BLESSINGS CORPORATION
ANNUAL REPORT ON FORM 10-K
YEAR ENDED December 31, 1997
<PAGE>
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, 1997
----------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 1-4684
BLESSINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-5566477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Enterprise Drive
Newport News, 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 February 20, 1998 (based on the closing price of those
shares on the American Stock Exchange).
Common Stock, par value $.71 per share - $66,410,600
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of February 20, 1998.
Common Stock, par value $.71 - 10,126,857 shares
DOCUMENTS INCORPORATED BY REFERENCE
PART I
Item 1 - BUSINESS Pages 2-11 and Note 16 on page 22 of the
Annual Re-port to Shareholders for the
year ended December 31, 1997.
Item 2 - PROPERTIES Notes 4 and 7 on pages 18 and 19 of the
Annual Report to Shareholders for the
year ended December 31, 1997.
PART II
Item 5 - MARKET FOR THE Note 13 on page 22 of the Annual Report
REG-ISTRANT'S to Share-holders for the year ended
COMMON STOCK December 31, 1997.
AND RELATED
SHAREHOLDER
MATTERS
Item 6 - SELECTED Page 23 of the Annual Report to Share-
FINANCIAL DATA holders for the year ended December 31,
1997.
<PAGE>
Item 7 - MANAGEMENT'S Pages 23-24 of the Annual Report to
DISCUSSION AND Shareholders for the year ended
ANALYSIS OF December 31, 1997.
FINANCIAL
CONDITION AND
RESULTS OF
OPER-ATIONS
Item 8 - FINANCIAL Pages 12-22 of the Annual Repor to
STATEMENTS AND Shareholders for the year ended
SUPPLEMENTARY December 31, 1997.
DATA
PART III
Item 10 - DIRECTORS AND Pages 14-17 of the Proxy Statement dated
EXECUTIVE April 9, 1998, in connection with its
OFFICERS OF Annual Meeting to be held on May 19, 1998.
THE REGISTRANT;
SECTION 16(a)
BENEFICIAL
OWNERSHIP
REPORTING
COMPLIANCE
Item 11 - EXECUTIVE Pages 5-14 of the Proxy Statement dated
COMPENSATION April 9, 1998, in connection with its
Annual Meeting to be held on May 19, 1998.
Item 12 - SECURITY Pages 2 and 3 of the Proxy Statement
OWNERSHIP OF dated April 9, 1998, in connection
CERTAIN with its Annual Meeting to
BENEFICIAL be held on May 19, 1998.
OWNERS
Item 13 - CERTAIN Pages 14-16 of the Proxy Statement dated
RELATIONSHIPS April 9, 1998, in connection with its
AND RELATED Annual Meeting to be held on May 19, 1998.
TRANSACTIONS
PART IV
Item 14 - EXHIBITS, Pages 12-22 of the Annual Report to
FINANCIAL Shareholders for the year ended
STATEMENT December 31, 1997.
SCHEDULES
AND REPORTS
ON FORM 8-K
<PAGE>
BLESSINGS CORPORATION
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. BUSINESS......................................... 1
Item 2. PROPERTIES....................................... 5
Item 3. LEGAL PROCEEDINGS................................ 5
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................. 5
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS............. 10
Item 6. SELECTED FINANCIAL DATA.......................... 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 10
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...... 10
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........... 10
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE............................. 11
Item 11. EXECUTIVE COMPENSATION........................... 11
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................ 11
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS... 11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.............................. 12
<PAGE>
PART I
Cautionary Statement under the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995: Included in this Report and other
written and oral information presented by management from time to time,
including, but not limited to, annual reports to shareholders, quarterly
shareholder letters, filings with the Securities and Exchange Commission, news
releases and investor presentations, are forward-looking statements about
business strategies, market potential, future financial performance and other
matters which reflect management's expectations as of the date made. Without
limiting the foregoing, the words "believes," "anticipates," "expects,"
"predicts," "seeks" and similar expressions are intended to identify
forward-looking statements. Future events and the Company's actual results could
differ materially from the results reflected in these forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation: economic,
competitive, governmental regulation, legal, currency valuations and
technological factors affecting the Company's operations, markets, products,
services and prices, and other factors discussed in the Company's filings with
the Securities and Exchange Commission. The Company disclaims any intent or
obligation to update these forward-looking statements, whether as a result of
new information, future events or otherwise.
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, both domestic and international, can be characterized as
one business segment producing extruded polyethylene and polypropylene films
through the Edison Plastics(R) Division domestically and through its now wholly
owned subsidiary, Nacional de Envases Plasticos, N.A. de C.V., and its
associated companies, collectively known as NEPSA(R), in Mexico. Through its
Edison Converting(TM) Division and NEPSA, the Company 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, 1997, December 31, 1996 and December
30, 1995 is set forth in Note 16 of the notes to the Consolidated Financial
Statements in the Annual Report to Shareholders for the year ended December 31,
1997 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.
The Edison Converting Division is a newly formed domestic printing and
converting operation. The division is focusing on high-speed, multicolor film
printing for use in the health care and industrial markets. The operation also
converts films through the application of bag making technology into finished
packaging products.
Internationally, the Company owns 100% of NEPSA which is located in the
Mexico City metropolitan area following its February, 1998 acquisition of the
remaining 40% of that Company. 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.
<PAGE>
The following is an analysis of the Plastics Operations domestic and
international sales, and net earnings during the last year:
Year Ended Year Ended 52 Wks. Ended
December 31, December 31, December 30,
1997 1996 1995
----- ----- ----
Domestic Sales $120,160,100 $109,616,200 $107,877,500
International Sales 54,596,000 48,518,900 48,431,900
------------ ------------ ------------
Total Sales $174,756,100 $158,135,100 $156,309,400
============ ============ ============
Domestic Net Earnings $ 5,519,500 $ 2,903,700 $ 5,479,500
International Net
Earnings 2,672,500 2,108,200 405,700
------------ ------------ ------------
Total Net Earnings $ 8,192,000 $ 5,011,900 $ 5,885,200
============ ============ ============
Sales to Kimberly-Clark Corporation amounted to $78,452,200, or 44.9%
of total Company sales during 1997. The loss of Kimberly-Clark Corporation as a
customer either in whole or in part would have a material adverse effect on the
Company's financial condition and results of operations.
Net sales in 1997 rose to a record $174,756,100, surpassing the
Company's previous high set in 1996 of $158,135,100. The 10.5% increase in
dollar revenues represent stronger demand for the Company's products both
domestically and in Mexico, with sales unit increases of 5.8% and 7.6%
respectively. While the market for certain healthcare films remains highly
competitive in the United States and in Mexico, aggressive marketing programs
coupled with investments in new product development were coming to fruition
during the last quarter of 1997 with a greater impact expected in 1998.
Cost productivity improvements coupled with marketing efforts focused
toward higher margin products resulted in a 16.2% improvement in gross margin
despite polyolefin raw material prices hovering at historically high levels
throughout much of the year. During the fourth quarter, polyolefin prices began
to decline somewhat, with many forecasters predicting further price erosion
during 1998. With major investments and product redesigns now in place, the
Company believes it is favorably positioned for 1998 and beyond.
Despite economic uncertainties in Mexico, the Company's 60% owned
subsidiary, NEPSA was a significant contributor to the Company's net earnings,
posting a 26.8% increase over 1996's results. The Company's belief in a positive
long-term performance at NEPSA is evidenced by its purchase of the remaining 40%
ownership of that Company in February, 1998.
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,
1997 which information is incorporated herein by reference.
Competition and Other Information
Each 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. World-wide demand for polyethylene and polypropylene resin
exceeded supplies during much of 1997 and resulted in historically high price
levels during that time. The Company did not experience difficulty in obtaining
resins even though they came at higher prices. Other raw materials and other
supplies essential to the business of the Company are available 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 financial condition and
results of 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 $22,000,000 at the
end of both fiscal 1997 and 1996. The Company is constantly seeking to develop
new products and to improve its existing products. In this effort, the Company
spent approximately $4,397,400, $2,436,500, and $2,160,700 on research and
development activities in fiscal 1997, 1996, and 1995 respectively.
The Company employs approximately 500 persons in its domestic
operations consisting of approximately 450 in the Edison Plastics Division, 20
in the Edison Converting Division 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 $1,362,100.
The Company owns all of its buildings and machinery and equipment free
and clear.
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, 1997 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, 50 1996 Mr. Michael C. Carlson joined the Company
President-Edison Plastics in October, 1996 as President, Edison
Plastics. Prior to joining Blessings
Corporation, Mr. Carlson was employed by
James River Corporation from 1987 -1996.
While at James River, his assignments
included the following positions: Vice
President and General Manager, 1994 -
1996 and Vice President and General
Manager - Riegel Paper Division, 1990 -
1994.
Timothy Collins, 55 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, 53 1978 Mr. Wayne A. Durboraw has been Controller
Controller of the Company since joining Blessings
Corporation in June, 1978.
<PAGE>
Joseph Fernandes, 38 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-Human in January, 1994 as Director of Human
Resources Resources. In December, 1995, Mr.
Hudson was promoted to Vice President,
Human Resources. 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, 55 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 since 1994. In 1996
Mr. Lesnowski was promoted to Vice
President- Sourcing /Purchasing.
<PAGE>
James P. Luke, 55* 1977 Mr. James P. Luke was elected Vice
Executive Vice President President-Finance in August, 1977. In
- - Secretary - 1984, he was elected Secretary. Effective
Jannuary, 1988, Mr. Luke was named Chief
Financial Officer February, Executive Vice
President of the Company and a Director and
designated Chief Financial Officer in 1995.
Elwood M. Miller, 53* 1993 Dr. Elwood M. Miller joined the Company
President and Chief in July, 1993 as Chief Operating Officer
Executive Officer 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 G., 44* 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 C.V. Chief Executive Officer of NEPSA upon the
(NEPSA) Company's acquisition of 60% of that
subsidiary in 1994.
<PAGE>
Jeffery T. Zeber, 42 1997 Mr. Zeber joined the Company in October,
General Manager 1995 as Director of Printing and
Edison Converting Converting and was promoted to General
Division Manager of the Edison Converting
Division in February, 1997. Prior to
joining Blessings Corporation, Mr. Zeber
was Operations Manager for American Can
during 1995 and Plant Manager for
Paramount Packaging from 1989 - 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 13 on page 22 in the Annual
Report to Shareholders for the year ended December 31, 1997 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 23 in the Annual Report to
Shareholders for the year ended December 31, 1997 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, 1997 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, 1997
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;
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Information required under this item with respect to directors is
contained on pages 14-17 of the Company's Proxy Statement dated April 9, 1998 in
connection with its Annual Meeting to be held on May 19, 1998 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 5-14 of the Company's Proxy Statement dated April 9, 1998 in connection
with its Annual Meeting to be held on May 19, 1998 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 9, 1998 in connection with its Annual
Meeting to be held on May 19, 1998 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 6,132,233 shares. Other information required under this item
is contained on pages 14-16 in the Company's Proxy Statement dated April 9, 1998
in connection with its Annual Meeting to be held on May 19, 1998 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 9, 1998 in
connection with its Annual Meeting to be held on May 19, 1998 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, 1997, which is
incorporated herein by reference:
Page (*)
Independent Auditors' Report......................... 12
Consolidated Statements of Earnings - Years
Ended December 31, 1997, December 31, 1996
and December 30, 1995.............................. 13
Consolidated Statements of Shareholders'
Equity - Years Ended December 31, 1997,
December 31, 1996 and December 30, 1995............ 14
Consolidated Balance Sheets at December 31,
1997 and 1996...................................... 15
Consolidated Statements of Cash Flows -
Years Ended December 31, 1997, December 31,
1996 and December 30, 1995......................... 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, 1997
and 1996 are included on page 23 in the Annual Report to Shareholders for the
year ended December 31, 1997 which is incorporated herein by reference.
Independent Auditors' Report........................ 15
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>
3. Exhibits
Exhibit Number
2(a) Stock Purchase Agreement (60%) 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.
2(b) Stock Purchase Agreement (40%) by and among Manuel
Villarreal Castaneda, et al, as Sellers, and Blessings
Corporation, as Purchaser, dated February 9, 1998; filed
with the Commission as an Exhibit to Form 8-K filed
February 20, 1998, such Exhibit is incorporated herein by
reference.
3(a) 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(b) 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 with the commission as an Exhibit
to Form 10K for the year ended December 31, 1996, such
Exhibit is incorporated herein by reference.
10(k) 1996 Executive Stock Loan Purchase Program; filed with the
commission as an Exhibit to Form 10K for the year ended
December 31, 1996, such Exhibit is incorporated herein by
reference.
10(l) Blessings Corporation Blessings 1997 Long-Term Incentive
Plan; filed with the Commission as an Exhibit to Form S-8
Registration Statement filed July 15, 1997, such Exhibit
is incorporated herein by reference.
10(m) Michael Carlson Compensation Contract; filed with the
Commission as an Exhibit to Form S-8 Registration
Statement filed September 15, 1997, such Exhibit is
incorporated herein by reference.
10(n) Key Executive Severance Agreement; filed with the
commission as an Exhibit to Form 10K for the year ended
December 31, 1997, filed herein.
11 Not required - explanation of earnings per share
computation is contained in Notes to
Consolidated Financial Statements
12 Not applicable
13 Blessings Corporation Annual Report to Shareholders for
the year ended December 31, 1997 - filed herewith
16 Not applicable
18 Not applicable
21 Subsidiaries of Blessings Corporation - filed herewith
22 Not applicable
23 Consent of Deloitte & Touche LLP
27 Financial data schedule
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 October 24, 1997,
relating to a press release regarding the Company's announcement that it had
entered into a non-binding letter of intent to acquire the remaining 40% of its
60% owned subsidiary in Mexico, Nacional de Envases Plasticos, S. A. de C. V.
(NEPSA).
<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, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997 and have issued our report thereon
dated February 20, 1998; such consolidated financial statements and report are
included in your December 31, 1997 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 20, 1998
<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 26, 1998
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 26, 1998
- -------------------
Elwood M. Miller
Chairman of the Board
/s/John W. McMackin Director March 26, 1998
- -------------------
John W. McMackin
Executive Vice President
Secretary and Chief
Financial Officer
/s/James P. Luke Director March 26, 1998
- ----------------
James P. Luke
/s/Wayne A. Durboraw Controller March 26, 1998
- --------------------
Wayne A. Durboraw
/s/Leonard Birnbaum Director March 26, 1998
- -------------------
Leonard Birnbaum
/s/Joseph J. Harkins Director March 26, 1998
- --------------------
Joseph J. Harkins
/s/J. Donovan Williamson Director March 26, 1998
- ------------------------
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, 1997:
Allowance for doubtful
accounts receivable $1,541,000 $394,000 -- ($331,800) $1,603,200
========== ======== ========= ========== ==========
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
========== ======== ========= ========== ==========
(A) Write-offs during year
</TABLE>
Exhibit 10(n)
AMENDMENT ONE TO JUNE 21, 1993 LETTER AGREEMENT
This Amendment One to June 21, 1993, Letter Agreement (the "Amendment")
is entered into this 9th day of September, 1997, by and between Blessings
Corporation, a Delaware corporation (the "Company") and Elwood M. Miller (the
"Key Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") considers
it essential to the best interests of the shareholders of the Company to foster
the continued employment of Elwood M. Miller, Chief Executive Officer and
President of the Company, and in this connection the Board recognizes that the
possibility of a sale of the company or a merger exists and that such
possibility and the uncertainty and questions which it necessarily raises may
result in the departure or distraction of the Key Executive to the detriment of
the Company and its shareholders in this period when the 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 ensure the Key Executive's
continued dedication and efforts in such event without undue concern on the part
of the Key Executive for his financial security; and
WHEREAS, it is the desire of the Board in the event of a Change of
Control, as defined hereafter in this Amendment One, but only in such event, to
supersede that section of the June 21, 1993, Letter Agreement which appears on
page 4 thereof as "Severance Agreement."
