CSS INDUSTRIES, INC. REPORTS SALES AND EARNINGS FOR THE NINE MONTHS AND QUARTER ENDED DECEMBER 31, 2007


CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the nine months and third quarter ended December 31, 2007. For the nine months ended December 31, 2007, sales decreased by 9% to $441,854,000 from $485,428,000 in 2006 while net income increased 8% to $31,962,000, or $2.88 per diluted share compared to prior year net income of $29,486,000, or $2.71 per diluted share. For the quarter ended December 31, 2007, sales decreased by 16% to $222,170,000 from $264,065,000 in the prior year. Net income for the quarter decreased 2% to $22,854,000, or $2.07 per diluted share, compared to prior year net income of $23,290,000, or $2.13 per diluted share. The Company's highly seasonal orientation results in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

The 9% decrease in sales for the nine months ended December 31, 2007 was primarily due to expected lower sales of Christmas items to warehouse clubs and lower sales of Christmas gift wrap, tissue and gift bags and educational products, partially offset by incremental sales of C.R. Gibson (less than 1% of year to date sales), which was acquired on December 3, 2007. The increase in net income is primarily related to current year savings and the absence of prior year costs associated with a restructuring plan implemented in November 2006. Under this plan, the Company combined the operations of the its Berwick Offray LLC and Cleo Inc subsidiaries, closed a production facility and exited a non-material, non-core business. Improved gross margins in certain Christmas product lines and reduced interest expense also added to the increase in earnings for the year, while reduced sales volume offset a large portion of the earnings improvement.

Sales declined 16% for the quarter ended December 31, 2007, largely as a result of the earlier timing of Christmas shipments in the second quarter compared to a year ago and lower sales of Christmas gift wrap, tissue and gift bags and educational products. The sales declines were partially offset by incremental sales of newly acquired C.R. Gibson (less than 2% of sales in the quarter). The decline in net income was due to reduced sales volume, partially offset by improved gross margins on certain Christmas product lines, lower interest expense and savings and the absence of costs in the prior year quarter associated with the restructuring plan implemented in fiscal 2007.

The Company also announced that its Cleo subsidiary has reached an agreement with the labor union representing approximately 600 production and maintenance employees at Cleo's Memphis, TN facility concerning the provisions of a new collective bargaining agreement to replace the prior agreement, which expired on December 31, 2007. The term of the new labor agreement extends until December 31, 2010.

 

"Despite the sales challenges, including the previously disclosed reduction in warehouse club sales, we are encouraged with the progress we are making in several areas. The combination of Cleo and Berwick Offray has proceeded according to plan, and we are pleased that we have reached an agreement on a new labor contract with Cleo's Memphis-based production and maintenance employees. In addition, the recent acquisition of C.R. Gibson, the restructuring announced on January 4, 2008 related to several Pennsylvania-based facilities and the previously announced systems integration plan, are important steps for the future growth of the Company," said Christopher J. Munyan, President and CEO. "We anticipate that the restructuring plan related to closing our Elysburg, PA and Troy, PA facilities will reduce earnings per diluted share by approximately $.23 for the fourth quarter and full fiscal year. Exclusive of these restructuring costs, we continue to expect earnings to be in line with our previous guidance of $2.45 to $2.60 per diluted share this fiscal year."

