CSS INDUSTRIES, INC. REPORTS SALES AND EARNINGS FOR THE NINE MONTHS AND QUARTER ENDED DECEMBER 31, 2008


CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the nine months and third quarter ended December 31, 2008. For the nine months ended December 31, 2008, sales decreased by 4% to $425,930,000 from $441,854,000 in 2007 while net income decreased 30% to $22,420,000, or $2.22 per diluted share compared to prior year net income of $31,962,000, or $2.88 per diluted share. For the quarter ended December 31, 2008, sales decreased by 11% to $197,122,000 from $222,170,000 in the prior year. Net income for the quarter decreased 28% to $16,412,000, or $1.68 per diluted share, compared to prior year net income of $22,854,000, or $2.07 per diluted share. The decline in diluted earnings per share of 23% and 19% for the nine months and quarter, respectively, is more favorable than the decline in net income due to the repurchase of stock during the year. 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 sales reduction for the nine months and quarter ended December 31, 2008 was primarily due to reduced sales of Christmas gift wrap, gift tissue and gift bags. In addition, the current poor economic environment has resulted in reduced buying patterns, product returns and order cancellations of both the Company's seasonal and all occasion products. Partially offsetting the sales decline were sales of acquired businesses, primarily C.R. Gibson, which was acquired on December 3, 2007. The decrease in net income is primarily related to reduced sales volume, higher material costs, plant inefficiencies and higher interest expense. Selling, general and administrative expenses increased 4% for the nine months ended December 31, 2008 as a result of the addition of C.R. Gibson, offset by lower incentive compensation, but are down 10% for the quarter as a result of lower incentive compensation.

While we expect weakened overall consumer demand to continue to affect all occasion product replenishment sales for the remainder of our fiscal year, the delayed timing of a portion of Valentine shipments should allow sales for the fiscal fourth quarter to remain in line with sales for the fourth quarter of the prior year. The absence of restructuring expenses related to the closure of several Pennsylvania facilities incurred in the fourth quarter of fiscal 2008 are expected to reduce the fiscal fourth quarter loss compared to the prior year.

"Sales volume for the quarter was well below prior year results. While we anticipated a reduction in Christmas sales as reported in prior announcements, all occasion product sales were also negatively impacted by the economic downturn," said Christopher J. Munyan, President and CEO. "As announced on December 23, 2008, we will not achieve our previously reported earnings expectations of $2.40 to $2.55 per diluted share. We believe the weak economic climate will continue and therefore have revised our current fiscal year earnings expectations downward to reflect weakened demand for our products. We now expect earnings to be in the range of $1.70 to $1.90 per diluted share. In order to combat the impact of the current economic environment we are continuing to reduce costs."

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, floral accessories, 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 sales volume, the expected amount of the Company's loss for the fourth quarter of fiscal 2009, and the Company's expected range of earnings per share for the 2009 fiscal year. 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; 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; risks associated with the restructuring plan to close the Company's facilities in Elysburg, Pennsylvania and Troy, Pennsylvania, including the risk that the restructuring related savings may be less than and/or costs may exceed the presently expected amounts and the risk that the closures will adversely affect the Company's ability to fulfill its customers orders on time; risks associated with the Company's enterprise resource planning 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, 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, 2008 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 statements of operations for the three and nine months ended December 31, 2008 and 2007 and condensed consolidated balance sheets as of December 31, 2008, March 31, 2008 and December 31, 2007 follow:


CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)

 

(In thousands, except
per share amounts)

 

 

 

Three Months Ended Nine Months Ended

 

December 31,

December 31,

 

2008

2007

2008

2007

 

 

 

 

 

SALES

$197,122

$222,170

$425,930

$441,854

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

Cost of sales

147,967

160,788

315,134

320,990

Selling, general and administrative expenses

23,104

25,545

74,218

71,493

Restructuring (income) expense, net

(574)

105

(275)

(2)

Interest expense, net

1,093

810

2,293

720

Other expense (income), net

225

(51)

195

(452)

 

 

 

 

 

 

171,815

187,197

391,565

392,749

 

 

 

 

 

INCOME BEFORE INCOME TAXES

25,307

34,973

34,365

49,105

 

 

 

 

 

INCOME TAX EXPENSE

8,895

12,119

11,945

17,143

 

 

 

 

 

NET INCOME

$ 16,412

$ 22,854

$ 22,420

$ 31,962

 

 

 

 

 

NET INCOME PER COMMON SHARE

 

 

 

 

Basic

$1.69

$2.12

$2.24

$2.95

Diluted

$1.68

$2.07

$2.22

$2.88

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

Basic

9,734

10,759

10,010

10,833

Diluted

9,796

11,036

10,120

11,115

 

 

 

 

 

CASH DIVIDENDS PER SHARE OF COMMON

STOCK

$.15

$.14

$.45

$.42

 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

(In thousands)

 

 

 

December 31,

March 31,

December 31,

 

 

2008

2008

2007

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

 

$5,492

$28,109

$26,892

Accounts receivable, net

 

145,513

39,144

163,350

Inventories

 

96,303

105,532

92,017

Deferred income taxes

 

5,457

7,276

8,498

Assets held for sale

 

1,363

3,590

2,564

Other current assets

 

12,732

16,242

13,370

 

 

 

 

 

Total current assets

 

266,860

199,893

306,691

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

53,557

50,632

54,234

 

 

 

 

 

OTHER ASSETS

 

 

 

 

Intangible assets, net

 

94,269

90,815

91,215

Other

 

4,023

3,701

3,632

 

 

 

 

 

Total other assets

 

98,292

94,516

94,847

 

 

 

 

 

Total assets

 

$418,709

$345,041

$455,772

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Notes payable

 

$67,400

$-

$50,000

Current portion of long-term debt

 

10,417

10,246

10,244

Accrued customer programs

 

13,061

9,438

17,419

Other current liabilities

 

54,060

44,209

75,043

 

 

 

 

 

Total current liabilities

 

144,938

63,893

152,706

 

 

 

 

 

LONG-TERM DEBT, NET OF CURRENT PORTION

 

-

10,192

10,255

 

 

 

 

 

LONG-TERM OBLIGATIONS

 

4,974

6,121

6,158

 

 

 

 

 

DEFERRED INCOME TAXES

 

3,304

2,482

__2,521

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

265,493

262,353

284,132

 

 

 

 

 

Total liabilities and stockholders' equity

 

$418,709

$345,041

$455,772

 


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