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 that the Severance Agreement provisions as stated on page 4 of the
Letter Agreement of June 21, 1993, from the Company to the Key Executive be
amended and supplemented as follows:
ARTICLE ONE
DEFINITIONS
As used in this Amendment, the following words and phrases shall hav
the following respective meanings unless the context clearly indicates
otherwise.
1.1 Amendment: This Amendment One to June 21, 1993, Letter
Agreement.
1.2 Base Salary: The base salary in effect on the date a Change
of Control occurs.
1.3 Company: Blessings Corporation.
1.4 Board: The Board of Directors of Blessings Corporation.
1.5 Key Executive: Elwood M. Miller, the Chief Executive Officer
and President of Blessings Corporation.
1.6 Compensation: The amount the Key Executive is entitled to receive
as Base Salary plus amounts which the Key Executive is entitled to receive
herein and under Blessings Corporation's Management Incentive Plan on an
annualized basis, but shall not refer to any other direct or indirect
compensation received by the Key Executive, including, without limitation, any
awards of restricted stock options, long-term incentive payouts or benefits.
1.7 Change in Control: A "Change in Control" shall be deemed to
occur if, within two (2) years from the date hereof:
-----------------
(a) the Company's shareholders approve of a sale, a
merger or disposition of all or substantially all of the Company's assets or
a plan of liquidation or dissolution of the Company; or
(b) there is a change of fifty percent (50%) or more in the
composition of the members of the Board in any twelve (12) consecutive
months. 1.8 Letter Agreement: The letter of June 21, 1993, from the
Company to the Key Executive outlining the financial compensation and
severance payment to
the Key Executive as an officer of the Company.
1.9 Payment Benefits: The benefits payable in accordance with
Article Three of this Amendment.
ARTICLE TWO
TERM
2.1 Term of Amendment: This Amendment shall commence on
September 9, 1997, and shall continue in effect through September 9, 1999,
when it shall terminate.
ARTICLE THREE
PAYMENT BENEFITS
3.1 Right to Payment Benefits: The Key Executive shall be entitled to
receive from the Company Payment Benefits in the amount provided in Section 3.2
if (a) this Amendment has not previously expired under the provisions contained
in Section 2 above and (b) a Change in Control has occurred and (c) the Key
Executive is employed by the Company at the time the Change in Control occurs.
3.2 Amount of Payment Benefits: If there is a Change in Control
within the term of this Amendment, then the Key Executive shall be entitled
to the following benefits:
(a) The Company shall pay to the Key Executive an amount equal
to the present value of the total amounts of money that would have been paid to
the Key Executive during the period beginning on the date of the Change in
Control and ending on a date two (2) years subsequent to the date of the Change
in Control. For purposes of this subparagraph (a), the total amounts of money
that would have been paid to the Key Executive during such period shall be based
on an annual rate calculated as follows: An amount equal to two (2) times the
Key Executive's average annual Compensation for the two (2) fiscal years of the
Company preceding the fiscal year in which the Change in Control occurs. The
present value of the foregoing total amounts shall be determined by using a
discount rate equal to one hundred percent (100%) 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 Compensation for
the period in question would be received by the Key Executive on a monthly
basis. In addition to the aforesaid payment, the Key Executive shall receive the
sum of One Hundred Thousand and 00/100 Dollars ($100,000.00) for each One and
00/100 Dollar ($1.00) the stock of the Company sells for in excess of Twelve and
50/100 Dollars ($12.50) per share (on the date the Change in Control occurs).
The additional payment on any increase in the value of the stock shall be
calculated on the fractional increase, e.g., if on the date the Change in
Control occurs the average price per share of Company Stock trades for Fourteen
and 00/100 Dollars ($14.00) per share, the additional payment to the Key
Executive shall be One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00).
Any payments made under this subparagraph (a) and under the Letter Agreement
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 date on which a Change in
Control occurs.
(b) The Key Executive shall not be required to mitigate the
amount of any payment provided for in this Amendment 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. These Payment Benefits are not contingent upon the Key Executive
retaining a position with the Company after a Change in Control occurs. If the
Key Executive is terminated for any reason after a Change in Control occurs, the
Company shall not be obligated to pay any severance benefits by reason of any
provision of the Letter Agreement.
3.3 Limitation on Payment Benefits: As it is the intention of the
parties that the Company's payments under this Amendment and the Letter
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) exceed two and ninety-nine one-hundredths (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
CHANGE IN CONTROL
Written Notice Required: Any purported Change in Control shall be
communicated by written notice to the Key Executive.
ARTICLE FIVE
SUCCESSORS TO CORPORATION
This Amendment 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 Amendment if no succession
had taken place. The Company shall require any successor by merger or otherwise
to expressly and unconditionally assume and agree to perform the Company's
obligations under this Amendment 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 Further Amendment: Any alteration to this Amendment shall be
a signed written instrument signed by both parties to this Amendment.
6.2 Indemnification: If the Key Executive is required to
institute a legal action to enforce this Amendment, or is required to defend
in any legal action, the validity or enforceability of any right or benefit
provided by this Amendment and the 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.
6.3 Validity and Severability: The invalidity or unenforceability of
any provision of this Amendment shall not affect the validity or enforceability
of any other provision of this Amendment, 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.
6.4 Reaffirmation of Letter Agreement: The terms of the Letter
Agreement, except as superseded under specific circumstances, remain in full
force and effect.
6.5 Governing Law: The validity, interpretation, construction and
performance of this Amendment shall in all respects be governed by the laws of
the Commonwealth of Virginia.
6.6 Choice of Forum: The Key Executive and the Company shall be
entitled to enforce the provisions of this Amendment or to assert any claim for
benefits under the terms of this Amendment in any state or federal court of
competent jurisdiction located in the Commonwealth of Virginia.
BLESSINGS CORPORATION
By: /s/John W. McMackin
-------------------
John W. McMackin
Chairman, Board of Directors
KEY EXECUTIVE
/s/Elwood M. Miller
-------------------
Elwood M. Miller
[logo]
BLESSINGS
CORPORATION
1997
ANNUAL
REPORT
WE MEAN
BUSINESS
<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(reg) 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 wholly-owned Mexican subsidiary, Nacional de
Envases Plasticos, S.A. (NEPSA(reg)) also produces mono and multi-layered
polyolefin films for a wide range of disposable healthcare and package
applications. In addition, NEPSA ranks among world technical leaders in high
speed, multicolor, plastic film printing and converted products. The Edison
Converting(TM) Division was established in February 1997 and began start-up
operations in a new facility adjacent to the Company's plastic film plant in
McAlester, Oklahoma. Edison Converting produces high quality, flexographic
printed and converted packaging products.
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
John W. McMackin, Esquire
Chairman
Partner; 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.
Ponte Vedra Beach, Florida
John M. Hogg
Chief Executive Officer
Sid Richardson Carbon
And Gas 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
Woodmont Capital L.L.C.
Nashville, Tennessee
Ing. Manuel Villarreal G.
President and Chief Executive Officer
NEPSA(R)
Robert E. Weber
Chairman and Retired
Chief Executive Officer
Osmose Wood Preserving, Inc.
Savannah, Georgia
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
John M. Hogg
Compensation Committee
Robert E. Weber, Chairman
Leonard Birnbaum
Joseph J. Harkins
Philip C. Williamson
Long Range Planning Committee
Leonard Birnbaum, Chairman
Joseph J. Harkins
John M. Hogg
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
John M. Hogg
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
Michael C. Carlson
President, Edison Plastics(R) Division
Ing. Manuel Villarreal G.
President and Chief Executive Officer
NEPSA
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
Jeffery T. Zeber
General Manager,
Edison Converting(TM) Division
OPERATING UNITS
Edison Plastics Division
Manufacturing Facilities:
Washington, Georgia
McAlester, Oklahoma
Newport News, Virginia
General Offices:
230 Enterprise Drive
Newport News, Virginia 23603
(757) 888-1700
Edison Converting Division
Manufacturing Facilities:
McAlester, Oklahoma
General Offices:
200 Enterprise Drive
Newport News, Virginia 23603
(757) 887-2100
NEPSA
Manufacturing Facilities:
Naucalpan de Juarez,
Edo. de Mexico
Naucalpan, Edo. de Mexico
Tlalnepantla, Edo. de Mexico
General Offices:
Hermes Industrial, S.A. de C.V.
Montana No. 176
Parque Industrial La Perla
Naucalpan de Juarez, Edo. De Mexico
C.P. 53340 Mexico
011-525-360-28-63
GENERAL INFORMATION
Annual Meeting
The annual meeting is to be held on May 19, 1998 at the Williamsburg Marriott,
Auditorium, 50 Kingsmill Road, Williamsburg, Virginia, at 10:00 A.M., Eastern
Daylight Savings Time.
Corporate Headquarters
200 Enterprise Drive
Newport News, Virginia 23603
(757) 887-2100
Stock Listing and Ticker Symbol
American Stock Exchange-BCO
Transfer Agent and Registrar
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Independent Accountants
Deloitte & Touche LLP
Richmond, Virginia
General Counsel
Patten, Wornom & 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, 1997 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
<PAGE>
[logo]
BLESSINGS CORPORATION
Executive Offices
200 Enterprise Drive
Newport News, VA 23603
(757) 887-2100
<PAGE>
FINANCIAL HIGHLIGHTS
(in thousands except per share data) 1997 1996 1995
- ------------------------------------------------------------------------------
Net Sales From Continuing Operations $ 174,756 $ 158,135 $ 156,309
- ------------------------------------------------------------------------------
Operating Profit $ 24,085 $ 18,594 $ 21,447
Corporate Expense, Goodwill, Interest
and Other - Net (9,033) (10,312) (9,413)
Income Taxes (6,860) (3,270) (6,149)
- ------------------------------------------------------------------------------
Net Earnings $ 8,192 $ 5,012 $ 5,885
==============================================================================
Shareholders' Equity $ 79,762 $ 71,748 $ 70,884
Total Assets $ 165,323 $ 158,077 $ 136,094
Per Common Share
Net Earnings $ .81 $ .49 $ .58
Shareholders' Equity $ 7.88 $ 7.07 $ 6.98
==============================================================================
NET SALES NET EARNINGS SHAREHOLDERS' EQUITY
(In Thousands) (In Thousands) (In Thousands)
[graph] [graph] [graph]
***** need plot points *****
BLESSINGS CORPORATION 1
<PAGE>
TO OUR SHAREHOLDERS
I am excited and pleased to share with you details of our 1997 performance. On
net sales of $174,756,100, an increase of 10.5% over 1996 sales of $158,135,100,
1997 net earnings totaled $8,192,000 or $0.81 per share compared with $5,011,900
or $0.49 per share in 1996. This 63% increase in earnings resulted from a number
of positive factors, all of which have had effect and will in the future have
significant impact on future results of the Company. I'd like to share some of
these factors with you.
Through its three operating subsidiaries, Edison Plastics(R), Nacional
de Envases Plasticos, S.A. (NEPSA(R)) and Edison Converting(TM), the Blessings'
engine is fueled by a combination of cost leadership, and customer responsive
product and process development capabilities. Our strategy is simple: to assume
the lead and work closely with our customers to find cost effective, unique
solutions to complex problems as fast as possible. Mike Carlson, President of
Edison Plastics says... "Deliver to our customers what they want ... and then
some". The implementation of this strategy has been fun and exciting for us at
Blessings. More importantly, this co-development strategy has resulted in
continued loyalty from key customers, and in many cases, reliance on Blessings'
products, while providing a substantial barrier to entry for our competition.
The investments we made at Edison Plastics, our U.S. based film
business, in new product and process technology during the past two years are
churning out new products for new customers in new markets at record pace.
During the past two years, the team at Edison Plastics has transformed mature
product offerings into an expanded family of materials ready to serve our core
customers in the personal care and health care segments while at the same time
[captioned text]
- ------------------------------------
"DELIVER TO OUR CUSTOMERS
WHAT THEY WANT...
AND THEN SOME."
- ------------------------------------
2 BLESSINGS CORPORATION
<PAGE>
[ART]
WE MEAN BUSINESS
positioning EdiSeal(TM), OptiFresh, and YieldMaster(TM) products in vibrant,
growth-oriented, new market segments.
The results at NEPSA are equally impressive. Since our acquisition of
60% of NEPSA in July 1994, we have enjoyed substantial growth in our Mexican
operations, despite the economic downturn that resulted from the December, 1994
peso devaluation. As you might expect, our customer-focused strategy has worked
equally well under the leadership of Manuel Villarreal and his strong
international business team. Moreover, NEPSA is projected to remain on an
aggressive growth track due to market share gains, growing market penetration in
disposable health care products, new product introduction from new customers in
new markets, and an improving Mexican economy. With much optimism, and as
previously reported, we were very pleased to acquire the additional 40% of the
NEPSA operation on February 9, 1998.
Based on our success in Mexico and NEPSA's leading market position and
strong customer relationships, Blessings has the unique opportunity to expand
into new Latin American markets with established customers. Blessings is in the
process of forming a manufacturing joint venture in which Blessings will have a
60% interest with Canguru Embalagens, a leading producer of flexible packaging
in Brazil. The new facility will be located on Canguru property in Criciuma,
Brazil, and will initially manufacture cast embossed film for the growing
personal care market. This will also serve as the Company's beachhead for
further expansion in Brazil and the Mercosur region, which represents a market
with enormous potential.
We are equally excited about the Edison Converting Division that was
established in 1997.
BLESSINGS CORPORATION 3
<PAGE>
This strategic initiative into high-end flexographic printing and converting
with associated $6.5 million dollar investment, positions Blessings to take
advantage of the core competencies at Edison Plastics and NEPSA. It will also
offer an expanded product line to our established core customers. Although in
the early stages of business expansion, management is highly confident in Edison
Converting's ability to serve customers with a superior product in less time and
at a lower cost than competition.
As we drive into the next millennium, we only know one speed ...
fast-forward. We remain focused on the opportunities and issues and with a
passion to serve our customers better than anyone else. It's a pride, even an
obsession, which comes with setting the bar high and being the best we can be.
Moreover, it's at the core, the heart and soul of our values, where the
Blessings engine that I referred to earlier is also fueled by dedicated teams of
people in all Divisions; leaders and people at all levels who believe in our
customers and who have the ability and willingness to share information, trust
and depend upon each other, drive change and deliver on promises in record time.
Blessings' operating results for 1997 clearly reflect a strong upward
trend and a continued implementation of the Company's basic vision, direction
and strategy. Furthermore, with expected reduction in raw materials costs,
commercialization of new products, a successful launch of Edison Converting,
multiple opportunities for international growth, and a pipeline full of new
products ready for commercialization, the Company expects record levels of
revenues and profits in 1998.
[ART]
DO WE MEAN BUSINESS?...YOU BET WE DO!!!
Respectfuly yours,
/s/ Elwood M .Miller
--------------------
Elwood M. Miller
President & Chief Executive Officer
4 BLESSINGS CORPORATION
<PAGE>
[photo]
James P. Luke Elwood M. Miller
Executive Vice President & CFO President & CEO
BLESSINGS CORPORATION 5
<PAGE>
EDISON PLASTICS(R) DIVISION
Net sales and profit contribution at Edison Plastics improved over 1996 by 9.5%
and 34.9%, respectively. Sales growth and earnings improvements were driven
primarily by new innovative products and processes and a focus on total cost
productivity. As a result of extensive joint development efforts, Edison has
numerous products that are unique and proprietary, permitting the division to be
in a sole sourcing position with several key customers. Advanced products for
the core personal care and medical markets have demonstrated Edison's leadership
in developing films with improved performance and lower cost. Reductions in film
gauge have resulted in the use of fewer pounds of raw material per square yard,
helping reduce the impact of raw material price swings while offering cost
savings to our customers.
The validation of our objective to be the leader in product and process
development is evident in our success with YieldMaster(TM), EdiSeal(TM), and
OptiFresh. YieldMaster has been shown to offer substantial crop yield gains to
customers of agricultural mulch films, and represents a significant
technological advance in this important segment.
