luke
/s/Wayne A. Durboraw Controller March 27, 1997
- ------------------------
Wayne A. Durboraw
/s/Leonard Birnbaum Director March 27, 1997
- ------------------------
Leonard Birnbaum
/s/Joseph J. Harkins Director March 27, 1997
- ------------------------
Joseph J. Harkins
/s/J. Donovan Williamson Director March 27, 1997
- ------------------------
J. Donovan Williamson
<PAGE>
<TABLE>
<CAPTION>
S-1
BLESSINGS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
-----------------------------------------
(1) (2)
Charged
Balance at To Costs Charged to Balance
Beginning And Expenses Other Deductions at End
Description Of Period Accounts (A) Of Period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED December 31, 1996:
Allowance for doubtful
accounts receivable $1,172,600 $613,700 -- ($245,300) $1,541,000
========== ======== ========== ========== ==========
YEAR ENDED December 30, 1995:
Allowance for doubtful
accounts receivable $1,170,700 $166,900 -- ($165,000) $1,172,600
========== ======== ========== ========== ==========
YEAR ENDED December 31, 1994:
Allowance for doubtful
accounts receivable $891,400 $398,900 -- ($119,600) $1,170,700
========== ======== ========== ========== ==========
(A) Write-offs during year
</TABLE>
BLESSINGS CORPORATION
EXECUTIVE STOCK LOAN PURCHASE PROGRAM
1. Purpose. The Executive Stock Loan Purchase Program ("Program"), of
Blessings Corporation, is adopted pursuant to the Blessings Corporation
1991 Stock Option Plan ("1991 Plan") to facilitate the immediate
purchase, by selected key executives of Blessings Corporation and its
subsidiaries (collectively, the "Company"), of Blessings Corporation's
common stock, $.71 par value ("Common Stock"). The purchases
facilitated by the Program are intended to achieve the following
specific purposes:
a) more closely align key executives' financial rewards with the financial
rewards realized by all other holders of the Common Stock;
b) increase key executives' motivation to manage the Company as owners; and
c) increase the ownership of Common Stock among key executives of the Company.
2. Eligibility. To be eligible to participate in the Program, the
individual must have been granted an option to purchase a specified
number of shares of Common Stock at a meeting of the Compensation
Committee of Blessings Corporation's Board of Directors held on
February 20, 1996 ("Stock Option") and, in connection with the grant of
the Stock Option, the individual must be designated as a key executive
in the minutes of that Compensation Committee meeting ("Eligible
Employee").
3. Participation. To become a Program participant ("Participant"),
an Eligible Employee must satisfy the following requirements:
(a) submit a completed, signed and irrevocable agreement to exercise all of the
stock Option, subject to the terms and conditions of the 1991 Plan and this
Program;
(b) complete and sign all necessary agreements and other documents relating to
the loan described in Section 4 below; and
(c) satisfy all other conditions of participation specified in the Program.
The agreements and other documents specified in subsections 3(a), (b)
and (c) must be in such form and must be submitted at such times and to
such Company offices as specified by the Company or its designee(s). No
Eligible Employee is required to participate in the Program.
<PAGE>
4. Payment of Exercise Price. Each Participant must deliver in cash 100%
of the exercise price of the shares, with respect to which the Stock
Option is exercised ("Purchased Shares"), within five days after the
option exercise date ("Exercise Date"). The Purchased Shares will not
be issued to the Participant until Company has received such payment.
The payment must be made at the time, place and manner specified by the
Company or its designee(s).
Company has arranged the opportunity for each Participant to obtain a
loan through Wachovia Bank ("Bank") to fund the purchase of the
Purchased Shares. Each Participant must sign a letter of direction
which directs all loan proceeds to be paid directly to Company in
payment of the Purchased Shares. Each Participant is responsible for
satisfying all of the lending requirements specified by the Bank to
qualify for the loan. Each Participant is fully obligated to repay to
the Bank all principal, interest, and any prepayment fees on the loan
when due and payable.
5. Registration of Shares. The Purchased Shares will be registered in the
name of the Participant and certificated. Each certificate will bear a
legend referring to the 1991 Plan and Program and the agreements
between the Participant and Company relating to the Purchased Shares.
The certificates for the Purchased Shares will be held in Company's
Stockholder Services Department until all restrictions on the Purchased
Shares have lapsed. Each Participant must deliver to the Stockholder
Services Department a stock power endorsed in blank with respect to the
Purchased Shares with Participant's signature guaranteed by a national
bank.
6. Stockholder Rights. The Purchased Shares will be shares issued from
treasury shares. During the period in which the Purchased Shares are
subject to restrictions on transfer, each Participant will have all of
the rights of a stockholder with respect to the Purchased Shares,
including the right to vote the shares and the right to receive all
dividends paid on the shares, subject, however, to the provisions of
Section 13(e) of this Program.
7. Sale of Purchased Shares. Each Participant is permitted to sell all
or any portion of the Purchased Shares, subject to the following
restrictions:
(a) except in the event of death or disability, termination of employment as
described in Section 11, or a Change in Control (as defined in the 1991
Plan), no Participant may sell any portion of the Purchased Shares before
the first anniversary of the Exercise Date;
(b) no Participant may sell any portion of the Purchased Shares unless all
principal, interest and any prepayment fees due on the loan contemplated by
Section 4 of the Program have previously been paid or all proceeds of the
sale are simultaneously applied first to the payment of all such principal,
interest and prepayment fees; and
(c) Until all principal, interest and any prepayment fees due on the loan
contemplated by Section 4 of the Program have been made, Company shall have
the right to impose reasonable restrictions on the timing, amount and form
of the sale of the Purchased Shares with respect to any Participant to the
extent it reasonably determines that such restrictions are in the best
interests of Company. Each Participant must notify Company of his or her
intention to sell the Purchased Shares before such a sale is implemented.
Company may elect to allow the Participant to sell the Purchased Shares in
the open market, Company may repurchase the shares or Company may take
other actions as it deems appropriate. If Company repurchases the Purchased
Shares, the purchase price will be the average closing sale price of a
share of Common Stock on the American Stock Exchange Composite Reporting
Tape over the 10-day period consisting of the five trading days before and
the five trading days after the notification to Company of intent to sell;
provided, however, that if the average closing sale price is more than ten
percent (10%) above or below the price of the shares on the date of
notification by Participant of his or her intention to sell, then neither
Company nor Participant will be obligated to proceed with the purchase and
sale, but Participant will then be permitted to sell in the open market.
8. Risk Sharing. If the Participant remains employed by Company until the
first anniversary of the Exercise Date, Company will share the loss, if
any, which the Participant incurs upon the sale of the Purchased
Shares. The loss will be measured by the difference between the
purchase price of the Purchased Shares and the sale price of the
Purchased Shares. The risk of loss on the Purchased Shares will be
allocated as follows:
(a) if any portion of the Purchased Shares is sold after the first anniversary
of the Exercise Date but before the third anniversary of the Exercise Date,
the Participant
1) is responsible for 75%of the loss on that portion of the Purchased
Shares; and
2) is entitled to receive 50% of the gain on that portion of the
Purchased Shares.
(b) if any portion of the Purchased Shares is sold on or after the third
anniversary of the Exercise Date, the Participant
1) is responsible for 50%of the loss on that portion of the Purchased
Shares; and
2) is entitled to receive 100% of the gain on that portion of the
Purchased Shares.
The risk sharing provisions of this Section 8 will apply only to such
Purchased Shares as are sold by the Participant and the proceeds from
which sale are applied to repayment of the loan under Section 4.
Further, the risk sharing provisions of this Section 8 will not apply
in the event of termination of employment as described in Section 11.
9. Death or Disability. If a Participant's employment with the Company
terminates, at any time while his or her loan under Section 4 is
outstanding, because of the participant's death or disability, as that
term is hereinafter defined, the Participant (or the Participant's
representative in the case of death) may sell all or any portion of the
Purchased Shares subject to the conditions specified in subsections
7(b) and (c). Upon the death of a Participant, his or her loan will
become due and payable sixty (60 days after the date of death of
Participant. With respect to the Purchased Shares sold after the
Participant's death or disability and while his or her loan under
Section 4 is outstanding, the Participant is not responsible for
any loss on the sale of the Purchased Shares but is entitled to
receive 100% of the gain on the sale of the Purchased Shares. This
Section 9 has no effect on a deceased or disabled Participant's sale
of Purchased Shares before the participant's death or disability or
after the Participant's loan under Section 4 has been repaid.
A Participant shall be deemed to have become disabled for purposes of
this Agreement if the Executive Committee of the Board of the Company
finds, upon the basis of medical evidence satisfactory to it, that the
Participant is totally disabled, whether due to physical or mental
condition, so as to be prevented from engaging in further employment by
the Company and that such disability will be permanent and continuous
during the remainder of his or her life.
10. Change in Control. In the event of a Change in Control, the
restrictions on the sale of the Purchased Shares specified in Section
7(a) will lapse immediately, each Participant employed by the Company
immediately before the Change in Control will be deemed to have been
employed by the Company until the first anniversary of the Exercise
Date (if the Change in Control occurs before the first anniversary of
the Exercise Date), and the Participant will be deemed to have sold the
Purchased Shares after the third anniversary of the Exercise Date for
purposes of Section 8(b) (if the sale of the Purchased Shares occurs
before the third anniversary of the Exercise Date).
11. Employment Termination. Nothing contained in this Program shall affect
the Company's right to terminate Participant's employment with Company
at Company's sole discretion, either for cause or without cause, and
even though Participant's loan with Bank may not be fully paid at the
date of employment termination ("Termination Date"), subject, however,
to the further provisions of this Section 11 as follows:
(a) if a Participant's employment is terminated for Cause, as that term is
hereinafter defined, and if Participant's loan has not been fully paid at
the Termination Date, Participant's loan will become due and payable sixty
(60) days after the Termination Date. Within thirty (30) days from the
Termination Date Participant shall notify Company, in writing, of whether
or not Participant intends to sell all or any portion of the common stock
covered by this Program to pay the balance of the loan. If any stock is to
be sold, Participant shall authorize Company to sell sufficient Shares to
pay the balance of the loan, including principal, interest and any
outstanding fees. Any loss on the sale of such stock between the purchase
price and the sale price of the stock shall be borne by Participant. Any
sale of stock under this Section 11(a) shall be conducted in accordance
with Section 7(c); provided, however, that any restriction on the sale of
stock imposed by Company under Section 7(c) shall not operate to the
financial detriment of Participant.
A termination"For Cause" is a termination evidenced by a resolution adopted
in good faith by the Executive Committee of the Board of the Company that
the Participant (a) willfully and continually failed to substantially
perform his duties with the Company (other than a failure resulting from
the Participant's incapacity due to physical or mental illness) which
failure continued for a period of at least thirty (30) days after a written
notice of demand for substantial performance has been delivered to the
Participant specifying the manner in which the Participant has failed to
substantially perform, or (b) willfully engaged in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise, or (c) is found to be grossly incompetent in the performance of
his duties for the Company; provided, however, that no termination of the
Participant's employment shall be for Cause as set forth in clause (a),
(b), or (c) above until (i) there shall have been delivered to the
Participant a copy of a written notice setting forth that they Participant
was guilty of the conduct set forth in clause (a), (b), or (c) and
specifying the particulars thereof in detail, and (ii) the Participant
shall have been provided an opportunity to be heard by the Executive
Committee of the Board of the Company (with the assistance of the
Participant's counsel if the Participant so desires). No act, nor failure
to act, on the Participant's part, shall be considered "willful" unless he
has acted or failed to act, with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best
interest of the Company. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Participant after
notice of termination is given to the Participant shall constitute Cause.
(b) if a Participant's employment is terminated without cause and if
Participant's loan has not been fully paid at the Termination Date,
Participant's loan will become due and payable sixty (60) days after the
Termination Date. Within thirty (30) days from the Termination Date,
Participant shall notify Company, in writing, of whether or not Participant
intends to sell all or any portion of the Common Stock covered by this
Program to pay the balance of the loan. If any stock is to be sold,
Participant shall authorize Company to sell sufficient Shares to pay the
balance of the loan, including principal, interest and any outstanding
fees. Any loss on the sale of such stock between the purchase price and the
sale price shall be borne by Company. Any sale of stock under this Section
11(b) shall be conducted in accordance with Section 7(c); provided,
however, that any restriction on the sale of stock imposed by Company under
Section 7(c) shall not operate to the financial detriment of the
Participant.
