CSS INDUSTRIES, INC. REPORTS SALES AND EARNINGS FOR THE NINE MONTHS AND QUARTER ENDED DECEMBER 31, 2009


CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the nine months and third quarter ended December 31, 2009. For the nine months ended December 31, 2009, sales decreased by 7% to $396,180,000 from $425,930,000 in 2008 while net income decreased 24% to $17,102,000, or $1.77 per diluted share compared to prior year net income of $22,420,000, or $2.22 per diluted share. For the quarter ended December 31, 2009, sales decreased by 8% to $182,230,000 from $197,122,000 in the prior year. Net income for the quarter decreased 23% to $12,700,000, or $1.31 per diluted share, compared to prior year net income of $16,412,000, or $1.68 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.

Nine Month Results

The decline in sales for the nine months ended December 31, 2009 was due to reduced shipments of Christmas products, primarily as a result of reduced customer purchases following weak retail sales in the preceding Christmas selling season. Sales of all occasion products in the current fiscal year have also been negatively impacted by the current economic downturn. Partially offsetting these declines were sales of businesses acquired since the beginning of last fiscal year, growth in our baby memory products business and improved Halloween sales. Excluding sales of businesses acquired since the beginning of last fiscal year, sales declined 9%. The decline in net income for the nine month period was primarily the result of reduced Christmas sales volume and lower gross margins on domestically produced Christmas products. Partially offsetting these negative factors were improved gross margins related to imported seasonal products, and reduced selling, general and administrative costs primarily related to the impact of cost savings initiatives.

Third Quarter Results

The decline in sales for the third quarter ended December 31, 2009 was primarily related to lower shipments of Christmas products as a result of reduced customer purchases following weak retail sales in the preceding Christmas selling season. Partially offsetting this decline was the impact of sales of a business acquired since the beginning of last year's third quarter and improved all occasion sales. Excluding sales of a business acquired since the beginning of last year's third quarter, sales declined 9%. The decline in net income for the third quarter was primarily due to reduced Christmas sales volume and lower margins on domestically produced Christmas products, net of improved gross margins on imported seasonal products. In addition, last year's selling, general and administrative expenses included reductions to incentive compensation expense.

Management Comments

"Fiscal 2010 has been a challenging year. While the reduction in Christmas sales was expected based on our customers reduced demand for our products following the weak retail sales environment in the preceding Christmas selling season, retailers replenishment rates were also lower than expected for all occasion products. In addition, margins were negatively impacted by competitive pricing pressures and Christmas product manufacturing inefficiencies, combined with difficulties encountered from the implementation of a phase of our enterprise resource planning systems standardization project," commented Christopher J. Munyan, CSS' President and CEO. "In this difficult economic environment, we have continued to focus on maximizing cash flow. For the full year, we still expect cash flow provided by operating activities to exceed $43 million and capital expenditures to be less than $7 million. This compares to cash flows provided by operating activities of $28 million and capital expenditures of $14 million in our prior fiscal year, resulting in a net improvement of at least $22 million between years. This improvement is primarily a result of improved inventory management and reduced capital spending."

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 cash flow, and benefits from expected future balance sheet management improvements. 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; 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, 2009 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, 2009 and 2008 and condensed consolidated balance sheets as of December 31, 2009, March 31, 2009 and December 31, 2008 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,

 

2009

2008

2009

2008

 

 

 

 

 

SALES

$182,230

$197,122

$396,180

$425,930

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

Cost of sales

136,661

147,967

295,356

315,134

Selling, general and administrative expenses

25,224

22,530

72,823

73,943

Interest expense, net

645

1,093

1,674

2,293

Other (income) expense, net

(86)

225

(337)

195

 

 

 

 

 

 

162,444

171,815

369,516

391,565

 

 

 

 

 

INCOME BEFORE INCOME TAXES

19,786

25,307

26,664

34,365

 

 

 

 

 

INCOME TAX EXPENSE

7,086

8,895

9,562

11,945

 

 

 

 

 

NET INCOME

$ 12,700

$ 16,412

$ 17,102

$ 22,420

 

 

 

 

 

NET INCOME PER COMMON SHARE

 

 

 

 

Basic

$1.32

$1.69

$1.78

$2.24

Diluted

$1.31

$1.68

$1.77

$2.22

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

Basic

9,646

9,734

9,627

10,010

Diluted

9,682

9,796

9,671

10,120

 

 

 

 

 

CASH DIVIDENDS PER SHARE OF COMMON

STOCK

$.15

$.15

$.45

$.45

 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

(In thousands)

 

 

 

December 31,

March 31,

December 31,

 

 

2009

2009

2008

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

 

$ 4,619

$ 2,179

$ 5,492

Accounts receivable, net

 

152,536

43,741

145,513

Inventories

 

67,530

99,971

96,303

Deferred income taxes

 

6,609

5,758

5,457

Assets held for sale

 

1,363

1,363

1,363

Other current assets

 

11,986

15,295

12,732

 

 

 

 

 

Total current assets

 

244,643

168,307

266,860

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

50,657

54,942

53,557

 

 

 

 

 

OTHER ASSETS

 

 

 

 

Intangible assets, net

 

93,991

94,907

94,269

Other

 

3,936

4,103

4,023

 

 

 

 

 

Total other assets

 

97,927

99,010

98,292

 

 

 

 

 

Total assets

 

$393,227

$322,259

$418,709

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Notes payable

 

$ 46,100

$ 4,150

$ 67,400

Current portion of long-term debt

 

497

10,479

10,417

Accrued customer programs

 

13,034

9,909

13,061

Other current liabilities

 

48,423

29,398

54,060

 

 

 

 

 

Total current liabilities

 

108,054

53,936

144,938

 

 

 

 

 

LONG-TERM DEBT, NET OF CURRENT PORTION

 

166

485

-

 

 

 

 

 

LONG-TERM OBLIGATIONS

 

4,646

4,376

4,974

 

 

 

 

 

DEFERRED INCOME TAXES

 

5,768

4,208

3,304

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

274,593

259,254

265,493

 

 

 

 

 

Total liabilities and stockholders' equity

 

$393,227

$322,259

$418,709

 


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