The introduction of the EdiSeal family of specialty packaging film to the
converter sealant market has been heralded by one customer as "leap-frogging the
competition". These films combine the toughness and tear resistance of cast
polypropylene film with rapid, low-temperature sealing and easy-peel features
not previously available in cast polypropylene. This new film technology
provides significant growth opportunity in a higher value-added segment for
Edison's smooth cast film capacity.
OptiFresh, the film product line with a controllable oxygen transmission,
and high clarity for the produce market, has been well accepted. It is currently
being specified by several nationally recognized retailers of "Salad-in-a-bag"
and selected because of cost and aesthetics over traditional printed and
laminated competitive offerings.
An improved, reduced gauge bag film for packaging personal care products,
was developed during the year and has complemented acceptance of the new
converting capabilities of the Edison Converting(TM) Division.
Edison's customer satisfaction organization was fully reengineered in 1997.
Through increased training, advanced information and data collection systems,
new efficient processes, and customer focused representatives, performance
improved as measured both internally and externally. An independent survey of
customers in the personal care and medical markets rated Edison in the top 20%
in meeting customer needs.
A major initiative at Edison that is resulting in lower cost and higher
productivity is the debottlenecking of processes by multi-functional teams at
each plant. As a result, with minimal capital input, every operating location
and most extrusion lines set productivity records on a near-daily basis.
There is no better indicator of the commitment of employees to excellence
than how safely they work. For the third consecutive year the safety performance
of Edison Plastics has made impressive gains. Safety, as measured by OSHA
standards in 1997, is more than twice as good as the average plastics
manufacturing company. Not only has this performance demonstrated management's
concern for the welfare of each and every employee, but it has also resulted in
significantly reduced costs and injury claims. The achievements in customer
satisfaction, safety, total cost productivity, product and process development,
revenue growth and profits during 1997 give great cause for optimism as we enter
1998.
[PHOTO]
[ART]
WE MEAN BUSINESS
6 BLESSINGS CORPORATION
<PAGE>
[photo]
Michael C. Carlson
President, Edison Plastics Division
BLESSINGS CORPORATION 7
<PAGE>
EDISON CONVERTING(TM) DIVISION
The Edison Converting Division, established in February of 1997, has been
positioned as a niche supplier to the expanding personal hygiene and healthcare
markets. This new packaging operation is designed to meet customers' ever
increasing demands for innovative and cost effective designs while providing
unparalleled customer service in markets that demand and define world class
quality.
Edison Converting offers to Blessings the opportunity to reduce the impact
of fluctuations in basic raw material costs by increasing the value-added
provided by post-extrusion and converting processes. These processes, in
combination with the film technologies of Edison Plastics(R) and the packaging
expertise of Blessings wholly-owned Mexican subsidiary NEPSA(R), create a
competitive advantage through improved packaging performance. Advanced printing
technology is the foundation on which Edison Converting was built to facilitate
product diversification within existing markets and customers, and expansion
into new markets and geographies. Edison Converting is demonstrating creative
leadership within Blessings' core markets with innovative products utilizing
thinner, stronger, multi-layered packaging films resulting in significantly
improved cost/performance for customers.
The McAlester, Oklahoma Converting facility, completed in early 1997, is an
achievement in manufacturing excellence. The bright, clean environment nourishes
employees' feelings of pride, ownership and commitment to quality. The
handpicked work force has undergone extensive training and education as well as
hands-on experience through the cooperative utilization of the resources of
NEPSA during the early start-up period. Progressively managed in a self-directed
team environment, employees have been extensively cross-trained to maximize
flexibility and quick response to customer needs.
The Oklahoma facility is outfitted with the latest technology in
flexographic printing, solventless laminating and high-speed bag making. Upon
completion of the installation and shake-down of equipment in mid-June, the
remainder of 1997 was dedicated to trials and to qualifying the new processes
with prospective customers. With this trial period behind it, the Division is
positioned to capitalize on established relationships within the personal
hygiene and healthcare markets in 1998 to provide high-end printed products
unequalled in today's marketplace.
With the consolidation currently taking place in the packaging industry,
lucrative opportunities exist for high quality, proactive, niche suppliers swift
enough to capture them. Edison Converting is built to be fast and sensitive to
customer needs and we are optimistic about the prospects for this new activity
in 1998 and the years to follow.
[PHOTO]
[ART]
WE MEAN BUSINESS
8 BLESSINGS CORPORATION
<PAGE>
[photo]
Jeffrey T. Zeber
General Manager, Edison Converting Division
BLESSINGS CORPORATION 9
<PAGE>
NACIONAL DE ENVASES PLASTICO, S.A.(NEPSA)(R)
Consolidated results for Mexican activities in 1997 showed continued improvement
and positive direction as the Mexican economy enjoyed an accelerating recovery
from the disruptions of 1995 and 1996. Net earnings increased 27% over
comparable earnings in 1996 (see note 16 to Financial Statements) reflecting
both the improvement in conditions in Mexico as well as the continued
strengthening of NEPSA's operations and market position with its major
customers. It was, therefore, with enthusiasm that the company announced late in
1997 its intention to acquire the remaining 40% of NEPSA that it did not already
own. This acquisition, which was consummated in early February 1998, will have
material impact upon the earnings of the Company in 1998.
Fiscal 1997 was one of significant accomplishment at NEPSA. The Company
strengthened and restructured its core operations and initiated new investments
for diversification in value-added flexible packaging technologies. Major
improvements were made in the Company's cast embossed, co-extruded manufacturing
plant with the addition of one entirely new multi-layer, co-extrusion line and
the complete overhaul and upgrading of two additional lines, all of which are
now capable of sophisticated, 5-layer co-extrusions, higher line speeds, lower
scrap generation and reduced change-over time. These improvements enable NEPSA
to offer customers down-gauged materials while maintaining or improving product
specification and uniformity. The resultant customer cost performance benefits
provide NEPSA a heightened competitive advantage over both its Mexican and U.S.
competitors. NEPSA's improved competitiveness has been augmented by an
organizational restructuring, coupled with consolidation into new administrative
offices at NEPSA's Hermes Plant. While re-organizations of this scope are rarely
accomplished without some disruption, the resultant streamlined organization is
positioned to promote NEPSA's enhanced capabilities to an expanding customer
base throughout Latin America.
In addition to the investment commitment made to NEPSA's core extrusion
technology, the company made two significant investments to build upon NEPSA's
established packaging expertise. The first of these new investments, which
completed start-up prior to year-end, positions NEPSA to support major new
customers with printed, multi-layer, co-extruded blown films for cereal liner
bags and printed, laminated cereal bags. This new product offers immediate
potential in Mexico and other Latin America markets, as well as longer term in
the United States.
A second major investment, which will start-up during 1998, is an
additional multi-layer, blown film co-extrusion line capable of producing high
barrier films for meat, milk and other sophisticated food packaging
applications. Both of these added technologies will enhance diversification into
new markets, new customers, new products and new applications, and will enable
NEPSA to displace imports from the U.S. which are less competitive due to
freight, service and currency disadvantages.
NEPSA looks forward to 1998 as a 100% subsidiary of Blessings Corporation
and the enhanced contribution to corporate earnings which that increased
ownership entails. The opportunities to serve its core customers with its
strengthened manufacturing capabilities and new directions in advanced flexible
packaging technologies offer a bright future for NEPSA in Mexico and throughout
Latin America.
[PHOTO]
[ART]
WE MEAN BUSINESS
10 BLESSINGS CORPORATION
<PAGE>
[photo]
Manuel Villarreal Gomez
President & CEO, NEPSA
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, 1997 and 1996 and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Blessings Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Richmond, Virginia
February 20, 1998
12 BLESSINGS CORPORATION
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended Year Ended 52 Weeks Ended
December 31, 1997 December 31, 1996 December 30, 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Net Sales $ 174,756,100 $ 158,135,100 $ 156,309,400
- --------------------------------------------------------------------------------------------------------
Cost and expenses
Cost of sales 124,878,300 115,207,000 111,032,500
Selling, general and administrative 28,659,700 27,948,200 25,242,000
Foreign exchange loss 383,600 293,300 3,600,600
Interest and other - net 2,575,900 2,466,500 2,464,200
- --------------------------------------------------------------------------------------------------------
Total cost and expenses 156,497,500 145,915,000 142,339,300
- --------------------------------------------------------------------------------------------------------
Earnings before provision for taxes on income
and minority interest 18,258,600 12,220,100 13,970,100
- --------------------------------------------------------------------------------------------------------
Taxes on income
Currently payable 5,083,100 3,902,400 6,235,600
Deferred 1,777,200 (632,900) (86,400)
- --------------------------------------------------------------------------------------------------------
Total taxes on income 6,860,300 3,269,500 6,149,200
- --------------------------------------------------------------------------------------------------------
Minority interest in net income of subsidiary 3,206,300 3,938,700 1,935,700
- --------------------------------------------------------------------------------------------------------
Net earnings $ 8,192,000 $ 5,011,900 $ 5,885,200
---------
Basic earnings per share on common stock $ .81 $ .49 $ .58
---
Diluted earnings per share on common stock $ .81 $ .49 $ .58
---
</TABLE>
See notes to consolidated financial statements
BLESSINGS CORPORATION 13
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
foreign
Common stock Additional currency Treasury stock
------------ paid-in translation Retained --------------
Shares Amount capital adjustment earnings Shares Amount
==============================================================================================================================
<S> <C>
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 of 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 of 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 $(892,300)
Purchase of company's
common stock -- -- -- -- -- 34,656 (353,000)
Reissuance of company's
common stock under
compensation plans -- -- (44,800) -- -- (16,952) 219,600
Net earnings -- -- -- -- 8,192,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 10,214,846$ 7,252,500$ 5,968,100$ (6,255,900)$ 73,823,200 98,046 $(1,025,700)
==============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
14 BLESSINGS CORPORATION
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1996
===================================================================================================
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,106,200 $ 5,801,800
Accounts receivable less allowance for doubtful accounts
of $1,603,200 and $1,541,000 for 1997 and 1996 respectively 21,632,600 22,832,200
Inventories 14,309,200 12,905,700
Prepaid deferred taxes 1,510,300 1,417,900
Prepaid expenses 1,039,900 1,723,700
- --------------------------------------------------------------------------------------------------
Total Current Assets 43,598,200 44,681,300
Property, Plant and Equipment - Net 89,378,200 80,573,600
Goodwill net of accumulated amortization of $3,710,700 and
$2,659,500 for 1997 and 1996 respectively 22,794,600 23,845,800
Deferred Taxes 7,267,300 7,565,400
Other Assets 2,284,700 1,410,600
- --------------------------------------------------------------------------------------------------
Total Assets $ 165,323,000 $ 158,076,700
==================================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 21,862,400 $ 25,025,800
Taxes on income 1,765,400 528,700
Current installments on long-term debt 3,125,000 3,744,300
Deferred taxes 1,397,000 1,024,200
- --------------------------------------------------------------------------------------------------
Total Current Liabilities 28,149,800 30,323,000
Long-Term Debt 30,937,500 34,253,100
Deferred Taxes 9,572,500 8,373,800
Deferred Supplemental Pension Liability 2,267,100 1,950,700
Minority Interest 14,633,900 11,427,700
Commitments and Contingencies -- --
Shareholders' Equity
4% Cumulative preferred stock, $10 par value
authorized 259 shares, none outstanding -- --
Common stock, $.71 par value; authorized 25,000,000 shares,
issued 10,214,846 for 1997 and 1996 respectively 7,252,500 7,252,500
Additional paid-in capital 5,968,100 6,012,900
Translation loss (6,255,900) (6,255,900)
Retained earnings 73,823,200 65,631,200
- --------------------------------------------------------------------------------------------------
80,787,900 72,640,700
- --------------------------------------------------------------------------------------------------
Common Stock in Treasury, at cost - 98,046 and 80,342 shares
for 1997 and 1996 respectively (1,025,700) (892,300)
- --------------------------------------------------------------------------------------------------
Total Shareholders' Equity 79,762,200 71,748,400
Total Liabilities and Shareholders' Equity $ 165,323,000 $ 158,076,700
===================================================================================================
</TABLE>
See notes to consolidated financial statements
BLESSINGS CORPORATION 15
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended 52 Weeks Ended
December 31, 1997 December 31, 1996 December 30, 1995
=================================================================================================================
<S> <C>
Cash flows from operating activities:
Net earnings $ 8,192,000 $ 5,011,900 $ 5,885,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,298,300 8,539,100 7,977,100
Amortization - goodwill 1,060,200 1,060,200 1,060,200
Amortization - other 47,900 466,300 348,200
Minority interest in net income
of consolidated subsidiary 3,206,300 3,938,700 1,935,700
Provision for losses on accounts receivable 394,000 613,700 216,500
(Gain) loss on sale of assets 92,400 (41,800) 800
Change in assets and liabilities:
(Increase) decrease in accounts receivable 597,500 (2,543,600) (2,739,300)
(Increase) decrease in inventories (1,466,000) (3,528,700) 5,050,100
(Increase) decrease in prepaid expenses 461,400 (782,600) 466,100
Increase (decrease) in accounts payable and
accrued expenses (3,114,700) 8,876,100 (2,254,900)
Increase (decrease) in taxes on income 881,500 (769,000) (195,100)
Increase (decrease) in deferred taxes on income 1,777,200 (632,900) (86,400)
(Increase) decrease in other assets (546,100) (33,400) (555,100)
Increase (decrease) in other liabilities 264,800 183,000 237,400
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,146,700 20,357,000 17,346,500
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
(Increase) decrease in notes receivable 25,000 25,000 --
Proceeds from disposition of fixed assets 200,600 167,000 13,000
Capital expenditures (18,867,100) (20,398,200) (10,364,500)
- -------------------------------------------------------------------------------------------------------------
Net cash required by investing activities (18,641,500) (20,206,200) (10,351,500)
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Reduction of long-term debt (3,934,900) (13,245,500) (10,258,800)
Proceeds from issuance of long-term debt -- 20,000,000 6,357,400
Issuance of common stock under stock option plan -- -- 30,800
Issuance and acquisition of treasury stock (178,200) 96,200 (964,600)
Dividends paid -- (4,059,000) (4,074,600)
Distribution to minority interest -- (400,000) --
- -------------------------------------------------------------------------------------------------------------
Net cash provided (required) by financing activities (4,113,100) 2,391,700 (8,909,800)
- -------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (87,700) (57,600) (1,744,100)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (695,600) 2,484,900 (3,658,900)
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 5,801,800 3,316,900 6,975,800
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,106,200 $ 5,801,800 $ 3,316,900
=============================================================================================================
</TABLE>
See notes to consolidated financial statements.
16 BLESSINGS CORPORATION
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years ended December 31, 1997; December 31, 1996 and December 30,
1995.
1. ACCOUNTING POLICIES
A. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly-owned with the
exception of NEPSA (see notes 2 and 14). All material intercompany profits,
transactions and balances have been eliminated in consolidation. The Company is
approximately 54% owned by the Williamson-Dickie Manufacturing Company. The
Company has no material transactions with the Williamson-Dickie Manufacturing
Company.
B. Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
C. Inventories
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out method (FIFO) and an
average cost method.
D. Property, Plant and Equipment
Property, plant and equipment, carried at cost, is depreciated over the
estimated useful life of the assets. Depreciation expense is computed on a
straight-line basis for book purposes. Accelerated methods are used for income
tax purposes. Major improvements are capitalized and ordinary repairs and
maintenance are expensed in the year incurred.
E. Accounting Period
Effective with the beginning of 1996, the Company changed its accounting
periods from four weeks to one month each with the fiscal year coinciding with
the calendar year. Accordingly, under the new calendar year, the Company's
quarters are each comprised of three calendar months of thirteen weeks each
ending March 31, June 30, September 30, and December 31. Formerly, the Company's
first quarter was comprised of sixteen weeks, and the remaining three quarters
were each comprised of twelve weeks. Therefore, the year ending December 30,
1995 was comprised of fifty-two weeks, while the following two years ending
December 31, 1997 and 1996 were comprised of twelve months each. Due to the
relative similarity of the year ending December 30, 1995 with the two following
years, 1995 results were not recast.