CSS is a consumer products company primarily engaged in the design and sale of seasonal and all occasion products, principally to mass market retailers. These products include gift wrap, gift bags, gift boxes, boxed greeting cards, gift tags, decorative tissue paper, decorations, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties, Easter egg dyes and novelties, craft and educational products, memory books, stationery, journals and notecards, infant and wedding photo albums and 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 relating to expected future earnings and financial performance, future growth of the Company and expected future costs associated with the project relating to the closure of the Company's Elysburg, Pennsylvania and Troy, Pennsylvania facilities. 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 conditions, increased competition, 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 the closure of the Company's Elysburg, Pennsylvania and Troy, Pennsylvania facilities, including the risk that the cost of the project will exceed expectations and that the restructuring related savings may not meet the expected amounts, risks associated with the Company's ERP systems standardization project, including the risk that the cost of the project will exceed expectations, the risk that the expected benefits of the project will not be realized and the risk that implementation of the project will interfere with and adversely affect the Company's operations and financial performance, the risk that customers may become insolvent, 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 in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 and elsewhere in the Company's SEC filings. 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 statements of operations for the three and nine months ended December 31, 2007 and 2006 and condensed consolidated balance sheets as of December 31, 2007, March 31, 2007 and December 31, 2006 follow:

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands) Dec 31,
2007

  Mar 31,
2007

  Dec 31,
2006

 
 
ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $26,892   $100,091   $10,303  
Accounts receivable, net 163,350   37,169   223,944  
Inventories 92,017   82,138   66,455  
Deferred income taxes 8,498   8,645   7,718  
Asset held for sale 2,564   2,564   2,796  
Other current assets 13,370   13,665   13,234  
 
 
 
Total current assets 306,691   244,272   324,450  
 
 
 
PROPERTY, PLANT AND EQUIPMENT, NET 54,234   58,897   61,307  
 
 
 
OTHER ASSETS
Intangible assets, net 91,215   35,280   35,304  
Other 3,632   4,621   3,806  
 
 
 
Total other assets 94,847   39,901   39,110  
 
 
 
Total assets $455,772   $343,070   $424,867  
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
Notes payable $50,000   $ â€"   $42,400  
Current portion of long-term debt 10,244   10,195   10,195  
Accrued customer programs 17,419   10,290   16,516  
Accrued restructuring expenses 264   1,456   1,232  
Other current liabilities 74,779   34,022   61,498  
 
 
 
Total current liabilities 152,706   55,963   131,841  
 
 
 
LONG-TERM DEBT, NET OF CURRENT PORTION 10,255   20,392   20,441  
 
 
 
LONG-TERM OBLIGATIONS 6,158   3,221   3,300  
 
 
 
DEFERRED INCOME TAXES 2,521   2,384   5,080  
 
 
 
STOCKHOLDERS' EQUITY 284,132   261,110   264,205  
 
 
 
Total liabilities and stockholders' equity $455,772   $343,070   $424,867  
 
 
 
 

 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts) Three Months Ended
December 31,

  Nine Months Ended
December 31,

 
  2007
  2006
  2007
  2006
 
SALES $222,170   $264,065   $441,854   $485,428  
 
 
 
 
 
COSTS AND EXPENSES
Cost of sales 160,788   197,695   320,990   360,761  
Selling, general and administrative expenses 25,545   26,424   71,493   73,917  
Restructuring Expenses 105   1,745   (2)   1,745  
Interest expense, net 810   1,446   720   2,663  
Other income, net (51 ) (130 ) (452 ) (358 )
 
 
 
 
  187,197   227,180   392,749   438,728  
 
 
 
 
INCOME BEFORE INCOME TAXES 34,973   36,885   49,105   46,700  
 
INCOME TAX EXPENSE 12,119   13,595   17,143   17,214  
 
 
 
 
NET INCOME $22,854   $23,290   $31,962   $29,486  
 
 
 
 
 
NET INCOME PER COMMON SHARE
Basic $2.12   $2.19   $2.95   $2.79  
 
 
 
 
Diluted $2.07   $2.13   $2.88   $2.71  
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 10,759   10,641   10,833   10,565  
 
 
 
 
Diluted 11,036   10,931   11,115   10,863  
 
 
 
 
 
CASH DIVIDENDS PER SHARE OF COMMON STOCK $.14   $.12   $.42   $.36  
 
 
 
 

 


FOR FURTHER INFORMATION CONTACT:
Clifford E. Pietrafitta
Chief Financial Officer
(215) 569-9900