(c) The provisions of this Section 11 affecting the sale of stock shall be in
effect for only so long as Participant's loan from Bank as contemplated in
Section 4, including principal, interest and any outstanding fees remains
unpaid in whole or in part.
12. Risk Sharing Implementation. If a Participant sells any portion of the
Purchased Shares at a loss (as determined by the provisions of Section 8)
while his or her loan under Section 4 is outstanding, and if the
participant is responsible for less than 100% of that loss under the
provisions of the Program, Company will assume the portion of the loss for
which the Participant is not responsible. Company will assume its portion
of the loss by delivering cash equal to such portion ("Risk Sharing
Payment") directly to the Participant simultaneously with the repayment of
the Participant's loan under Section 4. Company anticipates that the Risk
Sharing Payment will constitute compensation to the Participant, subject to
tax withholding and reporting. Company also anticipates deducting the Risk
Sharing Payment as compensation in the year in which it is paid. If Company
determines that it is not entitled to a current tax deduction for the Risk
Sharing Payment with respect to any Participant, because such compensation
is not deemed to constitute qualified performance-based compensation within
the meaning of section 162(m) and the related regulations under the
Internal Revenue Code of 1986, as amended, Company will not make the Risk
Sharing Payment to the Participant in connection with the repayment of the
Participant's loan under Section 4. Instead the Participant will receive
deferred compensation equal to the Risk Sharing Payment at a time and in a
form intended to secure Company's related tax deduction. Company has the
sole discretion to implement a deferred compensation agreement to the
extent necessary or desirable to achieve the intent of the preceding
sentence. This Section 12 shall not apply to payments which may be made to
Participant or on Participant's behalf in accordance with Section 11(b).
13. Loan Guarantee. Company will guarantee repayment to the Bank of 100% of
all principal, interest, prepayment fees and other obligations of each
Participant under such Participant's loan described in Section 4. The
Company loan guarantee is a condition to the loan arrangement Company has
made with the Bank. The terms and conditions of the guarantee are as agreed
by Company and the Bank. Each Participant is fully obligated to repay to
the Bank all principal, interest, and other amounts on the loan when due
and payable. Company may exercise all legal remedies with regard to
Participant, which the Company deems reasonable and necessary, to obtain
full reimbursement for amounts Company pays to the Bank under its guarantee
related to the Participant's loan, in excess of the Risk Sharing Payment it
is obligated to make under Section 12 ("Loan Default").
Notwithstanding any provisions of the loan agreement between Participant
and Bank and any renewals or extensions thereof which are the sole
responsibility of Participant and as further consideration for Company's
guaranty of Participant's loan, Participant agrees:
(a) that Bank loan shall not exceed a total of five (5)
years from the date of the original loan, including
all renewals and extensions;
(b) that Bank loan or any renewals or extensions thereof
shall be "interest only" for no more than the first
three (3) years of such loan, including any renewals
or extensions and the principal shall be amortized
over the fourth and fifth years or sooner;
(c) that the Bank loan shall be due and payable as set
out in Sections 9 and 13 notwithstanding the maturity
date of the loan or any renewals or extensions
thereof as between the Participant and the Bank.
(d) that not less than semi-annually beginning with the
date of the original loan, Participant will obtain
from Bank and deliver to Company a written statement
from Bank signed by an authorized Bank officer
verifying that Participant's loan is current in all
respects;
(e) that upon receiving notice from Bank of a loan
default in Participant's loan, Company shall be
authorized to withhold any dividends which may be
payable on the Common Stock being held by Company to
be applied to the payment of any outstanding
principal, interest or unpaid fees due on the unpaid
balance of the Participant's loan; and
(f) that upon receiving notice from Bank of a loan
default in Participant's loan, Company shall be
authorized, after the giving of fifteen (15) days
prior written notice to Participant and failure of
Participant to cure such loan default in a manner
satisfactory to Bank within such fifteen (15) day
period, to sell any Common Stock held by Company
pursuant to Section 5. Any sale by Company shall be
conducted in accordance with Section 7(c).
14. Effect of Program. The Program is governed by the provisions of the
1991 Plan, except as otherwise expressly stated in the Program.
15. Amendment. The Company may amend the Program at any time subject to the
limitations in Section 8.1 of the 1991 Plan.
BLESSINGS CORPORATION
By: /s/ John W. McMackin
John W. McMackin
Chairman of Board
Agreed to and Accepted:
/s/James P. Luke
JAMES P. LUKE
Date: February 23, 1996
KEY EXECUTIVE SEVERANCE AGREEMENT
This Key Executive Severance Agreement (the "Agreement") is entered
into this 10th day of July, 1990, by and between Blessings Corporation (the
"Company") and James P. Luke ("Key Executive").
WITNESSETH: WHEREAS, the Board of Directors of the Company (the
"Board") considers it essential to the best interests of the shareholders of
Company to foster the continued employment of the Key Executive and in this
connection the Board recognizes that the possibility of a change in control
exists and that such possibility and the uncertainty and questions which it
necessarily raises may result in the departure or distraction of Key Executive
to the detriment of the Company and its shareholders in this period when Key
Executive's undivided attention and commitment to the best interests of the
Company and its shareholders is particularly important; and
WHEREAS, the Board has determined that it is essential and in the
best interests of the Company and its shareholders to retain the services of
Key Executive in the event of a possibility of a change in control and to
insure Key Executive's continued dedication and efforts in such event without
undue concern on the part of Key Executive for his personal financial and
employment security.
NOW, THEREFORE, in order to fulfill the above purposes and in
consideration of the engagements to be performed by each of the parties hereto
it is agreed as follows:
KEY EXECUTIVE SEVERANCE AGREEMENT Page -1-
ARTICLE ONE
Definitions
As used in this Agreement, the following words and phrases shall have the
following respective meanings unless the context clearly indicates otherwise.
1.1 Agreement. This Key Executive Severance Agreement.
1.2 Company. Blessings Corporation.
1.1 Board. The Board of Directors of Blessings Corporation.
1.4 W-D. Williamson-Dickie Manufacturing Company, any of its wholly owned
subsidiaries, any shareholders of Williamson-Dickie Manufacturing Company or any
Trust established by any shareholder of Williamson-Dickie Manufacturing Company.
1.5 Key Executive. James P. Luke.
1.6 Total Compensation. The amount Key Executive is entitled to receive
as wages or salary plus amounts which the Key Executive is entitled to receive
under the Annual Incentive Compensation Plan on an annualized basis.
1.7 Cause. The Company may terminate the Key Executive's employment for
"Cause." A termination for Cause is a termination evidenced by a resolution
adopted in good faith by the Board that the Key Executive (a) willfully and
continually failed to substantially perform his duties with the Company (other
than a failure resulting from the Key Executive's incapacity due to physical or
mental illness) which failure
KEY EXECUTIVE SEVERANCE AGREEMENT Page -2-
<PAGE>
continued for a period of at least thirty (30) days after a written notice of
demand for substantial performance has been delivered to the Key Executive
specifying the manner in which the Key Executive has failed to substantially
perform, or (b) willfully engaged in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise, or (c) is found to
be grossly incompetent in the performance of his duties for the Company;
provided, however, that no termination of the Key Executive's employment shall
be for Cause as set forth in clause (a), (b), or (c) above until (i) there shall
have been delivered to the Key Executive a copy of a written notice setting
forth that the Key Executive was guilty of the conduct set forth in clause (a),
(b), or (c) and specifying the particulars thereof in detail, and (ii) the Key
Executive shall have been provided an opportunity to be heard by the Board (with
the assistance of the Key Executive's counsel if the Key Executive so desires).
No act, nor failure to act, on the Key Executive's part, shall be considered
"willful," unless he has acted or failed to act, with an absence of good faith
and without a reasonable belief that his action or failure to act was in the
best interest of the Company. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Key Executive after
Notice of Termination is given to the Key Executive shall constitute Cause.
KEY EXECUTIVE SEVERANCE AGREEMENT Page -3-
<PAGE>
1.8 Change in Control. A "Change in Control" shall be deemed to occur:
(a) If W-D becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company representing less than fifty and one-one hundredth percent (50.01%) of
the combined voting power of the Company's then outstanding securities; or
(b) upon the approval by the Company's shareholders of a sale
or disposition of all or substantially all of the Company's assets or a plan
of liquidation or dissolution of the Company.
1.9 Good Reason. "Good Reason" shall mean the occurrence of any of the
following events or conditions: (a) a change in the Key Executive's status,
title, position or responsibilities (including reporting responsibilities)
which, in the Key Executive's reasonable judgment, represents a substantial
reduction of the status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Key Executive of any duties or
responsibilities which, in the Key Executive's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or any
removal of the Key Executive from or failure to re-appoint or reelect him to any
of such positions, except in connection with the termination of his employment
for Cause, Permanent Disability, as a result of his death, or by the Key
Executive other than for Good Reason; or
KEY EXECUTIVE SEVERANCE AGREEMENT Page -4-
<PAGE>
(b) a reduction in the Key Executive's annual base salary or a
change in the formula used in computing entitlements under his Annual
Incentive Compensation Plan; or
(c) the failure by the Company to (i) continue in effect any
material benefit plan in which the Key Executive was participating at the time
of the Change in Control, including but not limited to the Supplemental
Executive Retirement Plan, and the Company Pension Plan, or (ii) provide the
Key Executive with compensation and benefits at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under each
employee benefit plan, program and practice as in effect immediately prior to
the Change in Control; provided, however, that the termination of this
Agreement by the Company or any successor, as defined in Article Five, under
the provisions of Section 2.2 shall not constitute "Good Reason" under this
Section 1.9;
(d) any material breach by the Company of any provision of this Agreement;
or
(e) relocation of the Company headquarters at a location which is outside
a radius of sixty (60) miles from the present Company headquarters at
645 Martinsville Road, Liberty Corner, New Jersey.
1.10 Notice of Termination. "Notice of Termination" shall mean a notice
which indicates the specific provisions in this Agreement relied upon as the
basis for any termination
KEY EXECUTIVE SEVERANCE AGREEMENT Page -5-
<PAGE>
of employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Key
Executive's employment under the provision so indicated. No purported
termination of employment shall be effective without such Notice of
Termination.
1.11 Permanent Disability. A Key Executive shall be deemed to have
become permanently disabled for purposes of this Agreement if the Board of the
Company finds, upon the basis of medical evidence satisfactory to it, that the
Key Executive is totally disabled, whether due to physical or mental
condition, so as to be prevented from engaging in further employment by the
Company and that such disability will be permanent and continuous during the
remainder of his life.
1.12 Severance Benefits. The benefits payable in accordance with Article
Three of this Agreement.
ARTICLE TWO
Term
2.1 Term of Agreement. This Agreement shall commence on July 10, 1990,
and shall continue in effect through November 11, 2007.
2.2 Termination of Agreement. The Company may in its sole discretion
terminate this Agreement at any time subsequent to its effective date upon
written notice to Key Executive. In such event this Agreement shall terminate
three (3) years from
KEY EXECUTIVE SEVERANCE AGREEMENT Page -6-
<PAGE>
the date of receipt by Key Executive of notice of termination by the
Company; subject, however, to the provisions of 2.3 below.
2.3 Automatic Termination. If not terminated earlier in accordance with the
provisions of Section 2.2 above, this Agreement shall, in any event,
automatically terminate on November 11, 2007; at which time Key Executive will
have reached age 65.
2.4 Continuance for Payment of Severance Benefits.
Notwithstanding any notice by the Company to terminate this Agreement, if Key
Executive becomes entitled to Severance Benefits as hereinafter set out in
Article Three during the term of this Agreement, Key Executive shall
nevertheless be entitled to receive all payments, if any, required to be made by
the Company or otherwise to Key Executive under this Agreement.
ARTICLE THREE
Severance Benefits
3.1 Right to Severance Benefits. Key Executive shall be entitled to
receive from the Company a Severance Benefit in the amount provided in Section
3.2 if (a) this Agreement has not previously expired under the provisions
contained in Section 2. above, and (b) a Change in Control has occurred, and
(c) thereafter, the Key Executive's employment with the Company terminates for
any reason, except that notwithstanding
KEY EXECUTIVE SEVERANCE AGREEMENT Page -7-
<PAGE>
the foregoing provisions, no benefits under this Agreement will be payable
should the Key Executive's termination of employment be (i) for Cause, (ii) by
reason of Permanent Disability, (iii) by reason of the Key Executive's death,
(iv) by reason of Key Executive's resignation for other than Good Reason, or
(v) by reason of Key Executive's voluntary retirement for other than Good
Reason.