F. Intangibles Resulting from Business Acquisitions
Intangible assets resulting from business acquisitions principally consist
of the excess of the acquisition cost over the fair value of the net assets of
the businesses acquired (goodwill). Goodwill is amortized over twenty-five
years. Other intangible assets are amortized on a straight-line basis over their
estimated useful lives. The carrying value of goodwill and other intangibles is
evaluated if circumstances indicate a possible impairment in value. If
undiscounted cash flows over the remaining amortization period indicate that
goodwill and other intangibles may not be recoverable, the carrying value of
goodwill and other intangibles will be reduced by the estimated shortfall of
cash flows on a discounted basis.
G. Taxes on Income
The company provides deferred taxes to reflect future consequences of
differences between the tax basis of assets and liabilities and their reported
amounts for financial reporting purposes, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. The significant components of
deferred tax assets and liabilities are principally related to depreciation,
allowance for doubtful accounts, retirement plans, inventory and accrued
expenses not currently deductible.
H. Translation of Foreign Currencies
In 1997 the functional currency of the Company's Mexican subsidiary changed
from the peso to the dollar. As a result of this change, translation gains and
losses previously recorded in shareholders' equity are recorded in income. Prior
to 1997, the Company translated foreign currency financial statements by
translating balance sheet accounts at the current exchange rate and income
statement accounts at the average exchange rate for the year. Translation gains
and losses were recorded in shareholders' equity, and transaction gains and
losses were reflected in income.
I. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts reflected on those statements.
Actual results could differ from those estimates.
J. Financial Instruments
The carrying amounts of assets and liabilities as reported on the balance
sheet at December 31, 1997, which qualify as financial instruments, approximate
fair value. The fair value of interest rate swap agreements held by the Company
at year end which were not recorded on the financial statements, was $395,000
and $470,400 which represents the cash requirement to settle these agreements at
December 31, 1997 and 1996, respectively.
K. Interest and Dividends - Net
- --------------------------------------------------------------------------------
December 31, December 31, December 30,
1997 1996 1995
- --------------------------------------------------------------------------------
Interest expense
(net of capitalized
interest) $ 3,138,900 $ 3,405,900 $ 3,122,900
Interest income (563,000) (923,200) (658,700)
Dividend income -- (16,200) --
- -------------------------------------------------------------------------------
Interest and dividends -
net expense $ 2,575,900 $ 2,466,500 $ 2,464,200
===============================================================================
Cash payments for interest were $3,215,600, $2,775,100 and $2,978,600 for
the 1997, 1996 and 1995 fiscal years respectively.
L. Other
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 128, Earnings Per Share. The adoption of this statement did not have a
material impact on the earnings per share calculations for the 1997, 1996 and
1995 fiscal years. During 1997, the FASB issued SFAS No. 130, Reporting
Comprehensive Income. This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. The effect of adopting the new standard is
not expected to be significant as the Company does not currently have material
items of other comprehensive income disclosed outside the statement of
operations. Also during 1997, the FASB issued SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information. The statement requires
enterprises to report financial and descriptive information about its operating
segments, products and services, countries and major customers, as well as
reconciliations of segment financial information to corresponding amounts in the
general-purpose financial statements. SFAS Nos. 130 and 131 will be adopted for
the Company's 1998 fiscal year.
BLESSINGS CORPORATION 17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. NEPSA ACQUISITION
The Company acquired 60% of the outstanding common stock of Nacional de
Envases Plasticos, S.A. de C.V., and its associated companies, collectively
known as NEPSA, on July 5, 1994. The acquisition of NEPSA was accounted for
using the purchase method of accounting. The allocation of the purchase price of
approximately $46,000,000 resulted in an excess of $26,505,300 in goodwill which
will be amortized on a straight-line basis over its estimated life of
twenty-five years. Amortization of goodwill was $1,060,200 for 1997, 1996, and
1995.
The Company had non-cash investing and financing activities associated with
the NEPSA transaction by issuing 400,000 shares of additional Blessings
Corporation common stock valued at $5,400,000.
On February 9, 1998 the Company purchased the remaining 40% of NEPSA (see
note 14).
3. INVENTORIES
- --------------------------------------------------------------------------------
December 31,
1997 1996
- --------------------------------------------------------------------------------
Raw materials $10,189,300 $10,050,500
Finished goods 4,119,900 2,855,200
- --------------------------------------------------------------------------------
Total $14,309,200 $12,905,700
================================================================================
4. PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------
December 31,
1997 1996
- --------------------------------------------------------------------
Land $ 629,200 $ 629,200
- --------------------------------------------------------------------
Buildings 15,614,400 15,258,800
Machinery and equipment 107,640,200 88,515,200
Motor vehicles 647,100 621,900
Furniture and fixtures 4,553,800 4,403,100
Leasehold improvements 1,317,500 936,900
Construction in progress 1,688,100 6,804,700
- --------------------------------------------------------------------
Gross depreciable assets $131,461,100 $116,540,600
Less accumulated depreciation
and amortization 42,712,100 36,596,200
- --------------------------------------------------------------------
Net depreciable assets 88,749,000 79,944,400
- --------------------------------------------------------------------
Net assets $ 89,378,200 $ 80,573,600
- --------------------------------------------------------------------
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- --------------------------------------------------------------------
December 31,
1997 1996
- --------------------------------------------------------------------
Accounts payable $14,764,700 $16,887,200
Salaries, wages and commissions 2,790,400 2,263,100
Taxes, other than taxes on income 357,400 841,800
Interest 616,300 716,600
Insurance 619,500 1,019,200
Relocation and restructuring 443,900 791,200
Miscellaneous current liabilities 2,270,200 2,506,700
- -------------------------------------------------------------------
Total $21,862,400 $25,025,800
===================================================================
6. LONG-TERM DEBT
- -------------------------------------------------------------------------------
December 31,
1997 1996
- -------------------------------------------------------------------------------
6.55% note due 2002 $10,000,000 $10,000,000
7.22% note due 2008 10,000,000 10,000,000
NEPSA Credit Agreement due 2002 14,062,500 17,187,500
Mexico bank loans due 1998
collateralized by equipment -- 809,900
- ------------------------------------------------------------------------------
$34,062,500 $37,997,400
Less installments due within one year 3,125,000 3,744,300
- ------------------------------------------------------------------------------
Total long-term debt $30,937,500 $34,253,100
==============================================================================
During 1996, the Company entered into a $20,000,000 Note Purchase Agreement
with a major insurance company. Under the terms of the Note Purchase Agreement,
the Company issued $10,000,000 of 7.22% senior unsecured notes due January 30,
2008 and $10,000,000 of 6.55% senior unsecured notes due January 30, 2002.
Interest is payable semi-annually on January 30 and July 30 of each year. The
Company is not obligated to make principal payments until January 30, 2000. The
proceeds were used to repay two secured mortgages and advances under the
revolving credit and to finance major capital projects.
The Company has available a $25,000,000 two year, unsecured revolving
credit agreement with major lending institutions. Borrowings under the revolving
credit agreement bear interest at rates based on the London Interbank Offered
Rates (LIBOR) or the prime interest lending rate. The Company had no borrowings
outstanding under this agreement at December 31, 1997.
On February 20, 1998, the Company entered into an $18,500,000 unsecured
Term Loan Agreement with a major lending institution. The term loan bears
interest at rates based upon either the LIBOR Rates or the Prime Rate and will
be payable quarterly. Principal payments will commence on September 15, 1998 and
will be payable quarterly thereafter with the final payment on June 15, 2006.
The proceeds from the term loan were used to purchase the remaining 40%
ownership of NEPSA (see note 14).
The Company has short-term lines of credit of $12,000,000 available through
its principal lenders. On December 31, 1997, the Company had standby letters of
credit of $997,000 outstanding under the lines of credit.
In December of 1994 and during the first half of 1995, the Company entered
into five interest rate swap agreements to limit its exposure to changes in
interest rates on the NEPSA Credit Agreement.
18 BLESSINGS CORPORATION
<PAGE>
The agreements obligate the Company to make fixed payments to a counter party
which, in turn, is obligated to make variable payments to the Company. The
amount to be paid or received under the terms of the swaps is measured by
applying contractually agreed upon variable and fixed rates to the notional
amounts of principal. The counterparty to the agreements is a major financial
institution which is expected to fully perform under the terms of the agreement.
The notional amounts, which decrease over the term of the agreements, are used
to measure the contractual amounts to be received or paid and do not represent
the amount of exposure to credit loss. The agreements terminate in 2002 and
effectively convert approximately $13,900,000 of three month LIBOR-based
floating rate debt to 8.21% fixed rate debt. Interest paid on these swaps was
recorded as an adjustment to interest expense.
The long-term debt agreements contain various restrictive covenants
limiting the Company's ability to incur additional indebtedness or to undertake
mergers and acquisitions. The agreements also include quarterly tests relating
to the maintenance of net worth, cash flow and interest coverage ratios.
The maturities on long-term debt are as follows:
- --------------------------------------------------------------
Fiscal Years Amount
- --------------------------------------------------------------
1998 $ 3,125,000
1999 3,125,000
2000 6,458,300
2001 6,458,300
2002 4,895,900
2003 and after 10,000,000
- --------------------------------------------------------------
Total $34,062,500
=============================================================
7. COMMITMENTS
At December 31, 1997, aggregate rental commitments on long-term real estate
operating leases were as follows:
- --------------------------------------------------------------
Fiscal Years Amount
- --------------------------------------------------------------
1998 $1,291,300
1999 645,600
2000 --
2001 --
2002 --
2003 and after --
- --------------------------------------------------------------
Total $1,936,900
=============================================================
Rent expense for the fiscal years ended December 31, 1997; December 31,
1996; and December 30, 1995, amounted to $1,362,100, $1,449,800 and $2,024,500
respectively. The Company has commitments to purchase raw materials over the
next two years of approximately $3,800,000 per year.
8. PENSION TRUST PLAN
The Company sponsors a defined benefit pension plan that covers
substantially all employees. The cost of the plan is borne by the Company. The
plan calls for benefits to be paid to eligible employees at retirement, based
primarily upon years of service with the Company and compensation rates near
retirement. Contributions are intended to provide not only for benefits
attributable to service to date but also for those expected to be earned in the
future. Plan assets consist primarily of bonds, mortgages and common stock.
Pension expense was $806,200, $587,800 and $459,500 in the 1997, 1996 and
1995 fiscal years respectively. Net pension cost for the Company's qualified and
nonqualified defined benefit plans for 1997, 1996 and 1995 included the
following components:
- -------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------
Service cost of
current period $ 716,200 $ 645,200 $ 597,200
Interest cost on
projected benefit
obligation 1,235,700 1,090,300 998,100
Actual return on
plan assets (1,951,600) (1,459,700) (1,887,300)
Net amortization
and deferral 805,900 312,000 751,500
- ------------------------------------------------------------------------
Net periodic
pension cost $ 806,200 $ 587,800 $ 459,500
========================================================================
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:
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
Vested benefits $ 15,173,600 $ 13,075,000
Non-vested benefits 225,200 351,100
- ---------------------------------------------------------------------------
Accumulated benefit obligation $ 15,398,800 $ 13,426,100
Fair value of assets held in the plan $ 16,143,000 $ 14,316,000
Projected benefit obligation for
services rendered to date (18,028,400) (15,865,200)
- ---------------------------------------------------------------------------
Projected benefit obligation in excess
of plan assets $(1,885,400) $(1,549,200)
Unrecognized net loss 1,194,500 924,100
Unrecognized prior service cost (85,000) (92,800)
Unrecognized net asset at
January 1, 1988, being amortized
over 17 years (213,200) (248,700)
Unrecognized net obligation at
December 31,1994, being amortized
over 15 years 740,900 808,300
- ---------------------------------------------------------------------------
Accrued pension cost
included in other liabilities $ (248,200) $ (158,300)
============================================================================
The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.5% and 5.0%, respectively, for 1997 and
1996. The expected long-term rate of return on assets was 10% for 1997 and 1996.
During 1994 the Company adopted a Supplemental Restoration plan designed to
restore pension benefits which have been limited as a result of changes in the
Internal Revenue Service code of 1993 (OBRA `93).
In December, 1990, and November, 1992, FASB issued SFAS No. 106, Employers'
Accounting for Post Retirement Benefits Other Than Pensions and SFAS No. 112,
Employers' Accounting for Post Employment Benefits respectively. These
pronouncements do not have an effect on the Company's financial statements as
the cost to the Company of providing the benefits covered in these
pronouncements is not significant.
BLESSINGS CORPORATION 19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. PENSION SAVINGS PLAN (401K)
The Company initiated a pension savings plan in 1988 designed to
comply with Section 401(k) of the Internal Revenue Service code. Under the
terms of the plan, the Company matches 50% of the employees' contribution up to
a maximum of 3% of salary. The Company's matching contribution to the plan was
$436,000, $378,200 and $337,900 for the 1997, 1996 and 1995 fiscal years
respectively.
10. STOCK OPTION PLAN
Under the Company's stock option plans, officers, directors and key
employees may be granted options to purchase the Company's common stock at no
less than 100% of the market price on the date the option is granted. The plans
provide options to become exercisable either immediately upon grant or one year
from date of grant and can be issued with or without stock appreciation rights
with terms of 5 to 10 years. The Company has authorized 443,000 shares for
issuance under the plans. At December 31, 1997, there were 130,750 shares
available under the plans. As permitted by SFAS No. 123, Accounting for Stock
Based Compensation, the Company has elected to follow APB Opinion No. 25
Accounting for Stock Issued to Employees, for the measurement and recognition of
employee stock-based compensation. Accordingly, no compensation cost has been
recognized for the Company's plans. The pro forma effect of applying SFAS 123
fair value method of measuring compensation costs to the Company's stock-based
awards was not significant to reported net income and earnings per share. A
summary of stock option transactions in fiscal 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996 December 30, 1995
- -----------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Outstanding, beginning of the year 159,200 $12.64 134,200 $12.98 98,200 $12.85
Granted 67,500 10.48 79,000 9.99 46,000 13.20
Exercised (6,000) 10.42 (50,000) 9.25 (3,000) 8.81
Canceled (3,250) 11.93 (4,000) 14.11 (7,000) 14.38
- -----------------------------------------------------------------------------------------------------------------
Outstanding, end of the year 217,450 $12.06 159,200 $12.64 134,200 $12.98
Options exercisable at year end 217,450 $12.06 134,700 $12.97 92,700 $12.89
=================================================================================================================
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
- --------------------------------------------------------------------------
Options Outstanding
- --------------------------------------------------------------------------
Number Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price
- --------------------------------------------------------------------------
$ 8.81 - 10.88 103,450 5.3 Years $10.29
$12.00 - 14.38 114,000 6.5 Years $12.69
==========================================================================
Using the Black-Scholes model, the weighted average fair value of options
granted and significant weighted-average assumptions used were as follows:
- ----------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------
Fair market value of options granted $4.20 $3.51
Risk-free interest rate 6.5% 6.5%
Expected life (years) 5.0 9.0
Expected dividends 0.0% 3.0%
Volatility 32.0% 31.8%
================================================================
11. TAXES ON INCOME
The components of income before taxes are as follows:
- -------------------------------------------------------------------------
December 31, December 31, December 30,
1997 1996 1995
- -------------------------------------------------------------------------
U.S. $8,573,600 $ 4,850,000 $8,398,800
Foreign 9,685,000 7,370,100 5,571,300
- -------------------------------------------------------------------------
$18,258,600 $12,220,100 $13,970,100
=========================================================================
Income tax expense from continuing operations consisted of the following
components in the fiscal year ended on:
- -------------------------------------------------------------------------
December 31, December 31, December 30,
1997 1996 1995
- -------------------------------------------------------------------------
Taxes estimated to be
payable currently
U.S $ 1,759,600 $ 1,174,400 $ 2,553,700
Foreign 3,135,500 2,689,900 3,383,500
State 188,000 38,100 298,400
- -------------------------------------------------------------------------
Total $ 5,083,100 $ 3,902,400 $ 6,235,600
- -------------------------------------------------------------------------
Taxes deferred - net
U.S $ 886,300 $ 587,800 $ 6,500
Foreign 670,700 (1,366,700) (153,700)
State 220,200 146,000 60,800
- -------------------------------------------------------------------------
Total 1,777,200 (632,900) (86,400)
$ 6,860,300 $ 3,269,500 $ 6,149,200
==========================================================================
20 BLESSINGS CORPORATION
<PAGE>
Temporary differences which give rise to deferred tax assets and
liabilities at December 31, 1997, December 31, 1996, and December 30, 1995, are
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred Deferred Deferred Deferred
tax assets tax liabilities tax assets tax liabilities tax assets tax liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Current
Allowance for doubtful accounts $562,400 -- $554,900 -- $427,100 --
Compensated absences 444,900 -- 361,600 -- 312,500 --
Restricted stock 138,400 -- 111,700 -- 138,600 --
Other 364,600 1,397,000 389,700 1,024,200 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total current 1,510,300 1,397,000 1,417,900 1,024,200 878,200 --
- ---------------------------------------------------------------------------------------------------------------------------------
Non-current
Tax deductible expenses not charged against
book income (primarily depreciation) -- 9,245,900 -- 8,038,900 -- $6,210,800
Income tax benefit of fixed asset
indexation 1,902,200 -- 2,316,700 -- -- --
Loss on foreign currency translation 4,170,600 -- 4,170,600 -- 4,047,200 --
Other 1,194,500 326,600 1,078,100 334,900 382,000 923,900
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-current 7,267,300 9,572,500 7,565,400 8,373,800 4,429,200 7,134,700
- ---------------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $8,777,600 $10,969,500 $8,983,300 $9,398,000 $5,307,400 $7,134,700
=================================================================================================================================
</TABLE>
A reconciliation of the differences between income taxes computed at the
U.S. income tax rate and the consolidated tax provision is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996 December 30, 1995
- ----------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Tax at statutory U.S. tax rate $6,390,500 35.0 $4,277,000 35.0 $4,889,500 35.0
Differential due to operations outside U.S. 45,500 .3 (1,540,000) (12.6) 892,600 6.4
State and local taxes net of federal tax benefit 265,300 1.5 184,100 1.5 237,100 1.6
Nondeductible goodwill amortization 371,100 2.0 371,100 3.0 371,100 2.7
Other - Net (212,100) (1.2) (22,700) (.1) (241,100) (1.7)
- ----------------------------------------------------------------------------------------------------------------
Total Provision for income taxes $6,860,300 37.6 $3,269,500 26.8 $6,149,200 44.0
=================================================================================================================
</TABLE>
Cash payments for taxes were $2,994,800, $3,128,200 and $6,442,000 for the
1997, 1996 and 1995 fiscal years respectively.
