Blessings Corp. - Company Profile, Information, Business Description, History, Background Information on Blessings Corp.

200 Enterprise Drive
Newport News, Virginia 23603

History of Blessings Corp.

Blessings Corp. produces plastics film products for health care, agricultural, and industrial applications. These include materials used by makers of disposal baby diapers and feminine hygiene products. Kimberley-Clark Corp. alone accounted for nearly 45 percent of Blessings' total sales in 1996.

Private Company Until 1962

General Diaper Service, the precursor of Blessings, was founded in 1932 by Morris A. Bonoff. Bonoff, whose father owned a laundry service, needed some way to support his family in the depths of the Depression and asked himself what he might do that no one else wanted to do and that someone might pay for. Picking up dirty diapers, washing them, and returning them to the customer was the answer for someone already steeped in the laundry trade. Shortly afterward, Bonoff launched Baby Talk, said to be the first baby magazine in the United States. The business was incorporated in Delaware in 1944 as Associated Baby Services, Inc. by a group of diaper-service operators led by Bonoff. The company began manufacturing disposable products in 1954. Net sales rose from $8.3 million in fiscal 1957 to $9.9 million in fiscal 1960 and 1961; net income increased from $132,014 in 1957 to $189,222 in 1961.

In 1962, when Associated Baby Services first offered shares of common stock to the public, the company and its subsidiaries operated diaper, laundry, dry-cleaning, and linen-supply services, publishing Baby Talk, and making disposable-diaper products. The diaper service ran out of 10 plants in 10 states. Laundry and linen-rental service divisions serviced the metropolitan areas of New Orleans and Houston, providing sheets, pillow cases, towels, table linens, uniforms, and other textile items to commercial and industrial establishments. The company operated 337 vehicles and was leasing a plant in Bound Brook, New Jersey, for the production of disposable items such as diapers and underpads for hospitals and nursing homes. These were constructed as a three-ply sandwich of plastics-film backing, absorbent material, and nonwoven facing. Corporate headquarters was in New York City. Bonoff served as both president and chairman.

The Pampers Challenge, 1966-1972

By 1965, when it had a circulation of more than 800,000, Baby Talk, was the leading monthly publication in the United States edited specifically for expectant mothers and was said to be making a handsome profit. Company sales reached $14.4 million in fiscal 1965 and net income $646,000. However, the business--and 400 others in the United States--faced devastation with the introduction in 1966 of Pampers disposable paper diapers by Procter & Gamble and, subsequently, similar products by competitors such as Kimberley-Clark and Scott Paper Co., at a cost of only about 10 percent more than (cotton) cloth diapers.

As the nation's largest diaper service by 1969, Associated Baby Services had the most to lose by a stampede to paper products. By then the company was operating 21 local services in 25 metropolitan areas of 11 states, handling 6 million diapers weekly. Of its net sales of nearly $27 million and pretax profits of $2.6 million in fiscal 1970 (the year ended April 25, 1970), diaper services accounted for 58 percent and 79 percent, respectively. Nevertheless, Associated Baby Services expressed confidence that its cloth-diaper business would continue to grow because so many mothers were switching from hand washing. Moreover, disposable diapers posed a pollution threat to communities with sewage problems and were thought to contribute more than cloth to baby rash. During 1969 and 1970 the company acquired local diaper services routes throughout the country as owners of such routes retired or decided to sell out.

Associated Baby Services was not neglecting its other businesses, however. The linen and laundry services in New Orleans and Houston accounted for 18 percent of 1970 sales, with the former showing impressive growth. Disposable products (including disposal diapers), was the fastest-growing sector of the company, accounting for 17 percent of 1970 sales. These products, made at three company plants, included materials for hospitals and other health-care facilities, plastic film to produce waterproof backing on disposable products, as well as packaging and wrapping material, and disposable head-rest covers and paper slippers for the transportation market. Baby Talk contributed about 5 percent to total company revenues. Associated Baby Services' disposable diapers (sold by its deliverymen), bed pads, surgical gowns, pillowcases, and similar items were being sold under the trade name "Blessings." In 1972 the company changed its name to Blessings.