3 . 2 Amount of Severance Benefits. If Key Executive's employment is
terminated in circumstances entitling him to a Severance Benefit as provided in
Section 3.1, then Key Executive shall be entitled to the following benefits:
(a) The Company shall pay to the Key Executive, as severance
pay and in lieu of any further salary for periods subsequent to the
termination date (as specified in Section 4.2), an amount equal to the present
value of the total amounts of money that would have been paid to Key Executive
during the period beginning on the Termination Date and ending on a date three
years subsequent to the Termination Date had Key Executive's employment not
been terminated. For purposes of this subparagraph (a), the total amounts of
money that would have been paid to Key Executive during such period shall be
based on an annual rate calculated as follows:
(i) If the Termination Date is before November 12, 2004, on an annual
basis equal to Key Executive's average annual Total Compensation for
the five fiscal years of the Company preceding the fiscal year in which
the Termination Date occurs; or
(ii) If the Termination Date is on or after November 12, 2004, on an annual
basis equal to Key
KEY EXECUTIVE SEVERANCE AGREEMENT Page -8-
<PAGE>
Executive's average annual Total Compensation for the two fiscal years
of the Company preceding the fiscal year in which the Termination Date
occurs.
The annualized rate determined in (i) or (ii) whichever is
applicable, shall be applied to a period which is the lesser of three years from
the Termination Date or the entire period between the Termination Date and
November 11, 2007, and shall be prorated for any fractional year.
The present value of the foregoing amount shall be determined by
using a discount rate equal to l00 percent of the applicable federal rate (as
defined in Section 1274(d) of the Internal Revenue Code), as of the Termination
Date, and shall be based on the assumption that the Total Compensation for the
period in question would be received by Key Executive on a monthly basis. Any
payment made under this subparagraph (a) shall be subject to the limitation set
forth in paragraph 3.3 below and shall be payable in a lump sum within thirty
(30) days of the Termination Date.
(b) for a period of two (2) years subsequent to the Key
Executive's termination of employment, the Company shall at its expense continue
on behalf of the Key Executive and his dependents and beneficiaries, the life
insurance, disability, medical, dental and hospitalization benefits which were
being provided to the Key Executive at the time of termination of employment.
The benefits provided in this Subsection 3.2(b) shall be no less favorable to
the Key Executive in terms of
KEY EXECUTIVE SEVERANCE AGREEMENT Page -9-
<PAGE>
amounts and deductibles and costs to him, than the coverage provided the
Key Executive under the plans providing such benefits at the time Notice of
Termination is given. The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the Key Executive obtains
any such benefits pursuant to a subsequent employer's benefit plans, in which
case the Company may deduct the coverage of any benefits it is required to
provide the Key Executive hereunder as long as the aggregate coverage of the
combined benefit plans is no less favorable to the Key Executive in terms of
amounts and deductibles and costs to him, than the coverage required to be
provided hereunder. This subsection 3.2(b) shall not be interpreted so as to
limit any benefits to which the Key Executive or his dependents may be entitled
under any of the Company's employee benefit plans, programs or practices
following the Key Executive's termination of employment. The provision of
continued benefits to the Key Executive under this subsection (b) shall not
deprive the Key Executive of any independent statutory right to continue
benefits coverage pursuant to Sections 601 through 606 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
(c) the Company shall obtain and transfer to the Key Executive
all right, title and ownership in any automobile then being provided by the
Company for use by the Key Executive.
KEY EXECUTIVE SEVERANCE AGREEMENT Page -10-
<PAGE>
(d) the Key Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Key Executive in any subsequent
employment.
3.3 Limitation on Severance Benefits. As it is the intention of the
parties that the Company's payments under this Agreement to or for the benefit
of the Key Executive shall not constitute "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code, in no event shall the
present value of the benefits provided for in Section 3.2 (a) and (c) (and, to
the extent that they may be the type of payment that is to be taken into
consideration in determining the amount of parachute payments, the benefits
provided by Section 3.2(b)) exceed 2.99 times the Base Amount. The Base Amount
and the present value of the benefits shall be determined in accordance with
Section 280G of the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
ARTICLE FOUR
Termination of Employment
4.1 Written Notice Required. Any purported termination of employment,
either by the Company or by the Key Executive, shall be communicated by written
Notice of Termination to the other.
KEY EXECUTIVE SEVERANCE AGREEMENT Page -1l-
<PAGE>
4.2 Termination Date. In the case of the Key Executive's death, the Key
Executive's Termination Date shall be his date of death. In all other cases,
the Key Executive's Termination Date shall be the date specified in the Notice
of Termination subject to the following:
(a) if the Key Executive's employment is terminated by the Employer for
Cause or due to Permanent Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Key Executive, provided that in the case of
Disability the Key Executive shall not have returned to the full-time
performance of his duties during such period of at least thirty (30) days; and
(b) if the Key Executive terminates his employment for Good Reason, the
date specified in the Notice of Termination shall not be more than sixty (60)
days from the date the Notice of Termination is given to the Company.
ARTICLE FIVE
Successors to Corporation
This Agreement shall bind any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, in the same manner and to the same
extent that the Company would be obligated under this Agreement if no
succession had taken place. Any such successor shall be entitled to
KEY EXECUTIVE SEVERANCE AGREEMENT Page -12-
<PAGE>
exercise all of the rights of the Company under this Agreement including, but
not limited to, the right of the Company to terminate this Agreement pursuant
to the provisions of Section 2.2 above. In the case of any transaction in
which a successor would not by the foregoing provision or by operation of law
be bound by this Agreement the Company shall require such successor expressly
and unconditionally to assume and agree to perform the Company's obligations
under this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
ARTICLE SIX
Miscellaneous
6.1 Amendment. Any Amendment to this Agreement shall be a signed written
instrument signed by both parties to this Agreement.
6.2 Indemnification. If the Key Executive institutes any legal action in
seeking to obtain or enforce, or is required to defend in any legal action,
the validity or enforceability of any right or benefit provided by this
Agreement and Key Executive is the prevailing party in any such legal action,
the Company will pay all actual legal fees and expenses incurred by the Key
Executive.
KEY EXECUTIVE SEVERANCE AGREEMENT Page -13-
<PAGE>
6.3 Employment Status. This Agreement does not constitute a contract of
employment or impose on the Company any obligation to retain the Key Executive
as an employee, to change the status of the Key Executive's employment or to
change any employment policies of the Company.
6.4 Validity and Severability. - The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement which shall remain in full force and
effect, and any prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
6.5 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall in all respects be governed by the laws of
the State of Delaware.
6.6 Choice of Forum. The Key Executive shall be entitled to enforce the
provisions of this Agreement or to assert any claim for benefits under the
terms of this Agreement in any state or federal court of competent
jurisdiction located in the State of Delaware.
KEY EXECUTIVE SEVERANCE AGREEMENT Page -14-
<PAGE>
BLESSINGS CORPORATION
By: /s/ Ivan E. Becker
IVAN E. BECKER
President and
Chief Operating Officer
JAMES P. LUKE-KEY EXECUTIVE
/s/ James P. Luke
KEY EXECUTIVE SEVERANCE AGREEMENT Page -15-
<PAGE>
Blessings Corporation
JOHN W. MCMACKIN
Chairman of the Board
AMENDMENT TO THE KEY EXECUTIVE SEVERANCE AGREEMENT
The KEY EXECUTIVE SEVERANCE AGREEMENT, (the "Agreement"),
entered into on July 10, 1990, by and between BLESSINGS CORPORATION,
(the "Company"), and JAMES P. LUKE, (the "Key Executive"), is hereby
amended as follows:
1. Par. 1.9 (e) is hereby deleted and the following language shall be
deemed inserted in its place:
(e) relocation of the Company headquarters at a
location which is outside a radius of sixty
(60) miles from the present Company
headquarters at 200 Enterprise Drive, Newport
News, Virginia.
2. In all other respects, the Agreement of the parties is hereby
reaffirmed.
Dated: April 18,1995
BLESSINGS CORPORATION
By: /s/ John W. McMackin
JOHN W. McMACKIN, Chairman
/s/ James P. Luke_____________
JAMES P. LUKE
Executive Vice-President
Key Executive
<PAGE>
KEY EXECUTIVE SEVERANCE AGREEMENT STOCK SUPPLEMENT
This Key Executive Severance Agreement Stock Supplement (the
"Supplement") is entered into on this 10th day of July, 1990 by and between
Blessings Corporation (the "Company") and James P. Luke (the "Key Executive").
WITNESSETH: WHEREAS, the Board of Directors of the Company (the
"Board") has heretofore authorized the execution of a Key Executive Severance
Agreement between the Company and the Key Executive under the terms of which
the Key Executive under certain operative circumstances may become entitled to
severance benefits; and
WHEREAS, in the event that Key Executive becomes entitled to
severance benefits under the provisions of the Severance Agreement by reason
of the termination of Key Executive's employment prior to his attaining the
age of 65 years Company desires to the extent possible to minimize Key
Executive's loss of benefits under other Company plans; and
WHEREAS, Key Executive's termination of employment prior to
attaining the age of 65 years could result in the forfeiture of his rights to
nonvested shares of stock awarded to him pursuant to Annual Incentive Plans
heretofore adopted by Company; and
WHEREAS, it is agreed and understood by the parties to this
Supplement Agreement that the supplement provided for hereunder shall only be
payable under circumstances which would
Key Executive Severance Agreement Stock Supplement Page 1
<PAGE>
cause the Severance Agreement to become operative and severance benefits to be
paid to Key Executive and that the supplement called for in this Agreement
shall not be payable under any other circumstances under which Key Executive's
employment might be terminated prior to his attaining the age of 65 years.
NOW, THEREFORE, in order to fulfill the above purposes and in
consideration of the engagements to be performed by each of the parties
hereto, it is agreed as follows:
ARTICLE ONE
Term
1.1 Term of Agreement. This Agreement shall commence on July 10, 1990,
and shall continue in effect through November 11, 2007.
1.2 Termination of Agreement. The Company may in its sole discretion
terminate this Agreement at any time subsequent to its effective date upon
written notice to Key Executive. In such event this Agreement shall terminate
three (3) years from the date of receipt by Key Executive of notice of
termination by the Company; subject, however, to the provisions of 1.3 below.
1.3 Automatic Termination. If not terminated earlier in accordance with
the provisions of Section 1.2 above, this Agreement shall, in any event,
automatically terminate on November 11, 2007; at which time Key Executive will
have reached age 65.
Key Executive Severance Agreement Stock supplement Page 2
<PAGE>
1.4 Continuance for Payment of Severance Benefits.
Notwithstanding any notice by the Company to terminate this Agreement, if Key
Executive becomes entitled to Severance Benefits as hereinafter set out in
Article Three during the term of this Agreement, Key Executive shall
nevertheless be entitled to receive all payments, if any, required to be made by
the Company or otherwise to Key Executive under this Agreement.
ARTICLE TWO
Accelerated vesting of Stock
In the event that Key Executive becomes entitled to severance
benefits by reason of the termination of his employment under the terms and
conditions of that certain Key Executive Severance Agreement dated July 10,
1990, between Key Executive and Company, (the "Severance Agreement") then and in
such event, Key Executive shall be entitled to receive any shares of stock
awarded to him, but not yet vested and delivered, pursuant to any and all Annual
Incentive Plans heretofore or hereafter adopted by Company and under which Key
Executive is a Participant; provided, however, that this award of stock shall be
subject to the overall limit contained in Section 2.3 of the Key Executive
Severance Agreement Pension and SERP Supplement, dated July 10, 1990 and entered
into by Key Executive and the Company.
Key Executive Severance Agreement Stock supplement Page 3
<PAGE>
ARTICLE THREE
Successors to Corporation
This Agreement shall bind any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction in
which a successor would not by the foregoing provision or by operation of law be
bound by this Agreement the Company shall require such successor expressly and
unconditionally to assume and agree to perform the Company's obligations under
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.
ARTICLE FOUR
Miscellaneous
4.1 Amendment. Any Amendment to this Agreement shall be a signed written
instrument signed by both parties to this Agreement.
4.2 Indemnification. If the Key Executive institutes any legal action in
seeking to obtain or enforce, or is required to defend in any legal action, the
validity or enforceability of any right or benefit provided by this Agreement
and Key Executive is
Key Executive Severance Agreement Stock Supplement Page 4
<PAGE>
the prevailing party in any such legal action, the Company will pay all actual
legal fees and expenses incurred by the Key Executive.
