CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2011


CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the quarter ended June 30, 2011. Sales for the first quarter of fiscal 2012 increased 3% to $55,040,000 from $53,288,000 in the first quarter of fiscal 2011. The net loss for the first quarter of fiscal 2012 was $7,569,000, or $0.78 per share, versus a net loss of $5,737,000, or $0.59 per share, in the first quarter of prior fiscal year. The Company's highly seasonal orientation has historically resulted in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

As previously announced, the Company, as part of a continuing review of its Cleo gift wrap business, approved a plan to close its manufacturing facility located in Memphis, Tennessee, with an exit to be completed by no later than December 31, 2011. As part of such closing, the Company plans to transition the sourcing of all gift wrap products to foreign suppliers. During the first quarter of fiscal 2012, the Company incurred pre-tax expenses of $5,540,000 ($2,498,000 of which is included in cost of sales) associated with the approved plan, which primarily related to staff reduction costs, which are expected to result in cash expenditures during the second and third quarters of fiscal 2012, and non cash charges to write down inventory to net realizable value. The foregoing charge was partially offset by a $1,993,000 tax benefit. The impact of the charge, net of the associated tax benefit, in the first quarter of fiscal 2012 was $0.36 per share. Excluding the charge, net of tax benefit, in the first quarter of fiscal 2012, net loss would have been $4,022,000, $0.41 per share versus the net loss of $5,737,000, $0.59 per share in the first quarter of fiscal 2011. During our fiscal year ending March 31, 2012, we expect to incur pre-tax expenses of up to $10,300,000 (inclusive of the $5,540,000 expensed in the first quarter) associated with the approved plan, which costs primarily relate to cash expenditures for facility and staff costs (approximately $7,100,000) and non-cash asset write-downs (approximately $3,200,000). Additionally, the Company expects to incur $1,300,000 in cash spending during fiscal 2012 relating to this plan which was expensed previously.

Additionally, during the first quarter of fiscal 2012, the Company began to charge incentive compensation expense to the periods in which profits are generated. There was no pre-tax incentive compensation expense in the first quarter of fiscal 2012 as compared to $1,473,000 in the first quarter of fiscal 2011.

First Quarter Results

Sales grew 3% in the first quarter of fiscal 2012 as compared to the same period last year, primarily driven by higher sales of all occasion products, partially offset by lower Halloween sales. The net loss for the first quarter of fiscal 2012 was reduced by the impact of the sales growth compared to the prior year first quarter and by lower selling, general and administrative expenses due largely to the reduced incentive compensation expense noted above, which was offset by the restructuring charge related to the Company's previously announced Memphis, Tennessee facility closure.

CSS is a consumer products company primarily engaged in the design, manufacture, procurement, distribution and sale of seasonal and all occasion social expression products, principally to mass market retailers. These seasonal and all occasion products include decorative ribbons and bows, boxed greeting cards, gift tags, gift wrap, gift bags, gift boxes, gift card holders, decorative tissue paper, decorations, classroom exchange Valentines, floral accessories, Halloween masks, costumes, make-up and novelties, Easter egg dyes and novelties, craft and educational products, stickers, memory books, stationery, journals, note cards, infant and wedding photo albums, scrapbooks, and other gift items that commemorate life's celebrations.

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including, among others, statements reflecting the amount of cash expenditures and non-cash expenses the Company expects to incur in fiscal 2012 in connection with its plan to close the Memphis manufacturing facility; the Company's plan to transition the sourcing of gift wrap to foreign suppliers and the Company's expectation that it will exit the Memphis facility by no later than December 31, 2011. Forward-looking statements are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management as to future events and financial performance with respect to the Company's operations. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they were made. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including without limitation, risks associated with the Company's restructuring plan to close its Memphis manufacturing facility, including the risk that the cost of implementing the plan will exceed expectations, the risk that the expected benefits of the plan will not be realized and the risk that implementation of the plan will interfere with and aversely affect the Company's operations, sales and financial performance; general market and economic conditions; increased competition (including competition from foreign products which may be imported at less than fair value and from foreign products which may benefit from foreign governmental subsidies); increased operating costs, including labor-related and energy costs and costs relating to the imposition or retrospective application of duties on imported products; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration costs and the risk that the Company may not be able to integrate and derive the expected benefits from such acquisitions; the risk that customers may become insolvent, may delay payments or may impose deductions or penalties on amounts owed to the Company; costs of compliance with governmental regulations and government investigations; liability associated with non-compliance with governmental regulations, including regulations pertaining to the environment, Federal and state employment laws, and import and export controls and customs laws; and other factors described more fully in the Company's annual report on Form 10-K for the fiscal year ended March 31, 2011 and elsewhere in the Company's filings with the Securities and Exchange Commission. As a result of these factors, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