As part of its effort to diversify, Associated Baby Services acquired Preferred Dental & Supply Co., a mail-order firm, in 1970. By late 1973 Blessings had added to its activities the development and assembly of high-precision automatic machinery for sewing paper and fabrics, both for its own use and for customers. A subsidiary, Acme Automatic Disposables Co., and a division, Automatic Thread Control Co., were moved to Bound Brook from New York City that year. A new plant for the Edison Plastics Co. subsidiary in South Plainfield, New Jersey, was brought into production in September 1972.

Deemphasizing Baby Diapers, 1975-1984

In spite of its growing scope of activities, Blessings' net income dwindled to $1.4 million in fiscal 1973 and $1.1 million in fiscal 1974. The following year the company incurred a loss of $4.4 million after taking a charge of $5.2 million to write off to goodwill "certain activities which had not attained their assigned earnings quota," according to a company spokesperson. That year David Lewis, a paper-company executive, was brought in as president, and two years later he succeeded Bonoff as chairman and chief executive officer. Lewis liquidated Preferred Dental & Supply, which was losing $400,000 a year, in 1976. He also decided Baby Talk was overstaffed and fired all but three of its about two dozen employees.

By April 1977 Williamson-Dickie Manufacturing Co. of Fort Worth, Texas, owned almost 30 percent of Blessings' common stock. That year this company&mdash′imarily a maker of work clothes--raised its stake in Blessings to 58 percent by offering other shareholders $3 in cash and a $9 subordinated sinking-fund debenture, due in 1992 and bearing 10 percent annual interest, for each share of stock. Blessings remained a separate company, however, and its stock continued to be traded on the American Stock Exchange. It moved its headquarters from New York City to Piscataway, New Jersey, in 1978.

Blessings opened a factory in Washington, Georgia, for its plastic films division, expanding it in 1980 and again in 1983.

The company sold its New Orleans and Houston linen services in 1979 for $4.7 million. In 1980 it still processed 6 million baby diapers a week in 24 plants, using a proprietary 13-step process and employing about 400 trucks for pickup and delivery. It also processed thousands of adult "Geri-Pads" for incontinent patients in nursing homes. The Edison Plastics Co. subsidiary manufactured thin-gauge plastic films for industry and agriculture. Founded in 1978, the GeriCare Division was manufacturing cotton adult and baby diapers for use by its own units and for sale to others. Baby Talk continued to be sold to department stores, diaper services, dairies, and firms in the infant market, usually for free distribution to customers and prospects. Net sales rose from $48.2 million in fiscal 1977 to $53.7 million in fiscal 1980.

In 1982 Blessings was still the country's largest diaper service, with 28 percent of the nation's $120-million market. However, although this segment of its business accounted for half of company sales, it contributed only one-third to net income.

Edison Plastics, more profitable, controlled 70 percent of the $8.5-million-a-year market for plastic outer shields for hospital bedpans and more than 80 percent of the $5-million-a-year market for plastic sanitary pads. GeriCare ($9 million in sales), sold its lines to linen-supply and textile companies for use in hospitals and nursing homes.

Lewis, who told a Forbes reporter in 1983 that his company's future was not in baby diapers but "at the other end of the age span," made good on this belief later that year, when he negotiated the sale of this sector of Blessings' business to Sketchley, a British company, for $13 million. The transaction was completed in March 1984. "We were on both sides of the street," James P. Luke, the company's chief financial officer, explained to a Barron's reporter. "We chose to go with disposables."

Primarily Plastic Films, 1985-1994

In 1985 Blessings earned $5.3 million on revenues of $63.6 million. Forty percent of its plastics sales were to disposable-diaper makers, chiefly Kimberley-Clark, maker of the Huggies brand diaper. The Edison Plastics division, which also made plastic liners for surgical instrument holders, sanitary napkins, and other high-quality plastic-sheet products, accounted for about three-quarters of revenues. The publishing subsidiary accounted for 7 percent and Geri-Care for 17 percent.

A plant for the production of polyethylene and polypropylene, built in McAlester, Oklahoma, opened in late 1985. Geri-Care added a factory in Union City, New Jersey, in 1987, and in Medley, Florida, in 1989. The publishing division was sold to Parenting Unlimited, an investment group, in 1987. The following year the company acquired Advanced Compounding, a manufacturer of specialized plastic materials in Cheshire, Connecticut, from RW Technology Inc.

