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CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE QUARTER AND YEAR ENDED MARCH 31, 2012

CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE QUARTER AND YEAR ENDED MARCH 31, 2012


 

CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the quarter and year ended March 31, 2012.  During the second quarter of fiscal 2012, the Company sold its Cleo Christmas gift wrap business and is reporting the results of that business as discontinued operations.

 

Sales for the fourth quarter of fiscal 2012 decreased 2.5% to $61,129,000 from $62,677,000 in the fourth quarter of fiscal 2011, primarily driven by lower sales of Easter products. Loss from continuing operations before income taxes for the fourth quarter of fiscal 2012 was ($4,432,000) compared to ($3,988,000) in the fourth quarter of fiscal 2011.  In fiscal year 2012, the Company began to charge incentive compensation expense to the periods in which profits are generated.  Due to this change, pre-tax incentive compensation expense for the fourth quarter of fiscal 2012 was $580,000 lower than the fourth quarter of fiscal 2011.  Loss from continuing operations for the fourth quarter of fiscal 2012 was ($2,747,000), or ($0.28) per diluted share, versus ($2,498,000), or ($0.26) per diluted share, in the fourth quarter of the prior fiscal year.  Net loss for the fourth quarter of fiscal 2012 was ($3,224,000), or ($0.33) per diluted share, versus ($9,972,000), or ($1.03) per diluted share, in the fourth quarter of fiscal 2011.

 

Sales for fiscal year 2012 increased slightly to $384,663,000 from $383,660,000 in fiscal year 2011, with this increase primarily due to higher sales of all occasion products which was partially offset by lower sales of Christmas cards.  Income from continuing operations before income taxes for fiscal year 2012 was $25,245,000, which was 5.9% lower than $26,841,000 in the prior year largely due to lower sales of Christmas cards.  Income from continuing operations for fiscal year 2012 was $16,229,000, or $1.67 per diluted share, versus $17,194,000, or $1.77 per diluted share, for fiscal year 2011.  Net income for fiscal year 2012 was $15,670,000, or $1.61 per diluted share, versus $5,611,000, or $0.58 per diluted share, for fiscal year 2011.  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.  The Company exited the Memphis facility in December 2011.  The Company incurred pre-tax expenses of $8,141,000 associated with the approved plan during full year fiscal 2012, which costs primarily related to cash expenditures for facility and staff costs (approximately $6,157,000) and non-cash asset write-downs (approximately $1,984,000).  In our financial statements for full year fiscal 2012, $706,000 was recorded in continuing operations and the balance within discontinued operations (approximately $7,435,000).

 

As previously announced in September 2011, the Company entered into an agreement for the sale of the Christmas gift wrap business and certain Cleo assets to Impact Innovations, Inc. ("Impact"). Under this agreement, Impact acquired the Christmas gift wrap portion of Cleo's business and certain of Cleo's assets relating to such business, including certain equipment, contract rights, customer lists, intellectual property and other intangible assets. Cleo's remaining assets, including accounts receivable and inventory were excluded from the sale. Under this agreement, Cleo retained the right and obligation to fulfill all customer orders for Cleo Christmas gift wrap products for Christmas 2011. The purchase price was $7,500,000, of which $2,000,000 was paid to Cleo in cash at closing. The remainder of the purchase price was paid through the issuance by Impact of an unsecured subordinated promissory note, which provides for quarterly payments of interest at 7% and principal payments as follows: $500,000 on March 1, 2012; $2,500,000 on March 1, 2013; and all remaining principal and interest on March 1, 2014. The principal payment due March 1, 2012 was paid timely by Impact.  This transaction resulted in a pre-tax gain to the Company of $5,849,000, which is included in loss from discontinued operations.  During the fourth quarter of fiscal 2011, the Company recorded a noncash impairment charge of $11,051,000 as it determined that the fair value of the Cleo asset group was less than the carrying value.

 

As a result of the sale of its Cleo Christmas gift wrap business, the Company has reported Cleo operations, including the operating results of the business and all exit activities, as discontinued operations, as shown in the following table (amounts in thousands):

 

 

 Discontinued Operations   Fiscal Year 2012 
   First   Second   Third   Fourth   
   Quarter   Quarter   Quarter   Quarter   Full Year 
 Operating results   $         (799)  $      1,643  $         708  $        (767)  $              785
 Exit costs           (5,540)            (364)         (2,450)               94              (8,260)
 Exit costs - equipment sale                  -               825                -                  -                    825
 Gain on sale of business to Impact                  -            5,849                -                  -                 5,849
 Discontinued operations, before income taxes   $      (6,339)  $      7,953  $     (1,742)  $        (673)  $             (801)
 Income tax (benefit) expense            (2,217)          2,782            (611)            (196)                 (242)
 Discontinued operations, net of taxes   $      (4,122)  $      5,171  $     (1,131)  $        (477)  $             (559)
           