12. NET EARNINGS PER SHARE
Net earnings per share for all periods presented have been computed based
upon the weighted average number of shares outstanding during the year. The
following schedule represents a reconciliation of the numerator and the
denominator used to calculate basic and diluted earnings per share for 1997,
1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share Income Shares Per-Share
(Num.) (Denom.) Amount (Num.) (Denom.) Amount (Num.) (Denom.) Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Basic EPS $8,192,000 10,117,965 $ .810 $5,011,900 10,149,692 $.494 $5,885,200 10,159,088 $.579
Effect of
Dilutive Options -- 30,497 -- 20,406 -- 44,211
- -------------------------------------------------------------------------------------------------------------------------------
Diluted EPS $8,192,000 10,148,462 $ .807 $5,011,900 10,170,098 $.493 $5,885,200 10,203,299 $.577
===============================================================================================================================
</TABLE>
BLESSINGS CORPORATION 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. QUARTERLY FINANCIAL DATA, MARKET AND DIVIDEND INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Fiscal Year Ended December 31, 1997 3 Months 3 Months 3 Months 3 Months Year
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $ 45,076,700 $ 43,185,000 $ 43,707,700 $ 42,786,700 $ 174,756,100
- -------------------------------------------------------------------------------------------------------------------------------
Cost of sales $ 31,510,300 $ 30,617,400 $ 31,946,100 $ 30,804,500 $ 124,878,300
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,296,900 $ 1,619,800 $ 1,962,000 $ 2,313,300 $ 8,192,000
- -------------------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 10,125,386 10,114,869 10,114,803 10,116,800 10,117,965
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ .23 $ .16 $ .19 $ .23 $ .81
- -------------------------------------------------------------------------------------------------------------------------------
Dividends paid per share -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Market price of common stock
HIGH $ 11.25 $ 10.75 $ 15.38 $ 15.88 $ 15.88
LOW $ 9.25 $ 9.31 $ 10.13 $ 13.75 $ 9.25
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<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 $ 8.50
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14. SUBSEQUENT EVENT
On February 9, 1998, the Company purchased the remaining 40% of its 60%
owned subsidiary in Mexico, NEPSA for $18,500,000. Pro forma results assuming
consolidation of 100% of NEPSA's earnings would have been net earnings of
$10,455,300 or $1.03 per share for 1997, $7,885,600 or $.78 per share for 1996
and $6,671,900 or $.66 per share for 1995.
15. MAJOR CUSTOMER
A customer of the Company accounted for 44.9%, 44.6% and 46.6% of total
sales in the 1997, 1996, and 1995 fiscal years respectively.
16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture and sale of specialty plastics for use in a variety of disposable
healthcare products, as well as in numerous industrial, agricultural and
packaging end uses. The Company operates in two primary geographic areas: the
United States and Mexico.
Geographic financial information is as follows:
- -------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------
Net Sales to
unaffiliated customers:
United States $120,160,100 $109,616,200 $107,877,500
Mexico 54,596,000 48,518,900 48,431,900
- -------------------------------------------------------------------------
Total sales $174,756,100 $158,135,100 $156,309,400
=========================================================================
Net Earnings:
United States $ 5,519,500 $ 2,903,700 $ 5,479,500
Mexico 2,672,500 2,108,200 405,700
- -------------------------------------------------------------------------
Total earnings $ 8,192,000 $ 5,011,900 $ 5,885,200
=========================================================================
Identifiable assets:
United States
(Including Goodwill) $132,652,600 $127,292,800 $116,976,300
Mexico 32,670,400 30,783,900 19,117,900
- -------------------------------------------------------------------------
Total assets $165,323,000 $158,076,700 $136,094,200
=========================================================================
22 BLESSINGS CORPORATION
<PAGE>
SELECTED FINANCIAL DATA
(dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Results of Operations
Net sales $174,756 $158,135 $156,309 $150,886 $114,211
Net earnings from continuing operations 8,192 5,012 5,885 11,642 9,436
Net earnings 8,192 5,012 5,885 11,940 9,783
- -----------------------------------------------------------------------------------------------------------------------------
Year-End Position
Cash, cash equivalents and short-term investments $ 5,106 $ 5,802 $ 3,317 $ 6,976 $ 17,065
Property, plant and equipment - net 89,378 80,574 69,148 75,022 43,092
Total assets 165,323 158,077 136,094 151,556 88,000
Long-term debt 30,938 34,253 23,747 26,476 8,192
Shareholders' equity 79,762 71,748 70,884 72,370 60,887
- -----------------------------------------------------------------------------------------------------------------------------
Per common share
Net earnings from continuing operations $ .81 $ .49 $ .58 $ 1.17 $ .97
Net earnings .81 .49 .58 1.20 1.00
Shareholders' equity 7.88 7.07 6.98 7.25 6.24
Dividends declared -- .40 .30(1) .36 .32
- -----------------------------------------------------------------------------------------------------------------------------
Financial Ratios
Current ratio(2) 1.5 1.5 1.5 1.4 3.3
Long-term debt to equity(3) 38.8% 47.7% 33.5% 36.6% 13.5%
=============================================================================================================================
</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.
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 31, December 30, Increase/(Decrease)
1997 1996 1995 97/96 96/95
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Net Sales from Continuing Operations 100.0% 100.0% 100.0% 10.5% 1.2%
Cost of Sales 71.5 72.9 71.0 8.4 3.8
- -----------------------------------------------------------------------------------------------------------------
Gross Margin 28.5 27.1 29.0 16.2 (5.2)
Other costs and expenses 18.1 19.4 20.0 3.0 (1.9)
- -----------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
provision for taxes on income and
cumulative effect of accounting change 10.4 7.7 8.9 49.4 (12.5)
Taxes on income 3.9 2.1 3.9 109.8 (46.8)
- -----------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations
before minority interest and cumulative
effect of accounting change 6.5 5.7 5.0 27.3 14.4
Minority interest in net income of subsidiary 1.8 2.5 1.2 (18.6) 103.5
- -----------------------------------------------------------------------------------------------------------------
Net Earnings 4.7% 3.2% 3.8% 63.5% (14.8)%
================================================================================
</TABLE>
BLESSINGS CORPORATION 23
<PAGE>
MANAGEMENT'S FINANCIAL ANALYSIS AND DISCUSSION (continued)
RESULTS OF OPERATIONS:
Net Sales: 1997/1996: Net sales in 1997 rose to a record $174,756,100,
surpassing the Company's previous high set in 1996 of $158,135,100. The 10.5%
increase in dollar revenues represent stronger demand for the Company's products
both domestically and in Mexico, with sales unit increases of 5.8% and 7.6%
respectively. While the market for certain healthcare films remains highly
competitive in the United States and in Mexico, aggressive marketing programs
coupled with investments in new product development were coming to fruition
during the last quarter of 1997 with a greater impact expected in 1998.
1996/1995: Net sales increased to $158,135,100 during 1996. 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 enabled the Company's Edison Plastics(R) Division
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 resulted in a strengthened position in core
accounts.
Cost of Sales: 1997/1996: Cost productivity improvements coupled with marketing
efforts focused toward higher margin products resulted in a 16.2% improvement in
gross margin despite polyolefin raw material prices hovering at historically
high levels throughout much of the year. During the fourth quarter, polyolefin
prices began to decline somewhat, with many forecasters predicting further price
erosion during 1998. With major investments and product redesigns now in place,
the Company believes it is favorably positioned for 1998 and beyond.
Despite economic uncertainties in Mexico, the Company's 60% owned
subsidiary, NEPSA(R) was a significant contributor to the Company's net
earnings, posting a 26.8% increase over 1996's results. The Company's belief in
a positive long-term performance at NEPSA is evidenced by its purchase of the
remaining 40% ownership of that Company in February, 1998.
1996/1995: Earnings were 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 continued into 1997. While significant new ethylene capacity is scheduled
to come on stream during 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 previous three years, the
Company changed the functional currency from the peso to the United States
dollar in 1997 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 are recorded in
income.
Selling, General, Administrative and Interest: 1997/1996: Total other costs and
expenses remained relatively unchanged from 1996 levels reflecting an
inflationary increase of 3%, but continuing to decline as a percentage of sales
due to the increase in sales revenue.
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.
Taxes on Income: 1997/1996: The Company's effective tax rate increased to 37.6%
from 26.8% in 1996. The increase in the effective tax rate was due to decreased
benefits from asset indexation, and the consequential lower depreciation expense
for tax purposes because of decreased inflation in the Mexican economy.
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.
Liquidity and Capital Resources: Subsequent to the end of the year, the Company
entered into an $18.5 million, eight year, unsecured term loan agreement with a
major financial institution. The proceeds were used to purchase the remaining
40% ownership of NEPSA (see Notes 6 and 14). The Company had available a $25
million revolving credit agreement and short-term credit lines of $12 million,
neither of which were 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.
Year 2000: During 1996 and 1997 the Company updated computer hardware and
implemented an integrated manufacturing, sales and financial system in both the
United States and Mexico. While the primary purpose of the system upgrades was
to enhance customer service and improve information reporting, the upgrades were
"year 2000 compliant". Accordingly, the Company does not anticipate additional
material expenditures related to the year 2000. The Company does not use its
systems extensively in dealing with suppliers, customers and financial
institutions. The year 2000 problem arises when computer programs cannot process
data for the year 2000 and beyond.
Other: In February, 1998, the Company disclosed that it has engaged in an
evaluation of strategic alternatives to optimize shareholder value. An
investment banker has been retained to advise the Board of Directors in
connection with this evaluation. Alternatives may include an investigation of
potential merger or investment partners which could bring operating synergies to
the Company and augment Blessings' commitment to support the global expansion of
its major customers.
Cautionary Statement under the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995: Included in this Report and other
written and oral information presented by management from time to time,
including, but not limited to, annual reports to shareholders, quarterly
shareholder letters, filings with the Securities and Exchange Commission,
news releases and investor presentations, are forward-looking statements
about business strategies, market potential, future financial performance and
other matters which reflect management's expectations as of the date made.
Without limiting the foregoing, the words "believes," "anticipates,"
"expects," "predicts," "seeks" and similar expressions are intended to
identify forward-looking statements. Future events and the Company's actual
results could differ materially from the results reflected in these
forward-looking statements. There are a number of important factors that
could cause the Company's actual results to differ materially from those
indicated by such forward-looking statements. These factors include, without
limitation: economic, competitive, governmental regulation, legal, currency
valuations and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors discussed in the
Company's filings with the Securities and Exchange Commission. The Company
disclaims any intent or obligation to update these forward-looking
statements, whether as a result of new information, future events or
otherwise.
24 BLESSINGS CORPORATION
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
State (Country) of Securities Owned
Incorporation
Name of Company
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 - CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated February 20,
1998, appearing in this Annual Report on Form 10-K of Blessings Corporation for
the year ended December 31, 1997.
Registration
Form Statement No.
S-8 33-41762
S-8 33-54108
S-8 33-70328
S-8 33-85382
S-8 33-85384
S-8 33-12387
S-8 33-31303
S-8 33-35611
DELOITTE & TOUCHE LLP
Richmond, Virginia
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,106,200
<SECURITIES> 0
<RECEIVABLES> 23,235,800
<ALLOWANCES> 1,603,200
<INVENTORY> 14,309,200
<CURRENT-ASSETS> 43,598,200
<PP&E> 132,090,300
<DEPRECIATION> 42,712,100
<TOTAL-ASSETS> 165,323,000
<CURRENT-LIABILITIES> 28,149,800
<BONDS> 30,937,500
0
0
<COMMON> 7,252,500
<OTHER-SE> 72,509,700
<TOTAL-LIABILITY-AND-EQUITY> 165,323,000
<SALES> 174,756,100
<TOTAL-REVENUES> 174,756,100
<CGS> 124,878,300
<TOTAL-COSTS> 156,497,500
<OTHER-EXPENSES> 31,619,200
<LOSS-PROVISION> 1,603,200
<INTEREST-EXPENSE> 3,138,900
<INCOME-PRETAX> 18,258,600
<INCOME-TAX> 6,860,300
<INCOME-CONTINUING> 8,192,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,192,000
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
[Blessings Corporation logo]
Blessings Corporation
200 Enterprise Drive
Newport News, VA 23603
(757) 887-2100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1998
To Shareholders of BLESSINGS CORPORATION:
We extend to you a cordial invitation to attend the 1998 Annual Meeting of
Shareholders of Blessings Corporation which will be held at 10:00 A.M. at the
Williamsburg Marriott, Auditorium, 50 Kingsmill Road, Williamsburg, Virginia,
on May 19, 1998, for the following purposes:
1. To elect a board of eleven (11) directors to serve for the ensuing year;
2. To transact any and all business as may properly come before the
meeting.
The Board of Directors has set April 3, 1998, as the record date. Only
holders of common stock of record at the close of business on such date will be
entitled to notice of or to vote at the meeting.
By Order of the Board of Directors
JAMES P. LUKE
Chief Financial Officer
Secretary
Newport News, Virginia
April 9, 1998
YOUR VOTE IS IMPORTANT
IMPORTANT -- Whether or not you expect to attend the meeting, please
promptly complete, date, sign and mail the accompanying proxy card in the
enclosed envelope. If you attend the meeting, you may withdraw your proxy
and vote in person.
It is necessary to have a majority of the stock represented at the meeting
in person or by proxy.