Geri-Care, making reusable cloth diapers that linen services rented to nursing homes, saw its future tied to the growth of the population 75 years or older. Lewis said that in addition to the perhaps 900,000 residents of nursing homes who were incontinent, perhaps another 11 million adults in the United States suffered from the malady but were not institutionalized. In an attempt to reach that market, Blessings introduced a disposable adult diaper bearing the brand name Confidence in 1985, but sales proved catastrophically small.

Lewis stepped down at the end of 1987 and was succeeded as president and chief executive officer by Ivan E. Backer, corporate vice-president and general manager of the Edison Plastics division. The following year Blessings rejected a proposal by Williamson-Dickie to buy the remaining shares in the company at $18.75 a share. Also in 1989, Blessings acquired a Newport News, Virginia, plant manufacturing polypropylene film and sheets from a division of Chicago-based Industrial Coating Group Inc. for about $2.5 million. In 1991 the company completed a new technical and commercial development center adjacent to the plant at a cost of nearly $9 million. A $5 million expansion of the Georgia plant also was completed that year, in which Blessings had net income of $9.6 million on revenues of $111 million.

Blessings Since 1994

In 1994 Blessings sold its Geri-Care Products division for a small after-tax gain. This segment of its business had accounted for 12 percent of its sales but only five percent of its profits in 1993. That year the company shut down its Advanced Compounding division and moved its head offices to Newport News. Also in 1994, Blessings purchased a 60 percent interest in Nacional de Envases Plasticos, S.A. de C.V. (NEPSA), a Mexican-based plastic-films processor and maker and its associated firms, in exchange for 200,000 share of common stock and about $41 million in cash. With three factories in the Mexico City metropolitan area, NEPSA was the leading Mexican manufacturer of extruded, printed, and converted plastic films and also was printing point-of-purchase messages on its products for a variety of packaging and uses.

Blessings was ranked among the top 100 small U.S. companies by Forbes in 1992, with a five-year average return on equity&mdash′ofits divided by net worth--of 17.2 percent. It set new records for revenues and net income every year between 1988 and 1994. The purchase of NEPSA, however, raised Blessings' long-term debt from $8 million to $28 million, and the collapse of the Mexican peso at the end of 1994 took a toll on this subsidiary's earnings.

In 1994 Blessings earned a record $11.9 million on sales of $151 million, but in 1995 the company's net income slid to $5.9 million on revenues of $156 million, and its stock dropped to below $10 a share, compared to a high of about $17 in 1994. Earnings for 1996 were lower again--$5 million on revenues of $158.1 million. Management blamed high raw-material costs, product development, increased competition in the health-care market, and the impact of Mexico's monetary problems on NEPSA. In February 1997 Blessings announced it would suspend its cash dividend in the first quarter of the year and would buy back up to 10 percent of its stock to increase the value, still under $10 a share. The company's long-term debt was $36.4 million in mid-1996.

Principal Subsidiaries: ASPEN Industrial, S.A. de C.V. (Mexico); Edison Exports, Inc. FSC Limited (Jamaica); Edison Plastics International, Inc.; Hermes Industrial, S.A. de C.V. (Mexico, 60%); Mexicana de Tintas, S.A. (Mexico, 60%); Nacional de Envases Plasticos, S.A. de C.V. (Mexico, 60%); Plastihul, S.A. de C.V. (Mexico, 60%); Servicios Profesionales Vigo (Mexico, 60%).

Additional Details

Further Reference

"Blessings Corporation," Stock Market Magazine, November 1973, pp. 13-15.Jones, John Wayne, "Associated Baby Services Is Set to Pin Down Record High Earnings," Barron's, December 21, 1970, pp. 17, 20.Krewatch, Mark, "Blessings Corp. Will Buy Back up to 10 Percent of Its Stock," Knight-Ridder Tribune Business News, February 7, 1997, p. 207B1105.Kuseski, Allen R., "Associated Baby Services," Wall Street Transcript, December 9, 1968, p. 15148.Rohmann, Laura, "Up from the Cradle," Forbes, July 4, 1983, pp. 69, 72.Weiss, Gary, "Formula for Growth," Barron's, September 8, 1986, pp. 15, 24.

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