CSS' consolidated results of operations for the three months ended June 30, 2011 and 2010 and condensed consolidated balance sheets as of June 30, 2011, March 31, 2011 and June 30, 2010 follow:

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS

(Unaudited)


(In thousands, except per share data)
  Three Months Ended
  June 30,
 
  2011

2010

 
SALES $55,040 $53,288
 
COSTS AND EXPENSES  
Cost of sales 43,286 39,555
Selling, general and administrative expenses 20,450 22,352
Restructuring expenses 3,060 41
Interest expense, net 43 209
Other expense, net 24 68
 
  66,863 62,225
 
LOSS BEFORE INCOME TAXES (11,823) (8,937)
 
INCOME TAX BENEFIT (4,254) (3,200)
 
NET LOSS $(7,569) $(5,737)
 
BASIC AND DILUTED NET LOSS PER COMMON SHARE $(.78) $(.59)
 
WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING 9,735 9,683


 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
  June 30, March 31, Jun 30,
  2011

2011

2010

  (Unaudited) (Unaudited) (Unaudited)
ASSETS      
 
CURRENT ASSETS      
Cash and cash equivalents $ 4,426 $ 50,407 $ 2,811
Accounts receivable, net 46,612 42,615 47,807
Inventories 107,953 80,767 118,291
Deferred income taxes 3,787 4,051 6,153
Other current assets 21,635 14,474 20,437
 
Total current assets 184,413 192,314 195,499
 
PROPERTY, PLANT AND EQUIPMENT, NET 31,577 32,345 48,686
 
DEFERRED INCOME TAXES 8,575 8,854 5,184
 
OTHER ASSETS      
Goodwill 17,233 17,233 17,233
Intangible assets, net 30,980 31,408 32,839
Other 4,641 4,769 3,945
 
Total other assets 52,854 53,410 54,017
 
Total assets $277,419 $286,923 $303,386
 
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES      
Notes payable $ - $ - $ 13,000
Current portion of long-term debt - 66 384
Accrued customer programs 4,409 4,726 6,939
Other current liabilities 40,195 40,626 49,101
 
Total current liabilities 44,604 45,418 69,424
 
LONG-TERM OBLIGATIONS 5,790 5,846 7,341
 
STOCKHOLDERS' EQUITY 227,025 235,659 226,621
 
Total liabilities and stockholders' equity $277,419 $286,923 $303,386

 



 

CSS Industries, Inc.
Reconciliation of Certain Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
 
Reconciliation and computation of loss before income taxes, net loss and diluted loss per share:
  Quarter Ended June 30, 2011
  Loss Before Income Taxes Net Loss Diluted Loss Per Share
 
As reported $(11,823) $(7,569) $(.78)
Restructuring charge related to facility closure:      
Included in cost of sales 2,498 1,599 .16
Included in restructuring expensess 3,042 1,948 .20
Non-GAAP measurement $(6,283) $(4,022) $ (.41)

 

Diluted loss per share does not foot due to rounding.

Management believes that presentation of results of operations adjusted for the affects of the restructuring charge related to the planned closure of the Company's manufacturing facility located in Memphis, Tennessee provides useful information to investors with respect to the Company's operating results for the first quarter of fiscal 2012 because it enhances comparability between the reporting periods.


FOR FURTHER INFORMATION CONTACT:
Vincent A. Paccapaniccia
Chief Financial Officer
(215) 569-9900