<PAGE>
BLESSINGS CORPORATION
200 Enterprise Drive
Newport News, VA 23603
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 19, 1998
----------------
Solicitation and Revocation of Proxy
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Blessings Corporation
("Blessings") for use at the Annual Meeting of Shareholders to be held on May
19, 1998, at 10:00 A.M. (E.D.S.T.). The approximate date this proxy statement
and the enclosed form of proxy, along with the annual report of Blessings
Corporation for the fiscal year ended December 31, 1997, are first being sent
to shareholders is April 9, 1998.
The cost of preparing, printing and mailing this proxy statement will be
borne by Blessings. Solicitation will be made for the most part by mail.
Employees of Blessings, who will receive no additional compensation, may also
solicit proxies by telephone, telegraph or personal interview. Blessings may
also request brokers and other custodians, nominees and fiduciaries to forward
the proxy material to their principals and will reimburse them for their
reasonable out-of-pocket expenses.
When voting for the election of directors, by checking the appropriate box
on your proxy card, you may:
1. Vote FOR all of the director nominees as a group;
2. Withhold authority to vote for all director nominees as a group; or
3. Decline to vote for any individual nominee by writing that nominee's
name in the space provided.
Shareholders executing a proxy may revoke it before it is voted by filing
with the Secretary of Blessings an instrument of revocation, by submitting a
subsequently dated proxy or by attending the meeting and withdrawing the proxy.
Each unrevoked proxy card, properly executed and received prior to the close of
the meeting, will be voted as indicated.
WHERE SPECIFIC INSTRUCTIONS ARE NOT INDICATED, THE PROXY WILL BE VOTED FOR
THE ELECTION OF ALL DIRECTORS AS NOMINATED.
1
<PAGE>
Voting Securities and Principal Holders Thereof
Only common shareholders of record at the close of business on April 3,
1998, are entitled to vote at the annual meeting. On February 20, 1998,
10,126,857 shares of common stock, $.71 par value, were outstanding and held by
approximately 2,200 beneficial shareholders. The presence, in person or by
proxy, of holders of a majority of the outstanding common stock entitled to
vote at the meeting is necessary to constitute a quorum to transact business.
Assuming the presence of a quorum, the affirmative vote of the holders of a
plurality of the shares of common stock represented at the meeting is required
for the election of directors, and any other matters to be voted upon will be
decided by the affirmative vote of the holders of a majority of the shares of
common stock present, or represented, and entitled to vote at the meeting.
Abstentions will be, but broker non-votes will not be, considered shares
present, or represented, and entitled to vote at the meeting. Holders of common
stock are entitled to one vote per share and have no cumulative voting rights.
The list of all shareholders of record on April 3, 1998, will be available at
the office of Geddy, Harris & Geddy, 516 South Henry Street, Williamsburg,
Virginia, for the ten days preceding the annual meeting. Inspectors of the
elections will be provided by the Company's transfer agent ChaseMellon
Shareholder Services.
Principal Shareholders
Reported as of December 31, 1997
Set forth below is information relating to the beneficial ownership of the
Company's common stock by each person or group of affiliated persons who is
known by the Company to own more than 5% of the Company's common stock.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Title of Class Name and Address of Beneficial Owner Ownership (1) Class (6)
- ---------------- ---------------------------------------- --------------- ------------
<S> <C> <C> <C>
Common Stock Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401 ............ 680,502 6.7(2)
Royce & Associates Inc.
1414 Avenue of the Americas
New York, NY 10019 ................ 535,200 5.3(2)
Williamson-Dickie Manufacturing Company
319 Lipscomb Street
Fort Worth, TX 76104 ............... 5,496,096 54.3
Williamson, J. Donovan
Suite 410 University Center I
1300 South University Drive
Fort Worth, TX 76107 ............... 5,501,628 54.3(3)
Williamson, Philip C.
Williamson-Dickie Manufacturing Company
PO Box 1779
Fort Worth, TX 76101 ............... 5,501,596 54.3(4)
</TABLE>
2
<PAGE>
Security Ownership by Management
Reported as of February 2, 1998
Set forth below is information relating to the beneficial ownership of the
Company's common stock by (1) each of the Company's directors and named
executive officers who own common stock, and (2) all of the Company's directors
and named executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Title of Class Name of Beneficial Owner Ownership (1)(5) Class (6)
- ---------------- -------------------------------------------------- ------------------ -------------
<S> <C> <C> <C>
Common Stock Birnbaum, Leonard ................................ 79,238 *
Carlson, Michael C. .............................. 10,000 *
Durboraw, Wayne A. ............................... 13,147 *
Harkins, Joseph J. ............................... 12,134 *
Hogg, John M. .................................... 3,400 *
Luke, James P. ................................... 69,490 *
McMackin, John W. ................................ 24,542 *
Miller, Elwood M. ................................ 87,812 *(7)
Patton, Richard C. ............................... 4,600 *
Villarreal G., Manuel ............................ 396,613 3.9(8)
Weber, Robert E. ................................. 12,000 *
Williamson, J. Donovan ........................... 5,501,628 54.3(3)
Williamson, Philip C. ............................ 5,501,596 54.3(4)
All of the above and other executive officers as a
group (18 persons) ........................... 6,260,033 61.1
</TABLE>
* Less than 1% of issued and outstanding shares of common stock of the
Company.
- ------------------
(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(2) Blessings has received Notices of Filing with the Securities and Exchange
Commission on Schedule 13G of beneficial ownership of shares of Blessings'
common stock in excess of 5% of total shares outstanding from Royce &
Associates Inc. and Dimensional Fund Advisors, Inc. Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor, is deemed
to have sole dispositive power over of 680,502 and sole voting power over
444,190 shares of Blessings Corporation stock as of December 31, 1997, all
of which shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(3) The Williamson-Dickie Manufacturing Company owns 5,496,096 shares of
Blessings' common stock outstanding. Mr. J. Donovan Williamson owns 4,032
shares of Blessings' common stock in addition to Blessings' shares owned
beneficially through his interest in the Williamson-Dickie Manufacturing
Company.
(4) The Williamson-Dickie Manufacturing Company owns 5,496,096 shares of
Blessings' common stock outstanding. Mr. Philip C. Williamson owns 4,000
shares of Blessings' common stock in addition to Blessings' shares owned
beneficially through his interest in the Williamson-Dickie Manufacturing
Company.
(5) Amounts shown include shares subject to options that are exercisable within
sixty days for the named directors and executive officers and directors
and executive officers as a group as follows: Mr. Birnbaum, 1,500; Mr.
Carlson 8,000; Mr. Durboraw, 9,700; Mr. Harkins, 1,500; Mr. Hogg, 500; Mr.
Luke, 25,400; Mr. McMackin, 1,500; Dr. Miller, 37,000; Mr. Patton, 1,500;
Mr. Weber, 1,500; Mr. J.D. Williamson, 1,500; Mr. P.C. Williamson, 1,500
all directors and executive officers as a group (18 persons), 127,800.
(6) Except for the percentages of certain parties that are based on presently
exercisable options which are indicated in Note (5) above, the percentages
indicated are based on 10,126,857 shares of common stock issued and
outstanding on February 20, 1998. In the case of parties holding presently
exercisable options, the percentage ownership is calculated on the
assumption that the shares presently purchasable, or purchasable within
the next sixty days, underlying such options are outstanding.
(7) Includes 800 shares held as custodian for a child and two grandchildren of
which the reporting person disclaims beneficial ownership.
(8) Includes 276,000 shares held by father and brother of which the reporting
person disclaims beneficial ownership.
3
<PAGE>
The Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of Blessings, although it is
not involved in day-to-day operating details. Members of the board are kept
informed by various reports and documents sent to them each month, as well as
by operating and financial reports made at board and committee meetings. There
were eleven (11) meetings of the board and ten (10) meetings of committees of
the board in the fiscal year ended December 31, 1997. The overall attendance at
these meetings was 97%. All members of the board attended at least 75% of the
meetings of the board and committees on which they served.
Committees of the Board of Directors
The board has seven (7) standing committees: the Executive Committee, the
Nominating Committee, the Audit Committee, the Compensation Committee, the
Organization Development Committee, the Long Range Planning Committee and the
Investor Relations Committee. The committee on which each nominee serves is
shown in the section entitled "Election of Directors" of this proxy statement.
The following is a description of the functions of each committee:
Executive Committee
The Executive Committee consists of seven members, four of whom are
non-employee directors. The Executive Committee meets on-call and has authority
to act on matters during the intervals between board meetings. The committee
did not meet during the fiscal year ended December 31, 1997.
Nominating Committee
The Nominating Committee consists of three members, all of whom are
non-employee directors. The Nominating Committee considers and recommends
nominations for directors of the corporation and other matters as may, from
time to time, be deemed appropriate. The committee met once during the fiscal
year ended December 31, 1997.
Audit Committee
The Audit Committee is comprised of three members, all of whom are
independent directors for purposes of the rules of the American Stock Exchange.
The Audit Committee reviews the results, findings and recommendations resulting
from audits performed by independent certified public accountants, significant
accounting policies, the audit fees to be paid and the nature of non-audit
services performed. It meets with appropriate officers and financial personnel
and independent certified public accountants in connection with these reviews.
The committee recommends to the board the appointment of independent certified
public accountants to serve as auditors for the following fiscal year. The
Audit Committee met two (2) times during the fiscal year ended December 31,
1997.
Compensation Committee
The Compensation Committee consists of four members, all of whom are
"non-employee directors" for purposes of Securities Exchange Act of 1934 Rule
16b - 3 and "Outside Directors" for purposes of Section 162 (m) of the Internal
Revenue Code. The committee reviews and approves the salary and incentive
compensation recommendations made by the CEO for all senior officers and key
employees of the company. The committee determines the salary and incentive
actions appropriate for the CEO and makes reports and recommendations to the
board with respect to all compensation and employee benefit matters. In
carrying out its responsibilities, the committee from time to time engages
independent compensation consultants to provide data on compensation trends and
practices to insure that the company maintains an equitable and competitive
compensation profile.
4
<PAGE>
The committee also administers the following incentive and stock plans of
the Company:
-- Blessings Corporation 1991 Stock Option Plan (1991 Option Plan).
-- Blessings Corporation 1993 Annual Incentive Plan for Key Employees
(1993 Incentive Plan).
-- 1993 Restricted Stock Plan for Non-Employee and Certain Other Directors
of Blessings Corporation (1993 Director Restricted Stock Plan).
-- Blessings Corporation 1993 Restricted Stock Plan for Key Employee (1993
Key Employee Restricted Stock Plan).
-- 1995 Non-Employee Directors Stock Option Plan (1995 DSOP).
-- 1997 Long-Term Incentive Plan (1997 Long-Term Plan).
The Committee met six (6) times during fiscal year ended December 31,
1997.
Organization Development Committee
The Organization Development Committee consists of two members, each of
whom is a non-employee director. The committee periodically reviews the
organization structure of the corporation and its operating divisions to ensure
effective organizational function and to ensure that replacements for key
positions are identified and provided for. The committee did not meet during
the fiscal year ended December 31, 1997.
Long Range Planning Committee
The Long Range Planning Committee is comprised of seven members, five of
whom are non-employee directors. The committee reviews the long-range
objectives of Blessings. The committee meets with key members of management and
outside consultants to conduct examinations of each activity of Blessings and
to recommend a long-term growth and development plan for the Company. The
committee met once during the fiscal year ended December 31, 1997.
Investor Relations Committee
The Investor Relations Committee is comprised of three members, one of
whom is a non-employee director and chairman of the committee. The role of the
committee is to assess the effectiveness of shareholder relations and
communications and to make recommendations with regard to improving overall
shareholder value. The committee did not meet during the fiscal year ended
December 31, 1997.
Compensation of Members of the Board of Directors and Committees
-- Non-employee directors not receiving other compensation are each paid an
annual retainer of $15,000 and a fee of $900 for each board and committee
meeting attended. In the event two or more meetings are held on the same
date, the fee for the first meeting is $900 and the fee for any
subsequent meetings on the same date is $450. Committee chairmen receive
an additional fee which varies depending upon the committee served as
follows: Compensation Committee, $4,000 per year; Audit Committee, $2,000
per year; Nominating Committee, $1,000 per year; Long Range Planning
Committee, $1,000 per year; Organization Development Committee and
Investor Relations Committee, $500 per meeting not to exceed $3,000 per
year. Non-employee directors of the Company are also eligible for limited
life and accidental death and dismemberment insurance and to participate
in the Company's medical benefit program. No additional compensation is
paid to employees for performance of their duties as directors.
5
<PAGE>
Mr. John McMackin, in his dual role as Chairman of the Board and Chairman
of the Executive Committee, receives annual compensation in the amount of
$100,000 and was granted a $60,000 bonus by the Board of Directors at its
meeting on May 20, 1997. Compensation for the Vice Chairman of the
Executive Committee has been set by the board at an annual rate of
$60,000.
1993 Restricted Stock Plan for Non-Employee and Certain Other Directors of
Blessings Corporation
-- With the advice and assistance of nationally recognized independent
compensation consultants, the Compensation Committee of the Board of
Directors undertook the consideration of a restricted stock plan for
non-employee and certain other directors of the Company. At the Annual
Meeting held on May 17, 1994, shareholders approved the adoption of the
1993 Restricted Stock Plan for Non-Employee and Certain Other Directors
of Blessings Corporation (the "1993 Director Restricted Stock Plan") as
recommended by the committee to the Board of Directors. The Committee
believes that the 1993 Director Restricted Stock Plan serves to promote
the Company's interests and those of its shareholders by permitting
grants of shares of common stock to non-employee and certain other
directors, subject to restrictions, in order to compensate such directors
and reward them for long-term performance, and increase their ownership
of common stock.
On May 20, 1997, in accordance with the 1993 Director Restricted Stock
Plan, the Board granted 3,000 shares of Blessings Corporation common
stock to the Chairman and 400 shares to the Vice Chairman and each of the
other non-employee directors.
On December 2, 1997, the Board of Directors extended the term of the 1993
Director Restricted Stock Plan for one additional year to July 9, 1998.
No additional shares were authorized under the Plan as 20,200 shares
remain undistributed.
1995 Non-Employee Directors' Stock Option Plan
-- At its meeting on May 17, 1995, the Board of Directors approved, subject
to the approval of shareholders, the 1995 Non-Employee Directors Stock
Option Plan (the "1995 DSOP"). At the annual meeting of shareholders held
on May 21, 1996, the shareholders approved the 1995 DSOP as recommended
by the Board of Directors. In accordance with the provisions of the 1995
DSOP, each non-employee director will be granted an option to acquire 500
shares of common stock of the Company on the first business day after the
date of each Annual Meeting. Except for certain conditions relating to
death, disability or retirement, each option expires five years from the
date of grant. The Company believes the 1995 DSOP promotes the interests
of the Company and its shareholders by strengthening the Company's
ability to attract, motivate and retain Directors of training, experience
and ability, and encourages the highest level of Directors' performance
by providing Directors with a proprietary interest in the Company's
financial success and growth.
1997 Long-Term Incentive Plan
-- At the Annual meeting of Shareholders held on May 20, 1997, the
shareholders voted to approve the adoption of the 1997 Long-Term
Incentive Plan. The objective of the Plan is to attract and retain
dedicated and loyal employees and directors of outstanding ability, to
stimulate the efforts of such persons in meeting the Company's objectives
and to encourage ownership of the Company's common stock by employees and
directors.
The Plan is administered by the Compensation Committee of the Board of
Directors who may grant either Incentive Stock Options or Non-Qualified
Stock Options, both of which cannot be less than one hundred percent
(100%) of the fair market value on the date the option is granted and
must be exercised during a term not to exceed ten (10) years. An
aggregate of 150,000 shares of Blessings common stock has been reserved
for issuance upon exercise of options granted under the plan.