4.3 Employment Status. This Agreement does not constitute a contract of
employment or impose on the Company any obligation to retain the Key Executive
as an employee, to change the status of the Key Executive's employment or to
change any employment policies of the Company. 4.4 Validity and Severability.
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement which shall remain in full force and effect, and any prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. 4.5 Governing Law. The
validity, interpretation, construction and performance of this Agreement shall
in all respects be governed by the laws of the State of Delaware. 4.6 Choice
of Forum. The Key Executive shall be entitled to enforce the provisions of
this Agreement or to assert any claim for benefits under the terms of this
Agreement in any state or federal court of competent jurisdiction located in
the State of Delaware.
Key Executive Severance Agreement Stock Supplement Page 5
<PAGE>
BLESSINGS CORPORATION
By /s/ IVAN E. BECKER
IVAN E. BECKER
President and
Chief Operating Officer
JAMES P. LUKE-KEY EXECUTIVE
/s/ JAMES P. LUKE
Key Executive Severance Agreement Stock Supplement- Page 6
<PAGE>
KEY EXECUTIVE SEVERANCE AGREEMENT
PENSION AND SERP SUPPLEMENT
This Key Executive Severance Agreement Pension and SERP
Supplement (the "Supplement") is entered into on this 10th day of July, 1990 by
and between Blessings Corporation (the "Company") and James P. Luke (the "Key
Executive").
WITNESSETH: WHEREAS, the Board of Directors of the Company (the
"Board") has heretofore authorized the execution of a Key Executive Severance
Agreement between the Company and the Key Executive under the terms of which the
Key Executive under certain operative circumstances may become entitled to
severance benefits; and
WHEREAS, in the event that Key Executive becomes entitled to
severance benefits under the provisions of the Severance Agreement by reason of
the termination of Key Executive's employment prior to his attaining the age of
65 years Company desires to the extent possible to minimize Key Executive's loss
of benefits under other Company plans; and
WHEREAS, Key Executive's termination of employment prior to
attaining the age of 65 years and the receipt of severance benefits under the
Severance Agreement would result in a reduction of Key Executive's pension and
SERP payments under the provisions of those plans because of reductions
resulting from early retirement provisions; and
Key Executive Severance Agreement
Pension and SERP Supplement Page 1
<PAGE>
WHEREAS, it is agreed and understood by the parties to this Supplement Agreement
that the supplement provided for hereunder shall only be payable under
circumstances which would cause the Severance Agreement to become operative
and severance benefits to be paid to Key Executive and that the supplement
called for in this Agreement shall not be payable under any other
circumstances under which Key Executive's employment might be terminated prior
to his attaining the age of 65 years.
NOW, THEREFORE, in order to fulfill the above purposes and in
consideration of the engagements to be performed by each of the parties
hereto, it is agreed as follows:
ARTICLE ONE
Term
1.1 Term of Agreement. This Agreement shall commence on July 10, 1990,
and shall continue in effect through November 11, 2007.
1.2 Termination of Agreement. The Company may in its sole discretion
terminate this Agreement at any time subsequent to its effective date upon
written notice to Key Executive. In such event this Agreement shall terminate
three (3) years from the date of receipt by Key Executive of notice of
termination by the Company; subject, however, to the provisions of 1.3 below.
1.3 Automatic Termination. If not terminated earlier in accordance with the
provisions of Section 1.2 above, this
Key Executive Severance Agreement
Pension and SERP Supplement Page 2
<PAGE>
Agreement shall, in any event, automatically terminate on November 11, 2007; at
which time Key Executive will have reached age 65.
1.4 Continuance for Payment of Severance Benefits.
Notwithstanding any notice by the Company to terminate this Agreement, if Key
Executive becomes entitled to Severance Benefits as hereinafter set out in
Article Three during the term of this Agreement, Key Executive shall
nevertheless be entitled to receive all payments, if any, required to be made by
the Company or otherwise to Key Executive under this Agreement.
ARTICLE TWO
Supplemental Payments
2.1 Right to Supplemental Payments. In the event that Key Executive becomes
entitled to severance benefits by reason of the termination of his employment
under the terms and conditions of that certain Key Executive Severance Agreement
dated July 10, 1990, between Key Executive and Company, (the "Severance
Agreement") then and in such event, Key Executive shall be entitled to
supplemental payments from the Company as hereinafter provided. 2.2 Amount of
Supplemental Payments. The total amount of the supplemental payments to be made
to Key Executive shall be the difference between (a) the present value of Key
Executive's pension and SERP benefits under the existing Company plans as
Key Executive Severance Agreement
Pension and SERP Supplement Page 3
<PAGE>
amended calculated as if Key Executive had retired upon attaining the age of 65
years, and (b) the present value of Key Executive's actual pension and SERP
benefits under the existing Company plans as amended.
The Present value of each of the foregoing amounts shall be
determined as of the date of Key Executive's termination of employment using a
discount rate (as of the termination of Key Executive's employment) equal to
100 percent of the applicable federal rate as defined in Section 1274(d) of
the Internal Revenue Code. The amount payable hereunder shall be subject to
the limitation set forth in paragraph 2.3 and shall be payable in a lump sum
within thirty (30) days of the termination of Key Executive's employment. 2.3
Limitation of Benefits. It is the intent of the parties that the Company's
payments to or for the benefit of the Key Executive under this Agreement, the
Severance Agreement, or any other agreement between the Company and the Key
Executive shall not constitute "parachute payments" within the meaning of
Section 280G of the Internal Revenue Code. Accordingly, and notwithstanding
any other provision of this Agreement or of the Severance Agreement, it is
agreed that in no event shall the present value of all Contract Benefits
exceed 2.99 times the Base Amount. For purposes of this Section 2.3:
(a) Present value shall be determined under Section 280G of
the Internal Revenue Code and the regulations thereunder, using the discount
rate described in Section 280G(d)(4).
Key Executive Severance Agreement
Pension and SERP Supplement Page 4
<PAGE>
(b) The term -"Contract Benefits" means the sum of (i) all
payments to or for the benefit of Key Executive under this Agreement, (ii) all
payments to or for the benefit of Key Executive under the Severance Agreement,
and (iii) all other payments to or for the benefit of Key Executive under any
other agreement to which Key Executive and the Company are parties, to the
extent that such other payments would constitute parachute payments under
Section 280G of the Internal Revenue Code and the regulations thereunder.
(c) The Base Amount shall be determined under Section 280G of
the Internal Revenue Code and the regulations thereunder.
In the event the present value of all Contract Benefits
exceeds 2.99 times the Base Amount, the aggregate amounts payable under this
Agreement and under the Severance Agreement shall be reduced by the amount of
such excess.
ARTICLE THREE
Successors to Corporation
This Agreement shall bind any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction in
which a
Key Executive Severance Agreement
Pension and SERP Supplement Page 5
<PAGE>
successor would not by the foregoing provision or by operation of law be bound
by this Agreement the Company shall require such successor expressly and
unconditionally to assume and agree to perform the Company's obligations under
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.
ARTICLE FOUR
Miscellaneous
4.1 Amendment. Any Amendment to this Agreement shall be a signed written
instrument signed by both parties to this Agreement. 4.2 Indemnification. If the
Key Executive institutes any legal action in seeking to obtain or enforce, or is
required to defend in any legal action, the validity or enforceability of any
right or benefit provided by this Agreement and Key Executive is the prevailing
party in any such legal action, the Company will pay all actual legal fees and
expenses incurred by the Key Executive. 4.3 Employment Status. This Agreement
does not constitute a contract of employment or impose on the Company any
obligation to retain the Key Executive as an employee, to change the status of
the Key Executive's employment or to change any employment policies of the
Company.
Key Executive Severance Agreement
Pension and SERP Supplement Page 6
<PAGE>
4.4 Validity and Severability. The invalidity or unenforceability or any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement which shall remain in full force and
effect, and any prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. 4.5
Governing Law. The validity, interpretation, construction and performance of
this Agreement shall in all respects be governed by the laws of the State of
Delaware. 4.6 Choice of Forum. The Key Executive shall be entitled to enforce
the provisions of this Agreement or to assert any claim for benefits under the
terms of this Agreement in any state or federal court of competent jurisdiction
located in the State of Delaware.
BLESSINGS CORPORATION
By /s/ IVAN E. BECKER
IVAN E. BECKER
President and Chief Operating officer
JAMES P. LUKE-KEY EXECUTIVE
/s/ JAMES P. LUKE
Key Executive Severance Agreement
Pension and SERP Supplement Page 7
[logo]
BLESSINGS
CORPORATION
1996 ANNUAL REPORT
<PAGE>
ABOUT THE COMPANY
Blessings Corporation is a recognized leader in the manufacture of high
specification extruded, printed and converted polyolefin films. The company's
Edison Plastics (Registration Mark) Division, produces mono and multi-layered
extruded polyethylene and polypropylene films at facilities in Newport News,
Virginia, Washington, Georgia and McAlester, Oklahoma for use in a variety of
disposable healthcare products, as well as in numerous industrial,
agricultural and packaging end uses. The company's 60% owned Mexican
subsidiary, Nacional de Envases Plasticos, S.A. (NEPSA) also produces mono
and multi-layered polyolefin films for a wide range of disposable healthcare and
packaging applications. In addition, NEPSA ranks among world technical
leaders in high speed, multicolor, plastic film printing, and converted
products.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(in thousands except per share data) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C>
Net Sales From Continuing Operations $ 158,135 $ 156,309 $ 150,886
- ---------------------------------------------------------------------------------------------
Operating Profit $ 18,594 $ 21,447 $ 28,263
Corporate Expense, Goodwill, Interest
and Other - Net (10,312) (9,413) (7,891)
Income Taxes (3,270) (6,149) (8,730)
- ---------------------------------------------------------------------------------------------
Net Earnings From Continuing Operations $ 5,012 $ 5,885 $ 11,642
Net Earnings From Discontinued Operations -- -- $ 298
- ---------------------------------------------------------------------------------------------
Net Earnings $ 5,012 $ 5,885 $ 11,940
=============================================================================================
Shareholders' Equity $ 71,748 $ 70,884 $ 72,370
Total Assets $ 158,077 $ 136,094 $ 151,556
Per Common Share
Net Earnings From Continuing Operations $ .49 $ .58 $ 1.17
Discontinued Operations -- -- $ .03
- ---------------------------------------------------------------------------------------------
Net Earnings $ .49 $ .58 $ 1.20
Shareholders' Equity $ 7.07 $ 6.98 $ 7.25
- ---------------------------------------------------------------------------------------------
Return on Equity* 7.0% 8.3% 17.4%
=============================================================================================
</TABLE>
* Net earnings divided by average shareholders' equity
BLESSINGS CORPORATION 1
<PAGE>
TO OUR SHAREHOLDERS
During 1996 net sales rose to a record $158,135,100, slightly ahead of the
previous record of $156,309,400 set in 1995. 1996 net earnings totaled
$5,011,900 or $0.49 per share compared with $5,885,200 or $0.58 per share in
1995. While we are not satisfied with these results, we are pleased with the
progress made toward meeting our strategic objectives which remain focused on
growth, diversification, and expansion into non-traditional areas.
Blessings Corporation remains firmly anchored by Edison Plastics, our
U.S. based film business and by NEPSA, our 60% owned Mexican manufacturer of
film, and high-end printed and converted products. Both businesses are built
upon a strong set of core competencies and are recognized as technical leaders
offering superior quality and service to customers.
At Edison Plastics, relationships with customers have never been
stronger. We have expanded our marketing, sales, and R&D resources and staffed
key positions with visionary, customer-focused people; people who listen to and
understand customer needs, can communicate these needs to and through
operations, and deliver solutions to the customer in record time. This
customer-driven, technology-based philosophy has strengthened our position with
existing customers and has resulted in significant market share gain in our
traditional healthcare markets.
We have pursued and captured a number of exciting new initiatives
focused on new markets, new customers, and new products. We now offer a product
line of ultra-thin gauge films to the health care market that brings customers
more value and lower cost. Through advances in chill cast process technology and
product design, we have established a position in the fresh produce packaging
market with a family of tailored and controlled
2 BLESSINGS CORPORATION
<PAGE>
oxygen transmission products. Using related technology, we have developed a
family of sealant web films for the packaging market which will be commercially
introduced during the first half of 1997 and will open a market previously
unavailable to Edison Plastics. We have invested in excess of $20,000,000 in
four major projects in 1996 to support these tactical and strategic initiatives.