           
 Discontinued Operations   Fiscal Year 2011 
   First   Second   Third   Fourth   
   Quarter   Quarter   Quarter   Quarter   Full Year 
 Operating results, before income taxes   $         (624)  $     (3,163)  $     (2,525)  $   (11,778)  $        (18,090)
 Income tax (benefit)              (218)         (1,104)            (881)         (4,304)              (6,507)
 Discontinued operations, net of taxes   $         (406)  $     (2,059)  $     (1,644)  $     (7,474)  $        (11,583)

 

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. 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, 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 and years ended March 31, 2012 and 2011 and condensed consolidated balance sheets as of March 31, 2012 and 2011 follow:
 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

Three Months Ended

 

Twelve Months Ended

 

March 31,

 

 

 

March 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

Sales

$ 61,129

 

$ 62,677

 

$384,663

 

$ 383,660

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

Cost of sales

45,455

 

45,334

 

273,213

 

269,082

Selling, general and administrative expenses

20,165

 

21,039

 

85,698

 

86,511

Interest expense, net

(32)

 

330

 

195

 

1,348

Other (income) expense, net

(27)

 

(38)

 

312

 

(122)

 

65,561

 

66,665

 

359,418

 

356,819

 

 

 

 

 

 

 

 

(Loss) income from continuing operations before income taxes

(4,432)

 

(3,988)

 

25,245

 

26,841

 

 

 

 

 

 

 

 

Income tax (benefit) expense

(1,685)

 

(1,490)

 

9,016

 

9,647

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

(2,747)

 

(2,498)

 

16,229

 

17,194

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax

(477)

 

(7,474)

 

(559)

 

(11,583)

 

 

 

 

 

 

 

 

Net (loss) income

$ (3,224)

 

$ (9,972)

 

$ 15,670

 

$ 5,611

 

 

 

 

 

 

 

 

Net (loss) income per common share

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

Continuing operations

$ (0.28)

 

$ (0.26)

 

$ 1.67

 

$ 1.77

Discontinued operations

$ (0.05)

 

$ (0.77)

 

$ (0.06)

 

$ (1.19)

Total

$ (0.33)

 

$ (1.03)

 

$ 1.61

 

$ 0.58

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

Continuing operations

$ (0.28)

 

$ (0.26)

 

$ 1.67

 

$ 1.77

Discontinued operations

$ (0.05)

 

$ (0.77)

 

$ (0.06)

 

$ (1.19)

Total

$ (0.33)

 

$ (1.03)

 

$ 1.61

 

$ 0.58

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

9,711

 

9,703

 

9,728

 

9,703

Diluted

9,711

 

9,703

 

9,732

 

9,715

 

 

 

 

 

 

 

 

Cash dividends per share of common stock

$ 0.15

 

$ 0.15

 

$ 0.60

 

$ 0.60  

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

 

March 31,

 

March 31,

 

 

 

2012

 

2011

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

 

$ 66,135

 

$ 48,577

Accounts receivable, net

 

 

45,026

 

42,411

Inventories

 

 

71,671

 

69,093

Deferred income taxes

 

 

3,595

 

4,051

Other current assets

 

 

15,441

 

13,268

Current assets of discontinued operations

 

 

183

 

14,914

 

 

 

 

 

 

Total current assets

 

 

202,051

 

192,314

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

 

29,582

 

32,345

 

 

 

 

 

 

DEFERRED INCOME TAXES

 

 

1,184

 

8,854

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

Goodwill

 

 

17,233

 

17,233

Intangible assets, net

 

 

29,689

 

31,408

Other

 

 

6,825

 

4,769

 

 

 

 

 

 

Total other assets

 

 

53,747

 

53,410

 

 

 

 

 

 

Total assets

 

 

$ 286,564

 

$ 286,923

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Short-term debt

 

 

$ -

 

$ -

Current portion of long-term debt

 

 

-

 

66

Accrued customer programs

 

 

3,298

 

4,279

Other current liabilities

 

 

33,069

 

38,245

Current liabilities of discontinued operations

 

 

2,390

 

3,910

 

 

 

 

 

 

Total current liabilities

 

 

38,757

 

46,500

 

 

 

 

 

 

LONG-TERM OBLIGATIONS

 

 

4,604

 

4,764

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

243,203

 

235,659

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

 

$ 286,564

 

$ 286,923  

 


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