6
<PAGE>
Directors' Stock Ownership Guidelines
-- At its meeting on April 18, 1995, the Board of Directors adopted the
following guidelines for common stock ownership by directors of the
Company:
Three (3) years of service 3,000 shares
Five (5) years of service 5,000 shares
Eight (8) years of service 8,000 shares
Executive Compensation
The following information is set forth with respect to compensation paid
by Blessings during each of the last three fiscal years to the Chief Executive
Officer and the other four most highly-compensated executive officers of the
company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
---------------------- -------------------------- ---------
Restricted
Stock Options/ LTIP All Other
Name and Salary Bonus Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) (1) ($) (#) ($) ($) (2)
- ---------------------------- ------ ----------- ---------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael C. Carlson (3) 1997 $168,967 $ 51,413 -0- 5,000/0 -0- $ 4,750
President, Edison Plastics 1996 38,076 30,000 -0- 3,000/900 -0- -0-
1995 -0- -0- -0- -0- -0- -0-
Wayne A. Durboraw 1997 115,825 42,396 -0- 3,000/0 1,988 24,930
Controller 1996 111,500 43,173 -0- 1,500/450 540 13,922
1995 105,200 50,370 -0- -0- 4,708 12,032
James P. Luke 1997 244,852 98,535 -0- 5,000/0 10,238 51,681
Executive Vice President 1996 237,600 82,799 -0- 25,000/0 1,120 31,707
Chief Financial Officer 1995 219,100 94,414 -0- 5,000/1,500 9,817 25,922
Elwood M. Miller 1997 305,770 123,156 -0- 8,000/0 46,846 69,898
President and 1996 289,000 100,711 -0- 25,000/0 107,163 65,381
Chief Executive Officer, 1995 262,500 113,116 -0- 10,000/3,000 136,744 67,586
Blessings
Manuel Villarreal G. 1997 140,601 60,200 -0- -0- -0- -0-
President and 1996 147,885 92,500 -0- -0- -0- -0-
Chief Executive Officer, 1995 96,272 74,000 -0- -0- -0- -0-
NEPSA
</TABLE>
- ------------------
(1) Cash amounts awarded under the 1993 Incentive Plan for the respective
fiscal years.
(2) Amounts included in all other compensation for fiscal years 1997, 1996, and
1995 respectively include company matching contributions to the 401(k)
savings plan: in 1997 of $4,750 for Mr. Carlson; $4,589 for Mr. Durboraw;
$4,589 for Mr. Luke; $4,589 for Dr. Miller; in 1996 of $4,500 for Mr.
Durboraw; $4,500 for Mr. Luke; $4,500 for Dr. Miller; in 1995 of $4,620
for Mr. Durboraw; $4,620 for Mr. Luke; $4,620 for Dr. Miller. The
remaining amounts for the named officers represent accruals to the
Supplemental Executive Retirement Plan.
(3) Michael C. Carlson joined the Company effective October 7, 1996.
7
<PAGE>
Options
The following table sets forth the details of options granted to the
individuals listed in the Summary Table during fiscal year 1997. The second
table in this section shows value of exercised and unexercised options.
Option/SAR Grants Table
Option/SAR Grants in the Year Ended 12/31/97
<TABLE>
<CAPTION>
Potential Realizable
Value
At Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Terms
--------------------------------------------------------- -------------------
% of Total
Options/SARs
Granted to Exercise
Options/SARs Employees in Price Expiration
Name Granted Fiscal Year $/Share Date 5% - $ 10% - $
- -------------------- -------------- -------------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Carlson 5,000/0 8.3/0 10.50 05/19/02 14,505 32,052
Wayne A. Durboraw 3,000/0 5.0/0 10.50 05/19/02 8,703 19,231
James P. Luke 5,000/0 8.3/0 10.50 05/19/02 14,505 32,052
Elwood M. Miller 8,000/0 13.3/0 10.50 05/19/02 23,208 51,283
</TABLE>
Option/SAR Exercises and Year-End Value Table
<TABLE>
<CAPTION>
$ Value of
Unexercised
In-the-Money
Number of Unexercised Options/SARs
Shares Options/SARs at 12/31/97 at 12/31/97
Acquired on Value -------------------------------- --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------- --------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Carlson -0- -0- 8,000/900 -0- 36,439/4,557 -0-
Wayne A. Durboraw -0- -0- 9,700/2,010 -0- 32,749/6,000 -0-
James P. Luke -0- -0- 25,400/6,120 -0- 75,684/16,330 -0-
Elwood M. Miller -0- -0- 37,000/8,700 -0- 75,250/12,375 -0-
</TABLE>
8
<PAGE>
The Blessings Corporation Employees' Pension Trust Plan (the "Pension
Plan"), the Cost Recovery Supplemental Retirement Income Plan (the "SERP"), the
Supplemental Restoration Plan (the "Restoration Plan") and the Employees'
Defined Contribution 401(k) Savings Plan (the "401(k) Plan") are available only
to domestic United States employees of Blessings Corporation and its divisions,
and not to employees of its NEPSA subsidiary.
Employee Pension Trust Plan
The Blessings Corporation Pension Plan is a defined benefit plan and the
amount of the contribution with respect to a specified person cannot be readily
calculated by the regular actuaries of the plan. The Pension Plan defines
annual earnings as taxable earnings plus any 401(k) deferrals of the employee.
While the Pension Plan formula does not incorporate a direct social security
offset, service credits are earned at the rate of 1% of the social security
wage base and 1.3% of earnings in excess of the social security wage base for
each participant. The Company maintains the Restoration Plan which is designed
to restore pension benefits otherwise provided by the Pension Plan, but which
have become limited as a result of changes in the Internal Revenue Code. The
Restoration Plan covers all employees of Blessings Corporation who are
participants in the Pension Plan and whose retirement income benefits are
limited, directly or indirectly, by the provisions of Code Section 401(a) (17)
or Code Section 415. In no event will benefits payable under the Restoration
Plan, when added to the benefits earned under the Pension Plan exceed total
benefits calculated under the Pension Plan as if no limitations had been
imposed.
The following table shows estimated annual benefits payable under both
plans (assuming payments made on the normal life annuity basis and not under
any of the various survivor options) to an employee at normal retirement age,
i.e., age 65, after selected periods of service with respect to varying levels
of remuneration covered by the plan.
<TABLE>
<CAPTION>
Annual Benefit Upon Retirement
Average Annual Earnings With Years of Service Indicated
During the Highest Five ----------------------------------------------------------------
Consecutive Years of the
Final Ten Years of Service 15 Years 20 Years 25 Years 30 Years 35 Years
- ----------------------------------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
$100,000............................ $ 18,104 $ 24,138 $ 30,172 $ 36,209 $ 42,242
200,000............................ 37,605 50,138 62,671 75,211 87,743
300,000............................ 57,106 76,138 95,170 114,212 133,244
400,000............................ 76,607 102,138 127,669 153,214 178,745
500,000............................ 96,108 128,138 160,168 192,216 224,246
600,000............................ 115,609 154,138 192,667 231,218 269,747
</TABLE>
The credited years of service for persons named above at their normal
retirement dates are as follows: Mr. Durboraw, 30 years; Mr. Hudson, 21 years;
Mr. Luke, 32 years; and Dr. Miller, 16 years; Sr. Villarreal is not a
participant in the Pension Plan.
Cost Recovery Supplemental Retirement Income Plan
Effective January 1, 1980, Blessings established the SERP which is an
unfunded, non-qualified plan and is not subject to the Employee Retirement
Income Security Act of 1974 as amended. The plan covers Messrs. Durboraw, Luke
and Miller.
The SERP is designed to provide for covered executives a retirement
benefit of 60% of compensation less 100% of primary social security benefits,
100% of benefits payable under the Pension Plan, and 100% of benefits payable
under the Restoration Plan. Benefits are payable for ten years following
retirement. Should the executive not live to receive ten years of payments, his
beneficiary will receive the balance. In addition, the SERP provides a
pre-retirement death benefit of 30% of compensation minus $7,500 annually for
ten years not to exceed $50,000 per year per individual. These death and
retirement payments are paid from the general funds of the corporation. The
corporation purchases "key-man" insurance to be used to recover the net
after-tax cost of the deferred compensation benefits and the net outlay for the
insurance. The SERP is designed so that, if the assumptions made as to
mortality experience, policy dividends and other
9
<PAGE>
factors are realized, the corporation will recover substantially all of its
payments plus a portion of the interest paid or imputed for the use of the
corporation's money. Estimated annual payments for ten years after retirement
stated at current value are as follows: Mr. Durboraw, $24,033; Mr. Luke,
$58,511; and Dr. Miller, $141,499.
Employees' Defined Contribution 401(k) Savings Plan
The Company maintains the 401(k) Plan for all employees. Under the terms
of the 401(k) Plan, each employee may elect to participate through the deferral
of from 1% to 15% of his or her earnings not to exceed an annual limitation
established by the Internal Revenue Service which was $9,500 during 1997. To
encourage and assist its employees in saving for their retirement, the Company
has established an employer contribution amounting to $.50 for each $1.00
deferred by the employee into the 401(k) Plan with the Company's contribution
not to exceed a maximum of 3% of the employee's earnings. The 401(k) Plan
further provides that all employee and Company-matching contributions are 100%
vested by the employee at all times. Each individual may select on a quarterly
basis the type of investment account in which he or she would choose to have
the funds of the account invested: equity fund, guaranteed fixed income fund,
balanced fund, small company fund, intermediate bond fund and international
equity fund. For the year ended December 31, 1997, the Company's matching
contributions to the 401(k) Plan totaled $435,069. Blessings' aggregate
contributions under the 401(k) Plan for the three most recent fiscal years with
respect to the persons named in the summary compensation table, all current
executive officers as a group and all other employees, excluding executive
officers as a group, were as follows: Mr. Carlson, $4,750; Mr. Durboraw,
$13,709; Mr. Luke, $13,709; Dr. Miller, $13,709; all current executive officers
as a group, $97,298; and all other employees, excluding current executive
officers as a group, $1,053,948.
Transactions With Management and Others
Pursuant to the provisions of the 1991 Option Plan and further subject to
the provisions of the Blessings Corporation 1996 Executive Stock Loan Purchase
Program (the "1996 Program"), the Company has guaranteed personal loans in the
amount of $231,250 each, undertaken by Dr. Elwood M. Miller and Mr. James P.
Luke with a major financial institution with interest at the prime rate minus
0.25% in order for them to exercise stock options for 25,000 shares each of
Blessings Corporation common stock granted on February 23, 1996. The guarantees
are for a term not to exceed five years. The agreement provides that the loans
may be "interest only" for no more than three years with amortization in full
over the fourth and fifth years, if not sooner.
The Company has undertaken this arrangement to facilitate the purchase of
Company stock by its senior executives in order to align their financial
rewards with the financial rewards realized by all other holders of the common
stock. The following table shows the outstanding balance of personal loans with
a concomitant company guarantee as of February 2, 1998:
<TABLE>
<CAPTION>
Executive Officer February 2, 1998
- ----------------------------------------------------------- -----------------
<S> <C>
Elwood M. Miller, President & CEO $231,250
James P. Luke, Executive Vice President & CFO $231,250
</TABLE>
On February 9. 1998, the Company acquired the remaining 40% of its
subsidiary in Mexico, Nacional de Envases Plasticos, S. A. de C. V. ("NEPSA")
and its associated companies. Sr. Manuel Villarreal G., received $1,283,415 on
the closing date for the sale of his interest as a minority stockholder in the
NEPSA companies.
10
<PAGE>
Stock Performance Chart
The following chart compares the cumulative total return to shareholders
on the Company's common stock with the cumulative total return of the American
Stock Exchange Market Index and a Plastics Industry Peer Group comprised of
sixty-eight (68) public companies identified by SIC Codes 3080-3089 with annual
sales of less than $1 billion. Interested shareholders may obtain a copy of the
listing of this Plastic Industry Peer Group by contacting the Controller,
Blessings Corporation. The comparison assumes $100 was invested on December 31,
1992, in the Company's common stock and in each of the foregoing indices, and
assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Blessings Corp., AMEX & Plastics Peer Group
Fiscal Year Ending December 31, 1997
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
Blessings Corporation 100 135 164 123 115 182
American Exchange Market 100 120 109 137 146 171
Plastics Peer Group 100 106 110 134 156 187
</TABLE>
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General Principles:
The guiding principle of the Executive Compensation Program of the Company
as supervised by the Compensation Committee (the Committee) of the Board of
Directors is to provide incentive to senior managers which will align their
financial interests closely with those of shareholders.
Following this overriding principle, the compensation program:
-- Seeks to provide competitive annual compensation consistent with the
attainment of established return on asset and growth in earnings
performance objectives to create a results oriented environment;
-- Provides longer-term incentive for the appreciation of shareholder value
by offering equity ownership in the Company through the stock award
component of the 1993 Incentive Plan, through stock option awards from
the 1997 Long-Term Plan and through the Executive Stock Loan Purchase
Program which encourages key employees to purchase Blessings common
stock.
-- Attracts and retains key executives critical to the long-term success of
the Company.
Key Elements:
-- A basic element of the Executive Compensation Program is to set
compensation target levels around the fiftieth percentile of industry
practices for comparable companies.
-- Salary increases for the five highest paid executives are determined
through evaluation of performance and individual position within
established salary grade and compensation range criteria as established
by the Committee based upon competitive market analysis provided by a
nationally recognized independent compensation consultant. During 1997,
the Committee engaged its independent consultant to reevaluate the most
senior management positions to ensure that appropriately competitive
compensation levels are maintained. These studies concluded that, of the
positions evaluated, all were essentially commensurate with competitive
positions. The recommendations contained in the studies were adopted by
the Committee, and have provided the basis for compensation decisions
throughout the ensuing year.
-- On May 18, 1993, shareholders approved the 1993 Incentive Plan for Key
Employees (the "1993 Incentive Plan"). The 1993 Incentive Plan adopted an
incentive compensation formula based upon a Return-On-Assets (ROA)
measure of performance under which actual three-year weighted return on
assets performance is measured against a pre-determined return on asset
target for the Edison Plastics(R) Division or for Blessings Corporation
as appropriate for each individual executive. Eligible executives can
earn bonus cash compensation up to a maximum of 50% of annual salary by
achieving the pre-determined ROA target. Performance below the
pre-determined ROA target results in less cash bonus and performance in
excess thereof is compensated for in shares of Blessings' common stock at
a market price representing the average price during the three last
trading days of the particular fiscal year. Such incentive stock is held
in Treasury by the Company pending satisfaction of a three-year vesting
requirement by each award recipient. In the case of the President & CEO
and the EVP & CFO, a secondary measure, growth in annual profit, is also
applied as a modifier to awards earned under the basic formula. Under
this performance modifier, growth in annual profit contribution of 0% or
less results in a 10% reduction in the award earned. Profit contribution
growth of between 0% and 8% results in no modification of the calculated
award; growth of more than 8% in annual profit contribution results in a
10% addition to the award otherwise earned. In each of the fiscal years
1995 and 1996, application of the performance modifier reduced, and in
1997 increased, the awards otherwise earned by Dr. Miller and Mr. Luke by
10%.
12
<PAGE>
-- In 1995, the Committee authorized the introduction of a discretionary
component to the 1993 Incentive Plan formula. This modification provides
for a 25% increase or decrease of individual cash bonuses at the
discretion of the President & CEO (with the exception of his own which is
determined by the Committee), subject to the approval of the Committee
and to the limitation that the net amount of all such discretionary
increases or decreases will not exceed the total cash award for all
participants if calculated solely in accordance with the return on assets
formula.
-- On May 20, 1997, shareholders approved the 1997 Long-Term Incentive Plan
(1997 Long-Term Plan) which provides for the award of common stock
options to senior executives, non-employee directors, and other key
employees of the Company designated by senior management and approved by
the Committee. The 1997 Long-Term Plan is designed to recognize and
reward key employee and director performance, to enhance the interest of
key employees and directors in Blessings' long-term success by providing
them a proprietary interest in Blessings and to enable Blessings to
maintain a competitive position in attracting and retaining superior key
personnel necessary for the success and development of the Company. The
Company has never repriced stock options. In 1997, 60,000 option shares
were granted under the 1997 Long-Term Plan.
Other:
-- Regarding the Committees' 1993 agreement with Dr. Miller for compensation
forfeited upon leaving his former employer (1993 Key Employee Restricted
Stock Plan), Dr. Miller was issued 25,094* shares, of which 11,050 shares
vested on November 15, 1994, 7,938 shares vested on November 15, 1995,
4,488 shares vested on November 15, 1996 and 1,618 shares vested on
November 15, 1997.