Two of these have started up during the fourth quarter of 1996 while the other
two will start up during the first half of 1997. These investments are
indicative of the confidence we have in our ability to build and grow within our
strong healthcare market position while investing in diverse opportunities where
we can establish and maintain distinct competitive advantages.
To support our invest and grow strategy, the Board has announced a
discontinuation of the cash dividend, coupled with a stock buy-back of up to one
million shares of common stock. In the interest of our shareholders, it was felt
that the funds previously allocated to the dividend could better be used for
internal growth and the stock buy-back program, ultimately resulting in
appreciation of the outstanding stock.
NEPSA, while hindered by the on-going recession in Mexico, delivered
positive earnings to the Corporation in both 1995 and 1996. Moreover, the drive
at NEPSA has concentrated internally on total cost productivity and externally
on strengthening relationships with existing customers during these difficult
times. In addition, NEPSA has restructured its sales, marketing, and R&D
organizations, added appropriate resources and focused on replicating the Edison
Plastics best practice approach of new products, new customers and new markets.
This strategy has resulted in new and significant export business to the U.S.
and an entree into specialized printed and converted packaging
BLESSINGS CORPORATION 3
<PAGE>
niches within Mexico. With the beginning signs of an economic recovery, we
believe NEPSA has weathered the worst part of the Mexican recession and is now
well-positioned for growth.
In order to make a quantum leap in revenue and profitability, growth
and diversification must be achieved beyond that already planned for Edison
Plastics and NEPSA. Accordingly, we continue to identify and assess internal
investment opportunities and external partnerships and acquisitions that would
help us achieve our aggressive 3-5 year goals. Our initial investment in the
flexographic printing and converting operation at the McAlester, Oklahoma
facility is our first step in entering the flexible packaging market in the U.S.
Even though the supplier base is viewed by some as currently over-crowded and
undergoing consolidation, we will enter this market as a niche supplier offering
expertise in packaging technology and design, exceptional quality and service,
and with the speed and response required to meet changing customer needs. With
expertise already built within our NEPSA operation, it is a natural extension of
one of our core competencies.
As we move forward with these exciting opportunities, we become more
dependent upon leadership and require greater participation from all of our
people. Throughout our business we continue to measure and reward results, but
we have also developed a culture in which leadership is recognized and all
employees are expected to be involved. We now have delayered and restructured
operations in manufacturing where work teams set priorities, identify solutions
to problems and focus on continuous improvement. Information is openly shared
across the business and traditional functional boundaries are now bridged with
multi-functional teams focused on delivering customer solutions in
4 BLESSINGS CORPORATION
<PAGE>
record time. Our leaders have developed the self-confidence to take this
business to the next level with values built around open and candid
communications, unyielding integrity, accountability, excellence, empowerment,
and the spirit to embrace and drive change throughout the business. These
changes have been reinforced by the Board of Directors through programs which
encourage senior managers to establish a personal equity position in Blessings
common stock to align management interests as closely as possible with those of
all other shareholders.
I am confident that we have taken the right steps to reposition
Blessings for growth as we drive forward. We have outstanding leadership and
people at both Edison Plastics and NEPSA and our customer base remains strong.
We are optimistic about the direction in which the Company is heading and remain
committed to returning Blessings to the level of profitability and growth to
which we have become accustomed with the ultimate goal of enhancing shareholder
value.
Respectfully yours,
/s/ Elwood M. Miller
- -----------------------
Elwood M. Miller
President & Chief Executive Officer
[photo of Elwood M. Miller (on left) and James P. Luke (on right)]
(L) Elwood M. Miller
President & CEO
(R) James P. Luke
Executive Vice President & CFO
BLESSINGS CORPORATION 5
<PAGE>
RAW MATERIALS
Operations in 1996 were significantly affected by a secondary run-up
in raw material costs. These costs, which had declined rapidly late in 1995 and
early 1996, reversed themselves in July and August, returning once again to
near-historic highs by year end. This instability in the polyolefin raw material
environment has been largely driven by capacity limitations in polyethylene and
in basic ethylene production, constraints which are projected to ease as 1997
progresses. Although disruptive, the effects of raw material fluctuations have
been moderated by our ability to work closely with certain key suppliers and
through effective market timing of purchases. In addition, we continue to focus
resources on productivity improvements to maximize efficiency and usage of all
key raw materials.
QUALITY, TECHNOLOGY,
ORGANIZATION
Significant achievements in the area of quality, technology, manufacturing
capabilities and manufacturing organization were realized in 1996. These
improvements will have their full impact in 1997 and beyond.
All three Edison manufacturing plants received ISO 9002 certification
during the year. ISO 9002 is recognized worldwide as an indication that a
company has adopted a rigorous approach to documenting its quality systems. The
ISO certification is just one milestone in the continuous quest for quality
improvement. In 1997, both Edison Plastics and NEPSA will be pursuing improved
systems to further strengthen process stability.
Major capital investments in pursuit of new business opportunities were
undertaken during the year. Capital investment by the combined companies
exceeded $20,000,000, an all-time record level of spending. These investments
are in support of new and advanced processes and new, value-added manufacturing
capabilities, each designed to augment diversification while building upon
fundamental core competencies within the healthcare disposables marketplace.
Most significant in terms of new direction, is the commitment authorized by the
Board of Directors to a printing and converting capability at the McAlester,
Oklahoma plant. This investment, which will become fully commercial during the
second quarter of 1997, expands upon the
6 BLESSINGS CORPORATION
<PAGE>
[PHOTO]
BLESSINGS CORPORATION 7
<PAGE>
printing expertise obtained with the acquisition of NEPSA in 1994 and
establishes a state-of-the-art printing capability for the first time within
Edison Plastics in the United States. Emphasis during 1997 will focus on
optimizing recent investments, and upon process debottlenecking to improve
productivity and to add needed capacity.
Major technology enhancements that were implemented included the ability
to produce ultra thin gauge cast films, and controlled respiration films. These
capabilities are a result of the resources that have been invested in R&D at the
Oakland Technical Center. Our investment, and more importantly, our success,
distinguishes us in the film producing industry.
MARKETING & SALES
The core business of Edison Plastics and NEPSA continues to be in the
healthcare markets. In the U.S., efforts have focused on bringing value to
customers through speed and quick response to their changing needs.
Specifically, at Edison Plastics, we have strengthened our leadership
position through joint technology programs on product redesign and film
downgauging which have offered our customers product improvements and cost
savings. As a result of these efforts Edison has seen its market share increase
in the adult incontinent market, while the medical/surgical segment grew in
excess of 25% over 1995.
Likewise, at NEPSA, our continued focus on meeting increased customer
demands for speed, total cost savings and product improvements has resulted in a
strengthened position at all core accounts.
During 1996, marketing and new business development efforts began to bear
fruit. At Edison Plastics, we have developed product and process technologies
that have established our fit in the fresh produce and converter sealant
packaging segments. At NEPSA, we have validated our export capabilities, added
resources in marketing and R&D, and launched programs focused on new markets,
new customers, and new products.
As we look forward, Edison and NEPSA offer a market basket of products and
services based on film, printing, laminating, converting and package design to
serve an expanding list of customers. These value-added processes have in turn
generated increasing levels of synergy between the capabilities of Edison and of
NEPSA. With the expansion of technology into non-traditional markets, marketing
and sales efforts will continue to capitalize on total cost productivity
advantages to solidify the Company's position in its' traditional healthcare
markets.
8 BLESSINGS CORPORATION
<PAGE>
[PHOTO]
(Left) Jorge Villarreal Dominguez,
Director, Sales & Key Accounts,
NEPSA; (Center) David W. Reese,
Vice President, Sales & Marketing,
Edison Plastics; (Right) Eduardo
Juan Martinez, Director,
Marketing & Business Development, NEPSA
BLESSINGS CORPORATION 9
<PAGE>
[PHOTO]
10 BLESSINGS CORPORATION
<PAGE>
TOTAL COST PRODUCTIVITY
The operating focus throughout 1996 was upon strengthening the commitment
at Edison Plastics and NEPSA to world-class quality, efficiency, and cost
control programs. Aggressive manufacturing cost control efforts were instituted
by NEPSA in response to difficult financial circumstances in Mexico, and many of
these best practices have been rapidly adopted into U.S. operations. Essential
to the success of cost and quality programs has been the introduction of
empowered work teams into our manufacturing operations, reinforced through
clearly stated operating objectives developed with the participation of all
levels within the organization. At the same time, improved extrusion and film
technology has been introduced into NEPSA by Edison Plastics through a
management exchange which has clearly benefited both companies.
A fundamental aspect of effective cost management is the ability to
measure, analyze and control performance results. Major accomplishments are
being realized in this regard with the successful implementation of a fully
integrated, manufacturing-based, financial accounting control system throughout
U.S. operations. This system was implemented on schedule and within budget and
began providing useful yield, scrap and cost data by mid-year. A similar and
compatible Spanish language version of this system is being implemented in the
facilities in Mexico and is expected to become equally effective in 1997.
In October, the Company announced the appointment of Michael C. Carlson to
the position of President, Edison Plastics Division. Mike brings to Edison many
years of operations experience in plastic film extrusion, printing and
converting. Mike and Manuel Villarreal G., President and CEO of NEPSA, together
constitute an exceptionally strong operating team to manage the Company's
increasingly diverse and expanding operations in North America.
The combined operations of the Edison Plastics Division and NEPSA have
made exceptional progress in repositioning themselves as leading participants in
the extrusion, printing and converting of high-quality, sophisticated plastic
films for an ever-increasing variety of healthcare and flexible packaging
applications in North America. We firmly believe that Edison Plastics and NEPSA
are both well positioned for significant profit growth in the years ahead.
BLESSINGS CORPORATION 11
<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, 1996 and December 30, 1995 and
the related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. 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, 1996, and December 30, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
February 21, 1997
12 BLESSINGS CORPORATION
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended 52 Weeks Ended 52 Weeks Ended
December 31, 1996 December 30, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Net Sales $ 158,135,100 $ 156,309,400 $ 150,885,800
- ---------------------------------------------------------------------------------------------------------------
Cost and expenses
Cost of sales 115,207,000 111,032,500 101,104,500
Selling, general and administrative 27,948,200 25,242,000 24,242,800
Foreign exchange loss 293,300 3,600,600 2,631,200
Interest and other - net 2,466,500 2,464,200 1,634,000
- ---------------------------------------------------------------------------------------------------------------
Total costs and expenses 145,915,000 142,339,300 129,612,500
- ---------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before provision for taxes on income
and minority interest 12,220,100 13,970,100 21,273,300
- ---------------------------------------------------------------------------------------------------------------
Taxes on income
Currently payable 3,902,400 6,235,600 8,296,800
Deferred (632,900) (86,400) 433,600
- ---------------------------------------------------------------------------------------------------------------
Total taxes on income 3,269,500 6,149,200 8,730,400
- ---------------------------------------------------------------------------------------------------------------
Minority interest in net income of subsidiary 3,938,700 1,935,700 901,200
- ---------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations 5,011,900 5,885,200 11,641,700
- ---------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Profit (loss) from operation of discontinued
Geri-Care Products Division less
applicable taxes on income -- -- 206,500
Profit on sale of discontinued Geri-Care Products
Division less applicable taxes on income -- -- 91,700
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations -- -- 298,200
- ---------------------------------------------------------------------------------------------------------------
Net Earnings $ 5,011,900 $ 5,885,200 $ 11,939,900
Earnings per share on common stock:
Continuing operations $ .49 $ .58 $ 1.17
Discontinued operations -- -- .03
- ---------------------------------------------------------------------------------------------------------------
Earnings per share on common stock $ .49 $ .58 $ 1.20
- ---------------------------------------------------------------------------------------------------------------
Average number of shares of
common stock outstanding 10,149,692 10,159,088 9,988,770
===============================================================================================================
</TABLE>
See notes to consolidated financial statements.
BLESSINGS CORPORATION 13
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Common stock paid-in Translation Retained Treasury stock
Shares Amount capital Adjustment earnings Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance January 1, 1994 4,889,123 $ 6,942,600 $ 609,200 $ -- $ 53,564,400 14,230 $ (229,500)
Dividends declared on
common stock
$.36 per share -- -- -- -- (3,657,200) -- --
Purchase company's
common stock -- -- -- -- -- 17,200 (556,000)
Reissuance of company's
common stock under
compensation plans -- -- 102,800 -- -- (24,690) 549,600
Issuance of company's
common stock upon
exercise of options 16,800 23,800 368,100 -- -- -- --
Issuance of company's
common stock upon
the purchase of NEPSA 200,000 284,000 5,116,000 -- -- -- --
Translation adjustment -- -- -- (4,479,100) -- -- --
Income tax associated with
translation adjustment -- -- -- 1,791,600 -- -- --
Two-for-one stock split 5,105,923 -- -- -- -- 6,740 --
Net earnings -- -- -- -- 11,939,900 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 10,211,846 $ 7,250,400 $ 6,196,100 $ (2,687,500) $ 61,847,100 13,480 $ (235,900)
Dividends declared on
common stock
$.30 per share -- -- -- -- (3,054,000) -- --
Purchase company's
common stock -- -- -- -- -- 88,650 (1,110,100)
Reissuance of company's
common stock under
compensation plans -- -- (49,900) -- -- (11,172) 195,500
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 -- -- -- -- 5,885,200 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 30, 1995 10,214,846 $ 7,252,500 $ 6,174,900 $ (6,070,800) $ 64,678,300 90,958 $ (1,150,500)
Dividends declared on
common stock
$.40 per share -- -- -- -- (4,059,000) -- --
Purchase company's
common stock -- -- -- -- -- 45,350 (445,600)
Reissuance of company's
common stock under
compensation plans -- -- (162,000) -- -- (55,966) 703,800
Translation adjustment -- -- -- (308,500) -- -- --
Income tax associated with
translation adjustment -- -- -- 123,400 -- -- --
Net earnings -- -- -- -- 5,011,900 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 10,214,846 $ 7,252,500 $ 6,012,900 $ (6,255,900) $ 65,631,200 80,342 $ (892,300)
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements
14 BLESSINGS CORPORATION
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 30,
1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,801,800 $ 3,316,900
Accounts receivable less allowance for doubtful accounts
of $1,541,000 and $1,172,600 for 1996 and 1995 respectively 22,832,200 21,134,500
Inventories 12,905,700 9,439,100
Prepaid deferred taxes 1,417,900 878,200
Prepaid expenses 1,723,700 943,400
- --------------------------------------------------------------------------------------------------------------------
Total Current Assets 44,681,300 35,712,100
- --------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment - Net 80,573,600 69,148,100
Goodwill net of accumulated amortization of $2,659,500 and
$1,599,300 for 1996 and 1995 respectively 23,845,800 24,906,000
Deferred Taxes 7,565,400 4,429,200
Other Assets 1,410,600 1,898,800
- --------------------------------------------------------------------------------------------------------------------
Total Assets $158,076,700 $136,094,200
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 25,025,800 $ 16,284,700
Taxes on income 528,700 701,200
Current installments on long-term debt 3,744,300 7,477,500
Deferred taxes 1,024,200 -
- --------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 30,323,000 24,463,400
- --------------------------------------------------------------------------------------------------------------------
Long-Term Debt 34,253,100 23,747,400
Deferred Taxes 8,373,800 7,134,700
Deferred Supplemental Pension Liability 1,950,700 1,769,700
Minority Interest 11,427,700 8,094,600
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 1996 and 1995 respectively 7,252,500 7,252,500
Additional paid-in capital 6,012,900 6,174,900
Translation loss (6,255,900) (6,070,800)
Retained earnings 65,631,200 64,678,300
- --------------------------------------------------------------------------------------------------------------------
72,640,700 72,034,900
Common Stock in Treasury, at cost - 80,342 and 90,958 shares
for 1996 and 1995 respectively (892,300) (1,150,500)
- --------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 71,748,400 70,884,400
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $158,076,700 $136,094,200
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
BLESSINGS CORPORATION 15
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended 52 Weeks Ended 52 Weeks Ended
December 31, 1996 December 30, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net earnings $ 5,011,900 $ 5,885,200 $11,939,900
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of discontinued operations - - (91,700)
Depreciation and amortization 8,539,100 7,977,100 6,833,600
Amortization - goodwill 1,060,200 1,060,200 539,100
Amortization - other 466,300 348,200 320,500
Minority interest in net income
of consolidated subsidiary 3,938,700 1,935,700 901,200
Provision for losses on accounts receivable 613,700 216,500 402,400
(Gain) loss on sale of assets (41,800) 800 23,000
Change in assets and liabilities:
(Increase) decrease in accounts receivable (2,543,600) (2,739,300) (1,771,400)
(Increase) decrease in inventories (3,528,700) 5,050,100 (5,087,300)
(Increase) decrease in prepaid expenses (782,600) 466,100 (838,400)
Increase (decrease) in accounts payable
and accrued expenses 8,876,100 (2,254,900) 6,915,600
Increase (decrease) in taxes on income (769,000) (195,100) 731,000
Increase (decrease) in deferred taxes on income (632,900) (86,400) 433,600
(Increase) decrease in other assets (33,400) (555,100) (283,700)
Increase (decrease) in other liabilities 183,000 237,400 (570,700)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,357,000 17,346,500 20,396,700
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of discontinued operations - - 3,391,800
(Increase) decrease in notes receivable 25,000 - (50,000)
Proceeds from disposition of fixed assets 167,000 13,000 1,455,900
Proceeds from sale of securities - - 6,800,200
Capital expenditures (20,398,200) (10,364,500) (14,816,000)
Payments made for acquisition of Mexican
subsidiary net of cash received - - (39,687,200)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash required by investing activities (20,206,200) (10,351,500) (42,905,300)
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Reduction of long-term debt (13,245,500) (10,258,800) (4,942,500)
Proceeds from issuance of long-term debt 20,000,000 6,357,400 27,656,000
Issuance of common stock under stock option plan - 30,800 494,700
Issuance and acquisition of treasury stock 96,200 (964,600) (6,400)
Dividends paid (4,059,000) (4,074,600) (3,416,600)
Distribution to minority interest (400,000) - -
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided (required) by financing activities 2,391,700 (8,909,800) 19,785,200
- ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (57,600) (1,744,100) (565,600)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,484,900 (3,658,900) (3,289,000)
Cash and cash equivalents at beginning of period 3,316,900 6,975,800 10,264,800
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,801,800 $ 3,316,900 $ 6,975,800
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
16 BLESSINGS CORPORATION
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years ended December 31, 1996; December 30, 1995
and December 31, 1994.
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 note 2). 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).
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 the current year, 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 years ending
December 30, 1995 and December 31, 1994 were comprised of fifty-two weeks, while
the current year ending December 31, 1996 was comprised of twelve months. Due to
the relative similarity of the two prior years with the current year, prior
years' results were not recast.
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
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 year. Translation gains and losses
are recorded in shareholders' equity, and transaction gains and losses are
reflected in income. In 1997 the functional currency of the Company's Mexican
subsidiary will change from the local currency to the dollar. As a result of
this change, translation gains and losses previously recorded in shareholders'
equity will be recorded 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, 1996, 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 $470,400
and $1,065,500 which represents the cash requirement to settle these agreements
at December 31, 1996 and December 30, 1995, respectively.
K. Interest and Dividends - Net
- --------------------------------------------------------------------------------
December 31, December 30, December 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Interest expense
(net of capitalized
interest) $ 3,405,900 $ 3,122,900 $ 2,013,000
Interest income (923,200) (658,700) (354,600)
Dividend income (16,200) -- (24,400)
- -------------------------------------------------------------------------------
Interest and dividend
- net expense $ 2,466,500 $ 2,464,200 $ 1,634,000
- --------------------------------------------------------------------------------
Cash payments for interest were $2,775,100, $2,978,600 and $1,964,300 for
the 1996, 1995 and 1994 fiscal years respectively.
L. 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 after
giving effect to the two-for-one stock split paid on December 15, 1994 (see
Note 13).
M. Presentation
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
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
BLESSINGS CORPORATION 17
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
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 1996,
$1,060,200 for 1995, and $539,100 for 1994.
The Company had non-cash investing and financing activities associated
with the NEPSA transaction by issuing 200,000 shares (restated to 400,000 shares
after the two-for-one stock split) of additional Blessings Corporation common
stock valued at $5,400,000.
Unaudited pro forma results assuming consolidation of NEPSA for the entire
fiscal year ending December 31, 1994, would be net sales of $185,795,000, net
earnings of $12,432,200 and net earnings per share of $1.24.
3. INVENTORIES
- --------------------------------------------------------------
December 31, December 30,
1996 1995
- --------------------------------------------------------------
Raw materials $10,050,500 $6,377,600
Finished goods 2,855,200 3,061,500
- --------------------------------------------------------------
Total $12,905,700 $9,439,100
- --------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------
December 31, December 30,
1996 1995
- --------------------------------------------------------------
Land $ 629,200 $ 629,200
- --------------------------------------------------------------
Buildings 15,258,800 16,094,500
Machinery and equipment 88,515,200 76,985,500
Motor vehicles 621,900 887,200
Furniture and fixtures 4,403,100 3,466,000
Leasehold improvements 936,900 892,600
Construction in progress 6,804,700 5,189,600
- --------------------------------------------------------------
Gross depreciable assets $116,540,600 $103,515,400
- --------------------------------------------------------------
Less accumulated
depreciation and amortization 36,596,200 34,996,500
- --------------------------------------------------------------
Net depreciable assets 79,944,400 68,518,900
- --------------------------------------------------------------
Net assets $ 80,573,600 $ 69,148,100
- --------------------------------------------------------------
Plant and equipment with a carrying value of $1,849,900 at December 31,
1996, are pledged as collateral for long-term debt.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- --------------------------------------------------------------
December 31, December 30,
1996 1995
- --------------------------------------------------------------
Accounts payable $16,887,200 $9,506,600
Salaries, wages
and commissions 2,263,100 1,828,100
Taxes, other than taxes
on income 841,800 1,111,100
Interest 716,600 210,000
Insurance 1,019,200 914,700
Relocation and restructuring 791,200 791,200
Miscellaneous current liabilities 2,506,700 1,923,000
- --------------------------------------------------------------
Total $25,025,800 $16,284,700
- --------------------------------------------------------------
6. LONG-TERM DEBT
- --------------------------------------------------------------
December 31, December 30,
1996 1995
- --------------------------------------------------------------
Georgia 8.15% loan due 1998
collateralized by plant
and equipment $ - $ 2,250,000
Virginia 7.76% loan due 1998
collateralized by plant
and equipment - 2,700,000
6.55% note due 2002 10,000,000 -
7.22% note due 2008 10,000,000 -
NEPSA Credit Agreement
due 2002 17,187,500 20,312,500
Revolving Credit Agreement - 3,000,000
Mexico bank loans due 1998
collateralized by equipment 809,900 2,962,400
- --------------------------------------------------------------
$37,997,400 $31,224,900
Less installments due
within one year 3,744,300 7,477,500
- --------------------------------------------------------------
Total long-term debt $34,253,100 $23,747,400
- --------------------------------------------------------------
On February 2, 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, 1996.
The Company has short-term lines of credit of $12,000,000 available through
its principal lenders. On December 31, 1996, the Company had standby letters of
credit of $1,447,000 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 are 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 $17,000,000 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.
18 BLESSINGS CORPORATION
<PAGE>
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:
- ---------------------------------------------------------------
Fiscal Years Amount
- ---------------------------------------------------------------
1997 $ 3,744,300
1998 3,315,600
1999 3,125,000
2000 6,458,300
2001 6,458,300
2002 and after 14,895,900
- ---------------------------------------------------------------
Total $37,997,400
- ---------------------------------------------------------------
7. COMMITMENTS
At December 31, 1996, aggregate rental commitments on long-term operating
leases, which were for real estate, were as follows:
- ---------------------------------------------------------------
Fiscal Years Amount
- ---------------------------------------------------------------
1997 $1,291,300
1998 1,291,300
1999 681,800
2000 36,200
2001 -
2002 and after -
- ---------------------------------------------------------------
Total $3,300,600
- ---------------------------------------------------------------
Rent expense for the fiscal years ended December 31, 1996; December 30,
1995; and December 31, 1994, amounted to $1,449,800, $2,024,500 and $1,649,600
respectively. The Company has commitments to purchase raw materials over the
next three 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 $587,800, $459,500 and $581,200 in the 1996, 1995, 1994
fiscal years respectively. Net pension cost for the Company's qualified and
nonqualified defined benefit plans for 1996, 1995 and 1994 included the
following components:
- ----------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------
Service cost of
current period $ 645,200 $ 597,200 $ 722,900
Interest cost on
projected benefit
obligation 1,090,300 998,100 1,004,600
Actual return on
plan assets (1,459,700) (1,887,300) (700,400)
Net amortization
and deferral 312,000 751,500 (445,900)
- ----------------------------------------------------------------
Net periodic
pension cost $ 587,800 $ 459,500 $ 581,200
- ----------------------------------------------------------------
The following table sets forth the plan's funded status and amounts
recognized in the Company's statement of cash flows
at year-end.