* After effect of 2 for 1 stock split paid 12/15/94.
-- The Company has an agreement with Mr. Luke which provides that in the
event of a change in control of the Company (as defined in the
agreements) and upon termination of the key executive's employment with
the Company for any reason other than cause, death or disability, the
executive shall have the right to receive as severance pay an amount
equal to the present value of the total amounts of salary and benefits
payable to the earlier of the date of his sixty-fifth birthday or three
years from the date of termination.
-- The Company has an agreement with Dr. Miller which provides that in the
event of a Change of Control (as defined by the agreement) the Company
will pay to Dr. Miller an amount equal to the present value of the total
amounts of money that would have been paid to him during the period
beginning on the date of the Change of Control and ending on a date two
(2) years subsequent to the Change of Control. In addition, Dr. Miller
will receive $100,000 for each $1.00 the stock of the Company sells for
in excess of $12.50 per share. In no event will the total of the present
value of the above payments exceed 2.99 times the base amount of
compensation as defined by the agreement.
-- The Company has an agreement with Mr. John W. McMackin which provides
that, in the event of a Change of Control in the Company, Mr. McMackin
will be entitled to receive the lesser of the sum of $500,000 or an
amount not to exceed 2.99 times his average annual compensation for the
two (2) Fiscal Years of the Company preceding the Fiscal Year in which
the Change of Control occurs.
CEO Compensation:
The parameters used in determining the salary and total compensation of
the Chief Executive Officer were established in accordance with the results of
an extensive analysis of competitive compensation undertaken by independent
compensation consultants engaged by the Committee. These studies, established
salary grade and incentive ranges for the CEO and other senior corporate
officers, based upon published competitive survey data from numerous sources to
establish a market match for companies with similar characteristics (e.g.,
freestanding, public manufacturing corporations with annual sales of
approximately $200 million).
13
<PAGE>
The CEO's current compensation level is in the middle of the range of
competitive industry analysis and, based on future performance and contribution
to the attainment of the goals established by the Board of Directors, he will
have the opportunity to advance to the highest level of the competitive range.
The CEO's salary increase in fiscal year 1997 was based on the Committee's
evaluation of his performance. It is the opinion of the Committee that Dr.
Miller has been instrumental since assuming his CEO responsibilities in May
1994, in initiating programs designed to lead the Company into new market
directions for the enhancement of long term growth and profitability. During
the year the Company entered into a Change of Control agreement with Dr. Miller
(see above). The Board of Directors of the Company considers it essential to
the best interests of the shareholders of the Company to foster the continued
employment of Dr. Miller during a period of assessment of strategic
alternatives to optimize shareholder value. The agreement is intended to ease
the uncertainty and distraction that such an assessment may induce and to
ensure his undivided dedication and efforts without undue concern for his
financial security.
All recommendations of the Committee are submitted to the full Board of
Directors of the Company for approval prior to implementation. There are no
Compensation Committee interlocks. All members of the Committee are
non-employee Directors of the Company.
This report has been provided by the members of the Compensation Committee
of the Board of Directors of Blessings Corporation: Leonard Birnbaum; Joseph J.
Harkins; Robert E. Weber (Chairman); Philip C. Williamson.
THE PRECEDING "STOCK PERFORMANCE CHART" AND "COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION " SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR
INCORPORATED BY REFERENCE IN ANY DOCUMENTS SO FILED.
Item No. 1
----------
Election of Directors
The Bylaws of Blessings provide that the Board of Directors shall not be
less than seven (7) nor more than fifteen (15) members. The board has fixed at
eleven (11) the number of directors to be elected to hold office until the next
annual meeting and until their successors shall be duly elected and qualified.
All of the nominees have been selected by the Nominating Committee. The
Nominating Committee will consider nominees suggested by shareholders for
election at the annual shareholders' meeting. Shareholders desiring to suggest
nominees should advise the Secretary of the Company in writing not less than
fifty (50) days nor more than seventy-five (75) days prior to the meeting date
and include sufficient biographical material to permit an appropriate
evaluation.
All of the nominees are currently members of the Board of Directors, and
all have consented to serve if elected. The appointees named in the
accompanying proxy will vote for the election of the nominees named below
unless authorization to do so is withheld in the proxy. In the event any
nominees should become unavailable for election, which presently is not
anticipated, the persons named in the proxy will vote for the election of such
other person or persons designated by the Board of Directors. The information
presented below is as of February 2, 1998, and is based, in part, on
information furnished by the nominees and, in part, on the records of
Blessings.
14
<PAGE>
<TABLE>
<CAPTION>
Number Of
Shares
Name, Age And Principle Occupation Director Beneficially
For The Last Five Years Since Owned (1)
- --------------------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
Leonard Birnbaum, 79, private investor and former President and Chief
Executive Officer of Peartree Imports, Inc., New York, New York.
Mr. Birnbaum is Chairman of the Long Range Planning Committee
and a member of the Compensation and Audit Committees of the
Board of Directors ....................................................... 1952 79,238
Joseph J. Harkins, 66, Executive Vice President, Retired, The Chase
Manhattan Bank, N.A., New York, New York; a director of Mutual
Fund Group, New York, New York. Mr. Harkins is also a director of
Jefferson Insurance Company, New York, New York and Monticello
Insurance Company, New York, New York. Mr. Harkins is Chairman of
the Audit Committee and a member of the Compensation, Long
Range Planning and Nominating Committees of the Board of
Directors. (2) ........................................................... 1972 12,134
John M. Hogg, 65, President, Chief Executive Officer and a director of
the Sid Richardson Carbon & Gas Co., Fort Worth, Texas; and a
director of Williamson-Dickie Manufacturing Company, Fort Worth,
Texas. Mr. Hogg is a member of Audit, Long Range Planning and
Nominating Committees of the Board of Directors .......................... 1997 3,400
James P. Luke, 55, Executive Vice President, Chief Financial Officer
and Secretary of Blessings Corporation. Mr. Luke joined Blessings in
1975 and has served in a variety of executive positions since that
time. Mr. Luke is a member of the Executive, Long Range Planning
and Investor Relations Committees of the Board of Directors .............. 1988 69,490
John W. McMackin, 67, Shareholder in the law firm of Decker, Jones,
McMackin, McClane, Hall & Bates, Fort Worth, Texas, and a director
of Williamson-Dickie Manufacturing Company, Fort Worth, Texas.
Mr. McMackin is Chairman of the Board of Directors of Blessings
Corporation and Chairman of the Executive Committee of the Board
of Directors.(3) ......................................................... 1977 24,542
Elwood M. Miller, 53, President and Chief Executive Officer of Blessings
Corporation. Dr. Miller joined Blessings in 1993. Prior to that Dr. Miller
was employed by the General Electric Corporation for twenty-one
years in a variety of executive positions. Dr. Miller is a member of the
Executive, Long Range Planning and Investor Relations Committees
of the Board of Directors ................................................ 1993 87,812(4)
Richard C. Patton, 35, President of Woodmont Capital LLC. Mr. Patton
was a former portfolio manager for Fidelity Investments, Boston,
Massachusetts. Mr. Patton attended Harvard Graduate School of
Business Administration 1990 to 1992. Mr. Patton is a member of the
Long Range Planning Committee and Chairman of the Investor
Relations Committee of the Board of Directors ............................ 1994 4,600
Manuel Villarreal G., 44, President and Chief Executive Officer of
Nacional de Envases Plasticos, S.A. De C.V. (NEPSA), Mexico.
Mr. Villarreal joined NEPSA in 1976 and has served in a variety of
executive functions since that time. Sr. Villarreal is a member of the
Executive Committee of the Board of Directors ............................ 1994 396,613(5)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Number Of
Shares
Name, Age And Principle Occupation Director Beneficially
For The Last Five Years Since Owned (1)
- ---------------------------------------------------------------------- ---------- ------------------
<S> <C> <C>
Robert E. Weber, 66, Chairman and Retired Chief Executive Officer of
Osmose Wood Preserving, Inc., Buffalo, New York. Mr. Weber is a
member of the Executive Committee and Chairman of the
Compensation and Organization Development Committees of the
Board of Directors .................................................. 1989 12,000
J. Donovan Williamson, 61, Consultant to and Director of
Williamson-Dickie Manufacturing Company, Fort Worth, Texas; Vice
President and a Director of Williamson Industries, Ltd.; President of
JDW, Inc., an investment company, Fort Worth, Texas. Mr. Williamson
is Vice Chairman of the Executive Committee and Chairman of the
Nominating Committee of the Board of Directors ...................... 1973 5,501,628(6)
Philip C. Williamson, 35, Chairman, President, Chief Executive Officer
and a director of Williamson-Dickie Manufacturing Company, Fort
Worth, Texas. Mr. Williamson is a member of the Executive, Long
Range Planning, Compensation and Organization Development
Committees of the Board of Directors (7) ............................ 1990 5,501,596(6)
</TABLE>
- ------------------
(1) Amounts shown include shares subject to options that are exercisable within
sixty days for the named directors as follows: Mr. Leonard Birnbaum,
1,500; Mr. Joseph Harkins, 1,500; Mr. John Hogg, 500; Mr. James Luke,
25,400; Mr. John McMackin, 1,500; Dr. Elwood Miller, 37,000; Mr. Richard
Patton, 1,500; Mr. Robert Weber, 1,500; Mr. J.D. Williamson, 1,500; Mr.
Phillip Williamson, 1,500.
(2) Mr. Joseph J. Harkins was formerly an Executive Vice President of The Chase
Manhattan Bank, N.A. Mr. Harkins retired from his position as Executive
Vice President effective January 31, 1990. On August 18, 1994, the Chase
Manhattan Bank participated to the extent of $13,000,000 in the Term Loan
Agreement in the amount of $25,000,000 undertaken to finance the Company's
investment in its Mexican subsidiary, NEPSA.
(3) Mr. John W. McMackin is a shareholder in the law firm of Decker, Jones,
McMackin, McClane, Hall & Bates of Fort Worth, Texas. The law firm of
Decker, Jones, McMackin, McClane, Hall & Bates provides professional
services in the ordinary course of business to Williamson-Dickie
Manufacturing Company and its principals.
(4) Reporting person disclaims beneficial ownership of 800 shares held as
custodian for a child and for two grandchildren.
(5) Reporting person disclaims beneficial ownership of 276,000 of the shares
held by father and brother.
(6) The Williamson-Dickie Manufacturing Company owns 5,496,096 shares (54.3%)
of Blessings' common stock outstanding. Mr. J. Donovan Williamson owns
4,032 shares and Mr. Philip C. Williamson owns 4,000 shares of Blessings'
common stock in addition to the Blessings shares owned beneficially
through their interest in the Williamson-Dickie Manufacturing Company.
Thus, beneficially, Mr. J. Donovan Williamson owns 5,500,128 shares
(54.3%) and Mr. Philip C. Williamson owns 5,500,096 shares (54.3%) of the
outstanding common stock of Blessings.
(7) Mr. Philip C. Williamson is the nephew of Mr. J. Donovan Williamson.
The shares represented by the proxy cards returned will be VOTED FOR the
election of these nominees unless instructions to the contrary are indicated on
the proxy cards.
16
<PAGE>
Selection of Auditors
The Board of Directors, in accordance with the recommendation of its Audit
Committee, the members of which are not employees of the Company, has appointed
Deloitte & Touche LLP, independent certified public accountants, as the
auditors of the Company for the fiscal year ended December 31, 1997, and is
planning to reappoint the firm for the 1998 fiscal year. The Company has also
engaged the firm of Galaz, Gomez Morfin, Chavero, Yamazaki of the international
accounting firm Deloitte Touche Tohmatsu International as the auditors of its
NEPSA subsidiary for the fiscal year ended December 31, 1997, and intends to
reappoint the firm for the 1998 fiscal year. Deloitte & Touche LLP, a
nationally-known firm of independent certified public accountants, has audited
Blessings' financial statements for more than twenty-seven years. Blessings has
been advised by Deloitte & Touche LLP that neither that firm nor any of its
associates has any relationship with Blessings or any affiliate of Blessings
other than the usual relationship that exists between independent certified
public accountants and client. If Deloitte & Touche LLP should decline to act
or otherwise become incapable of acting or if their appointment is otherwise
discontinued, the Board will appoint other independent accountants. Deloitte &
Touche LLP will have representatives at the shareholders' meeting who will have
an opportunity to make a statement and will be available to respond to
appropriate questions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's common stock to file with the Securities and Exchange
Commission and the American Stock Exchange initial reports of ownership and
reports of changes in their ownership in the Company's common stock. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such reports furnished to the
Company and written representations that no Forms 5 were required, the Company
believes that, during the last fiscal year, all Reporting Persons complied on a
timely basis with all filing requirements applicable to them with respect to
transactions during fiscal 1997, except that Mr. Richard Patton filed a Form 4
late with regard to the purchase of 1,000 shares in May 1997. Upon discovery of
this oversight the transaction was correctly reported.
Submission of Shareholder Proposals
for The 1999 Annual Meeting of Shareholders
Any shareholder proposal submitted for inclusion in the proxy statement
and form of proxy for the 1999 Annual Meeting of Shareholders must be received
at Blessings' principal executive offices in Newport News, Virginia, on or
before December 11, 1998.
17
<PAGE>
Other Matters That May Come Before The Meeting
The management of the corporation knows of no matters to be brought before
the meeting other than as stated in the Notice of Meeting. However, if any
other matters properly come before the meeting, it is the intention of
Blessings that proxies received in response to this solicitation will be voted
on such matters in accordance with the best judgment of the person or persons
named on the accompanying form.
A copy of the annual report for the fiscal year ended December 31, 1997,
is being mailed to shareholders with the proxy statement. The annual report is
not to be regarded as a proxy-soliciting material or a communication by means
of which any solicitation is to be made.
By Order of The Board of Directors
JAMES P. LUKE
Chief Financial Officer,
Secretary
Newport News, Virginia
April 9, 1998
18
BLESSINGS CORPORATION
200 Enterprise Drive
Newport News, VA 23603
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders-May 19, 1998
Revoking any prior appointments, the undersigned hereby appoints James
P. Luke, John W. McMackin and Elwood M. Miller and each of them as
Proxies with full power of substitution, and hereby authorizes them to
represent and to vote as designated herein all the shares of the common
stock of Blessings Corporation held of record by the undersigned on
April 3, 1998 at the Annual Meeting of Shareholders to be held at The
Williamsburg Marriott, 50 Kingsmill Road, Auditorium, Williamsburg,
Virginia on Tuesday, May 19, 1998 at 10:00 A.M. (E.D.S.T.).
(Continued on Other Side)
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The Board of Directors recommends a vote FOR the nominees listed in Item No. 1 Please mark
your votes as
indicated in [ X ]
this example
Item No. 1. ELECTION OF DIRECTORS NOMINEES: L. Birnbaum, J.J. Harkins,
J.M. Hogg, J.P. Luke, J.W. McMackin,
E.M. Miller, R.C. Patton, M. Villarreal
G., R.E. Weber, J.D. Williamson and P.C.
Williamson.
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to the to vote for all nominees __________________________________________________________
contrary) listed to the right
INSTRUCTION: To withhold authority to vote for any
[ ] [ ] individual nominee, write that nominee's name in the
space provided above.
Item No. 2. In their discretion, the Proxies are authorized to vote upon such THIS PROXY WHEN PROPERLY EXECUTED WILL BE
other business as may properly come before the meeting. VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
Please Mark, Sign, Date and Return the Proxy
Card Promptly Using the Enclosed Envelope.
Please sign name exactly as it appears. If
joint tenants, both should sign. Give full
title if signing as attorney, executor,
administrator, trustee or guardian. If a
corporation, sign full corporate name by
authorized officer. If a partnership, sign
partnership name by authorized person.
__________________________________________
__________________________________________
Signature of Shareholder(s)
Date _______________________________, 1998
</TABLE>
FOLD AND DETACH HERE