Actuarial present value of benefit obligations:
- ----------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------
Vested benefits $13,075,000 $ 11,871,800
Non-vested benefits 351,100 253,200
- ----------------------------------------------------------------
Accumulated benefit obligation $13,426,100 $ 12,125,000
- ----------------------------------------------------------------
Fair value of assets
held in the plan $14,316,000 $ 13,574,400
Projected benefit obligation
for services rendered to date (15,865,200) (14,484,900)
- ----------------------------------------------------------------
Projected benefit obligation in
excess of plan assets (1,549,200) (910,500)
Unrecognized net loss 924,100 798,600
Unrecognized prior service cost (92,800) (100,600)
Unrecognized net asset at
January 1, 1988, being
amortized over 17 years (248,700) (284,200)
Unrecognized net obligation
at December 31, 1994, being
amortized over 15 years 808,300 875,600
- ----------------------------------------------------------------
Prepaid (accrued) pension
cost included in other
assets (liabilities) $ (158,300) $ 378,900
- ----------------------------------------------------------------
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 1996 and
1995. The expected long-term rate of return on assets was 10% for 1996 and 1995.
During 1994 the Company adopted a Supplemental Restoration plan designed to
restore pension benefits which have been limited as a result of recent 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 $378,200,
$337,900 and $388,800 for the 1996, 1995 and 1994 fiscal years respectively.
10. STOCK OPTION PLAN
At December 31, 1996 the Company had two stock based compensation plans.
Under the Blessings Corporation 1991 Stock Option Plan the Company may grant
options to its employees for up to 240,000 shares of common stock with or
without stock appreciation rights. Under the 1995 Non-Employee Directors Stock
Option Plan the Company may grant options to its non-employee directors for up
to 50,000 shares of common stock. The Compensation Committee determines the
option price (which cannot be less than 100% of the fair market value per share
on the date the option is granted), the number of shares
BLESSINGS CORPORATION 19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
granted and the term (which cannot exceed ten years for the 1991 plan and five
years for the 1995 plan). The options on the 1991 plan cannot be exercised until
one year from the date of grant. In October, 1995 FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation". The Company has made the decision not
to apply SFAS 123 and will continue to use 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. Had compensation cost for the Company's two plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, the Company's net
earnings per share would have been reduced on a pro forma basis by $.01 and $.02
for fiscal 1995 and 1996, respectively, resulting in pro forma earnings per
share of $.57 and $.47 for the two years respectively. A summary of stock option
transactions in fiscal 1994, 1995 and 1996 follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
December 31, 1996 December 30, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Outstanding, beginning
of the year 134,200 $12.98 98,200 $12.85 64,800 $ 9.27
Granted 79,000 9.99 46,000 13.20 67,000 14.28
Exercised (50,000) 9.25 (3,000) 8.81 (33,600) 8.81
Canceled (4,000) 14.11 (7,000) 14.38 - -
- -----------------------------------------------------------------------------------------------------------------------------
Outstanding, end
of the year 159,200 $12.64 134,200 $12.98 98,200 $12.85
- -----------------------------------------------------------------------------------------------------------------------------
Options exercisable
at year end 134,700 $12.97 92,700 $12.89 31,200 $ 9.80
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996, there were 42,000 shares available under the 1995
Non-Employee Directors Plan for future option grants and all shares had been
granted under the 1991 Stock Option Plan.
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
$ 8.81 - 10.88 43,700 5.6 Years $ 9.97 19,200 $ 8.81
$12.00 - 14.38 115,500 6.6 Years $13.66 115,500 $13.66
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Using the Black-Scholes model, the weighted average fair value of options
granted and significant weighted average assumptions used were as follows:
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------
Fair market value of options granted $ 3.51 $ 4.72
Risk-free interest rate 6.5% 6.3%
Expected life (years) 9.0 9.0
Expected dividends 3.0% 3.0%
Volatility 31.8% 33.7%
- -------------------------------------------------------------------
11. TAXES ON INCOME
The components of income before taxes are as follows:
- ------------------------------------------------------------------
December 31, December 30, December 31,
1996 1995 1994
- ------------------------------------------------------------------
U.S. $ 4,850,000 $ 8,398,800 $18,533,500
Foreign 7,370,100 5,571,300 2,739,800
- ------------------------------------------------------------------
$12,220,100 $13,970,100 $21,273,300
- ------------------------------------------------------------------
Income tax expense from continuing operations consisted of the following
components in the fiscal year ended on:
- -----------------------------------------------------------------
December 31, December 30, December 31,
1996 1995 1994
- -----------------------------------------------------------------
Taxes estimated to be
payable currently
U.S. $1,174,400 $2,553,700 $5,251,200
Foreign 2,689,900 3,383,500 1,959,100
State 38,100 298,400 1,086,500
- -----------------------------------------------------------------
Total $3,902,400 $6,235,600 $8,296,800
- -----------------------------------------------------------------
Taxes deferred - net
U.S. $ 587,800 $ 6,500 $ 401,400
Foreign (1,366,700) (153,700) (1,500)
State 146,000 60,800 33,700
- -----------------------------------------------------------------
Total (632,900) (86,400) 433,600
- -----------------------------------------------------------------
$3,269,500 $6,149,200 $8,730,400
- -----------------------------------------------------------------
20 BLESSINGS CORPORATION
<PAGE>
Temporary differences which give rise to deferred tax assets and
liabilities at December 31, 1996, December 30, 1995, and December 31, 1994, are
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred
Deferred tax Deferred tax Deferred tax
tax assets liabilities tax assets liabilities tax assets liabilities
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Current
Allowance for doubtful accounts $ 554,900 - $ 427,100 - $ 388,400 -
Compensated absences 361,600 - 312,500 - 208,700 -
Restricted stock 111,700 - 138,600 - 163,700 -
Other 389,700 1,024,200 - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Total current 1,417,900 1,024,200 878,200 - 760,800 -
- -------------------------------------------------------------------------------------------------------------------------------
Non Current
Tax deductible expenses not charged against
book income (primarily depreciation) - $8,038,900 - $6,210,800 - $5,575,900
Income tax benefit of fixed asset
indexation 2,316,700 - - - - -
Loss on foreign currency translation 4,170,600 - 4,047,200 - 1,791,700 -
Other 1,078,100 334,900 382,000 923,900 382,000 1,527,800
- -------------------------------------------------------------------------------------------------------------------------------
Total non-current 7,565,400 8,373,800 4,429,200 7,134,700 2,173,700 7,103,700
- -------------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $8,983,300 $9,398,000 $5,307,400 $7,134,700 $2,934,500 $7,103,700
- -------------------------------------------------------------------------------------------------------------------------------
</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, 1996 December 30, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Tax at statutory U.S. tax rate $ 4,277,000 35.0 $ 4,889,500 35.0 $ 7,445,700 35.0
Differential due to operations
outside U.S. (1,540,000) (12.6) 892,600 6.4 407,700 1.9
State and local taxes net of federal
tax benefit1 84,100 1.5 237,100 1.6 746,200 3.5
Nondeductible goodwill amortization 371,100 3.0 371,100 2.7 188,700 .9
Other - Net (22,700) (.1) (241,100) (1.7) (57,900) (.3)
- ------------------------------------------------------------------------------------------------------------------------------
Total Provision for income taxes $ 3,269,500 26.8 $ 6,149,200 44.0 $ 8,730,400 41.0
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Cash payments for taxes were $3,128,200, $6,442,000 and $6,947,900 for the
1996, 1995 and 1994 fiscal years respectively.
12. QUARTERLY FINANCIAL DATA, MARKET AND DIVIDEND INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Fiscal Year Ended December 31, 1996 3 Months 3 Months 3 Months 3 Months Year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 $ .22 $ .10 $ .12 $ .05 $ .49
- ---------------------------------------------------------------------------------------------------------------------------
Dividends paid per share $ .10 $ .10 $ .10 $ .10 $ .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 $ 8.63
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended December 30, 1995 16 Weeks 12 Weeks 12 Weeks 12 Weeks 52 Weeks
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $45,056,600 $38,729,000 $36,767,700 $35,756,100 $156,309,400
Cost of sales $30,940,400 $27,375,400 $27,731,800 $24,984,900 $111,032,500
Net earnings $ 1,921,200 $ 1,796,100 $ 412,000 $ 1,755,900 $ 5,885,200
Average number of shares outstanding 10,205,588 10,164,954 10,126,421 10,123,888 10,159,088
Net earnings per share $ .19 $ .17 $ .05 $ .17 $ .58
Dividends paid per share $ .10 $ .10 $ .10 $ .10 $ .40
Market price of common stock
HIGH $ 14.75 $ 13.13 $ 13.38 $ 13.25 $ 14.75
LOW $ 11.75 $ 11.88 $ 12.00 $ 9.50 $ 9.50
</TABLE>
BLESSINGS CORPORATION 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. STOCK SPLIT
On December 1, 1994, the shareholders approved a two-for-one stock split
payable to shareholders of record as of December 1, 1994, paid on December 15,
1994.
14. SUBSEQUENT EVENT
On February 4, 1997 the Company's Board of Directors approved a plan for
the Company to purchase up to 1,000,000 of the Company's outstanding shares of
common stock under a new Stock Buyback Program. The program provided for the
purchase of shares on the open market or in privately negotiated transactions in
amounts and at prices the Company deems appropriate.
15. MAJOR CUSTOMER
A customer of the Company accounted for 44.6%, 46.6% and 47.0% of total
sales in the 1996, 1995, and 1994 fiscal years respectively.
16. DISCONTINUED OPERATIONS
On August 5, 1994, the Company sold the assets of the Geri-Care Products
Division. The sale resulted in an after tax gain of $91,700. The results of this
transaction and Geri-Care's earnings have been reflected in discontinued
operations. Summary operating results of discontinued operations, excluding the
above gain, are as follows:
- -------------------------------------------------------------------
December 31, December 30, December 31,
1996 1995 1994
- -------------------------------------------------------------------
Net Sales - - $7,920,300
- -------------------------------------------------------------------
Earning (loss)
before income taxes - - 339,300
Provision for income taxes - - (132,800)
- -------------------------------------------------------------------
Net earnings (loss)
from discontinued
operations - - $ 206,500
- -------------------------------------------------------------------
17. 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:
- -------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
Net Sales to
unaffiliated
customers:
United States $ 109,616,200 $ 107,877,500 $ 115,432,400
Mexico 48,518,900 48,431,900 35,453,400
- -------------------------------------------------------------------------------
Total sales $ 158,135,100 $ 156,309,400 $ 150,885,800
- -------------------------------------------------------------------------------
Net Earnings:
United States $ 2,903,700 $ 5,479,500 $ 12,058,900
Mexico 2,108,200 405,700 (119,000)
- -------------------------------------------------------------------------------
Total earnings $ 5,011,900 $ 5,885,200 $ 11,939,900
- -------------------------------------------------------------------------------
Identifiable assets:
United States
(Including
Goodwill) $ 127,292,800 $ 116,976,300 $ 124,347,100
Mexico 30,783,900 19,117,900 27,209,200
- -------------------------------------------------------------------------------
Total assets $ 158,076,700 $ 136,094,200 $ 151,556,300
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(dollar amounts in thousands except per share data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Results of Operations
Net sales $158,135 $156,309 $150,886 $114,211 $106,548
Net earnings from continuing operations 5,012 5,885 11,642 9,436 9,158
Net earnings 5,012 5,885 11,940 9,783 9,467
----------------------------------------------------------------------------------------------------------------------------
Year-End position
Cash, cash equivalents and short-term investments $ 5,802 $ 3,317 $ 6,976 $ 17,065 $ 11,626
Property, plant and equipment - net 80,574 69,148 75,022 43,092 41,231
Total assets 158,077 136,094 151,556 88,000 82,534
Long-term debt 34,253 23,747 26,476 8,192 12,645
Shareholders' equity 71,748 70,884 72,370 60,887 54,295
----------------------------------------------------------------------------------------------------------------------------
Per common share
Net earnings from continuing operations $ .49 $ .58 $ 1.17 $ .97 $.94
Net earnings .49 .58 1.20 1.00 .97
Shareholders' equity 7.07 6.98 7.25 6.24 5.57
Dividends declared .40 .301 .36 .32 .29
---------------------------------------------------------------------------------------------------------------------------
Financial ratios
Current ratio (2) 1.5 1.5 1.4 3.3 3.7
Long-term debt to equity (3) 47.7% 33.5% 36.6% 13.5% 23.3%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) First quarter, 1996 dividend declared February 1, 1996. Previous first
quarter dividends declared in December of preceding year.
(2) Current assets at year-end divided by current liabilities at year-end.
(3) Long-term debt at year-end divided by equity at year-end.
22 BLESSINGS CORPORATION
<PAGE>
MANAGEMENT'S FINANCIAL ANALYSIS AND DISCUSSION
Summary of Operations:
The following table sets forth for the periods indicated 1) the percentages
which certain items reflected in the financial data bear to net sales on
operations of the Company and 2) the percentage increase or (decrease) of such
items as compared to the indicated prior period.
<TABLE>
<CAPTION>
Relationship to Net Sales
Year Ended Year to Year
- ---------------------------------------------------------------------------------------------------------------------------
December 31, December 30, December 31, Increase/(Decrease)
1996 1995 1994 ------------------
96/95 95/94
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Sales from Continuing Operations 100.0% 100.0% 100.0% 1.2% 3.6%
Cost of Sales 72.9 71.0 67.0 3.8 9.8
- ---------------------------------------------------------------------------------------------------------------------------
Gross Margin 27.1 29.0 33.0 (5.2) (9.0)
Other costs and expenses 19.4 20.0 18.9 (1.9) 9.8
- ---------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before provision for taxes
on income and cumulative effect of accounting change 7.7 8.9 14.1 (12.5) (34.3)
Taxes on income 2.1 3.9 5.8 (46.8) (29.6)
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations before minority
interest and cumulative effect of accounting change 5.7 5.0 8.3 14.4 (37.6)
Minority interest in net income of subsidiary 2.5 1.2 .6 103.5 114.8
Net earnings from discontinued operations - .- .2 N/A (100.0)
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings 3.2% 3.8% 7.9% (14.8)% (50.7)%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS:
Net Sales:
1996/1995: Net sales in 1996 rose to a record $158,135,100, surpassing the
Company's previous high set in 1995 of $156,309,400. While dollar revenues
increased by 1.2% over 1995 results, unit sales for the year increased by 3.2%.
Concentrated research and development efforts in support of product redesigns
and film downgauging have enabled Edison Plastics to increase market share in
the adult incontinent market and to enjoy growth in the medical/surgical segment
in excess of 25% over the prior year. At NEPSA, a continued focus on meeting
increased customer demands for speed, total cost savings and product
improvements has resulted in a strengthened position in all core accounts.
1995/1994: The increase in sales in 1995 over 1994 of $5.4 million or 3.6%,
resulted from the inclusion of a full year of sales from the Company's 60% owned
Mexican subsidiary, NEPSA. NEPSA was acquired in July, 1994, thus reflecting
sales revenues for only six months in 1994. Domestic unit volume was down 14%
from 1994 due primarily to the downgauging of diaper backsheet products. In
addition, the effects of the devaluation of the Mexican peso which was initiated
on December 20, 1994, resulted in a 23% reduction in NEPSA's dollar denominated
revenues when compared to the previous twelve months.
Cost of Sales:
1996/1995: Earnings have been hindered by competitive pricing pressures,
exacerbated by upward trends in polyolefin raw material prices. Raw material
prices represent a substantial portion of the cost of sales. High raw material
costs have continued into 1997, although most forecasters at this time predict a
softening of polyolefin resin prices as a result of significant new ethylene
capacity scheduled to come on stream during the second half of 1997 and early
1998. The Company cannot offer any assurance that polyolefin or other raw
material costs will decline in the future, or that the Company will be able to
pass increases in raw material costs on to its customers for competitive and
other reasons. Peso declines during the year had a less adverse effect upon
earnings and upon the balance sheet in 1996 than in 1995, resulting in a
reduction in consolidated net earnings of $(96,800) and an unfavorable impact on
shareholders' equity of $(185,100).
Due to the hyper-inflation in Mexico over the last three years, the Company
will change the functional currency from the peso to the dollar in accordance
with Statement of Financial Accounting Standard No. 52, "Foreign Currency
Translation". As a result of this change, translation gains and losses
previously recorded in shareholders' equity will be recorded in income.
BLESSINGS CORPORATION 23
<PAGE>
1995/1994: A major factor in the increased cost of sales and the resulting
decrease in gross margin was the continuation of high, although declining raw
material costs throughout 1995. Raw material prices nearly doubled within a
relatively short time period making full cost pass-through to customers
virtually impossible. During the year, peso currency declines against the dollar
resulted in a reduction of the Company's consolidated net earnings of
$(1,188,200), and a currency translation adjustment which reduced shareholders'
equity by $(3,383,300).
The Company reacted to the reduced domestic demand and the economic crisis
in Mexico in several ways. The Company's domestic operations totally
restructured and regionalized its sales and marketing program, which supported
by a reorganized research and development department can respond promptly to
changes in customer specification and other market opportunities. In Mexico,
NEPSA reduced headcount by 30% and significantly improved overall productivity.
Selling, General, Administrative and Interest:
1996/1995: While total dollars expended during 1996 for other costs and
expenses increased, their cost as a percentage of sales declined due to the
increase in sales volume. Increased sales and research and development efforts
were the primary causes of the increased expenditures.
1995/1994: Total dollars expended during 1995 for other costs and expenses
declined before the effect of a full year of goodwill amortization, a full year
of interest expense associated with the acquisition of NEPSA, and a full year of
NEPSA's selling, general and administrative costs. Other costs and expenses as a
percentage of sales increased due primarily to lower sales volumes.
Taxes on Income:
1996/1995: The Company's effective tax rate decreased to 26.8% from 44.0%
in 1995. The decrease in the tax rate resulted primarily from an increase in the
depreciation expense for tax purposes due to inflationary indexation of fixed
assets in Mexico.
1995/1994: The Company's effective tax rate increased to 44.0% from 41.0%
in 1994. The increase is primarily due to a higher effective tax rate for the
full year in 1995 associated with NEPSA and the related amortization of
nondeductible goodwill.
Liquidity and Capital Resources:
1996/1995: In February, 1996, the Company entered into a $20 million Note
Purchase Agreement with a major insurance company (see Note 6). The proceeds of
the $20 million senior notes were used to repay two secured mortgages and the $3
million balance outstanding under the revolving credit agreement. The remaining
proceeds were used to finance capital expenditures during the year. In addition,
the Company increased its short-term credit lines to $12 million. The Company
was not utilizing its short-term credit line at the end of the year.
1995/1994: During the year the Company entered into a $25 million, three
year, unsecured revolving credit agreement replacing the $6 million revolving
credit agreement which expired in October, 1995. In addition, the Company had
short-term credit lines of $7 million which were not being utilized at the end
of the year.
Inflation:
The Company believes that other than with respect to its Mexican
operations, the effect of inflation has not been material to the Company.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained herein, the matters
discussed in this annual 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.
24 BLESSINGS CORPORATION
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
John W. McMackin, Esquire
Chairman
Shareholder; Decker, Jones
McMackin, McClane, Hall & Bates
Fort Worth, Texas
Leonard Birnbaum
Private Investor
New York, New York
Joseph J. Harkins
Executive Vice President; Retired
The Chase Manhattan Bank, N.A.
New York, New York
R. Stephen Lefler*
President and Chief Operating Officer
Williamson-Dickie
Manufacturing Company
Fort Worth, Texas
James P. Luke
Executive Vice President,
Secretary and Chief Financial Officer
Blessings Corporation
Elwood M. Miller
President and Chief Executive Officer
Blessings Corporation
Richard C. Patton
President
Trident Partners LP
Nashville, Tennessee
Ing. Manuel Villarreal G.
President and Chief Executive Officer
NEPSA
Robert E. Weber
Chairman
Osmose Wood Preserving, Inc.
Buffalo, New York
J. Donovan Williamson
Consultant to Williamson-Dickie
Manufacturing Company
Fort Worth, Texas
Philip C. Williamson
Chairman, President and
Chief Executive Officer
Williamson-Dickie
Manufacturing Company
Fort Worth, Texas
COMMITTEES OF THE BOARD
Executive Committee
John W. McMackin, Chairman
J. Donovan Williamson, Vice Chairman
James P. Luke
Elwood M. Miller
Manuel Villarreal G.
Robert E. Weber
Philip C. Williamson
Audit Committee
Joseph J. Harkins, Chairman
Leonard Birnbaum
R. Stephen Lefler*
Compensation Committee
Robert E. Weber, Chairman
Leonard Birnbaum
Joseph J. Harkins
Philip C. Williamson
Long Range Planning Committee
Leonard Birnbaum, Chairman
Joseph J. Harkins
R. Stephen Lefler*
James P. Luke
Elwood M. Miller
Richard C. Patton
Philip C. Williamson
Organization Development Committee
Robert E. Weber, Chairman
Philip C. Williamson
Nominating Committee
J. Donovan Williamson, Chairman
Joseph J. Harkins
R. Stephen Lefler*
Investor Relations Committee
Richard C. Patton, Chairman
James P. Luke
Elwood M. Miller
Officers
Elwood M. Miller
President and Chief Executive Officer
James P. Luke
Executive Vice President, Secretary and
Chief Financial Officer
Kenneth J. Hudson
Vice President, Human Resources
Joseph J. Lesnowski
Vice President, Sourcing/Purchasing
Wayne A. Durboraw
Controller
Joseph Fernandes
Treasurer
Timothy Collins
Assistant Secretary
OPERATING UNITS
Edison Plastics(R) Division
Manufacturing Facilities:
Washington, Georgia
McAlester, Oklahoma
Newport News, Virginia
General Offices:
230 Enterprise Drive
Newport News, VA 23603
(757) 888-1700
NEPSA
Manufacturing Facilities in Mexico:
Naucalpan de Juarez,
Edo. de Mex.
Naucalpan, Edo. de Mex.
Tlalnepantla, Edo. de Mex.
General Offices:
Nacional de Envases
Plasticos, S.A. de C.V.
Calz. de Las Armas No. 12
Industrial Las Armas
Tlalnepantla, Edo. de Mex.
C.P.54080 Mexico
011-525-727-92-21
GENERAL INFORMATION
Annual Meeting
Annual Meeting is to be held on
May 20, 1997 at the Williamsburg
Marriot, Auditorium, 50 Kingsmill Road,
Williamsburg, Virginia, at 10:00 A.M.,
Eastern Daylight Savings Time.
Corporate Headquarters
200 Enterprise Drive
Newport News, VA 23603
(757) 887-2100
Stock Listing and Ticker Symbol
American Stock Exchange-BCO
Transfer Agent and Registrar
ChaseMellon Shareholder Services
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Independent Accountants
Deloitte & Touche LLP
Richmond, Virginia
General Counsel
Patten, Wornam & Watkins, L.C.
Newport News, Virginia
Shareholder Inquiries
Communications regarding transfer
requirements, lost certificates, dividends
and change of address should be
directed to the transfer agent.
Form 10-K
A copy of the Blessings Corporation
10-K Report filed with the Securities
and Exchange Commission for the
fiscal year ended December 31, 1996
which contains additional information
relating to Blessings Corporation
and subsidiaries, can be obtained
by writing to:
Secretary, Blessings Corporation
200 Enterprise Drive
Newport News, Virginia 23603
*Resigned effective January 27, 1997.
<PAGE>
[Blessings Logo]
Blessings Corporation
Executive offices
200 Enterprise Drive
Newport News, VA 23603
(757) 887-2100
[PHOTO]
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
State Percentage of Voting
(Country) of Securities Owned
Name of Company Incorporation
- --------------- ------------- --------------------
Edison Plastics International, Inc. Delaware 100%
Edison Exports, Inc. FSC Limited Jamaica 100%
ASPEN Industrial, S.A. de C.V. Mexico 100%
Nacional de Envases Plasticos,
S.A. de C.V. Mexico 60%
Mexicana de Tintas, S.A. Mexico 60%
Plastihul, S.A. de C.V. Mexico 60%
Hermes Industrial, S.A. de C.V. Mexico 60%
Servicios Profesionales Vigo Mexico 60%
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated February 21,
1997, appearing in this Annual Report on Form 10-K of Blessings Corporation for
the year ended December 31, 1996.
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
Richmond, Virginia
March 27, 1997
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0
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