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CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2013

CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2013


 

CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the three and six months ended September 30, 2013. As previously announced, the Company divested the Halloween portion of its Paper Magic Group, Inc. business during the second quarter of fiscal 2013. Halloween sales in the three and six months ended September 30, 2012 totaled approximately $19,089,000 and $27,930,000, respectively. Due to the divestiture, this level of sales did not recur in fiscal 2014. The Company's fiscal year ends on March 31. References to a particular fiscal year refer to the fiscal year ending in March of that year. For example, "fiscal 2014" refers to the fiscal year ending March 31, 2014.

 

Sales for the second quarter of fiscal 2014 decreased to $112,487,000 from $133,485,000 in the second quarter of fiscal 2013. Approximately $18,440,000 of the lower sales level is due to the divestiture of the Halloween business as discussed above, with the balance of the lower sales level primarily due to lower sales of All Occasion stationery products. Income from continuing operations before income taxes for the second quarter of fiscal 2014 was $16,040,000 compared to $12,259,000 in the second quarter of fiscal 2013. Results in the second quarter of fiscal 2013 include a pretax loss of $4,695,000 relating to the Halloween business. This loss was comprised of $2,069,000 of income from Halloween operations prior to the divestiture offset by $6,764,000 of charges incurred as a result of the divestiture. Income from continuing operations for the second quarter of fiscal 2014 was $10,846,000, or $1.14 per diluted share, versus $6,840,000, or $0.71 per diluted share, in the second quarter of the prior fiscal year. Results in the second quarter of fiscal 2013 include a net loss of $3,880,000, or $0.40 per diluted share, relating to the Halloween business. Net income for the second quarter of fiscal 2014, including discontinued operations, was $10,958,000, or $1.16 per diluted share, versus $6,921,000, or $0.72 per diluted share, in the second quarter of fiscal 2013. Results for the second quarter of fiscal 2014 and 2013 excluding income from Halloween operations prior to the divestiture and charges incurred as a result of the divestiture are detailed in the charts below.

 

Second Quarter of Fiscal 2014   Halloween Impact Non GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $16,040,000 $131,000 $- $16,171,000
Income tax expense 5,194,000 48,000 - 5,242,000
Income from continuing operations 10,846,000 83,000 - 10,929,000
Diluted net income per common share - continuing operations $1.14 $0.01 $- $1.15

 

 

Second Quarter of Fiscal 2013   Halloween Impact Non GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $12,259,000 $(2,069,000) $6,764,000 $16,954,000
Income tax expense 5,419,000 (717,000) 1,532,000 6,234,000
Income from continuing operations 6,840,000 (1,352,000) 5,232,000 10,720,000
Diluted net income per common share - continuing operations $0.71 $(0.14) $0.54 $1.11

 

Sales for the first six months of fiscal 2014 decreased to $159,604,000 from $194,552,000 in the first six months of fiscal 2013. Approximately $26,764,000 of the lower sales level is due to the divestiture of the Halloween business as discussed above, with the balance primarily due to lower sales of All Occasion stationery products. Income from continuing operations before income taxes for the first six months of fiscal 2014 was $13,469,000 compared to $10,926,000 in the first six months of fiscal 2013. Results in the first six months of fiscal 2013 include a pretax loss of $4,129,000 relating to the Halloween business. This loss was comprised of $2,635,000 of income from Halloween operations prior to the divestiture offset by $6,764,000 of charges incurred as a result of the divestiture. Income from continuing operations for the first six months of fiscal 2014 was $9,179,000, or $0.96 per diluted share, versus $5,973,000, or $0.62 per diluted share, in the first six months of the prior fiscal year. Results in the first six months of fiscal 2013 include a net loss of $3,510,000, or $0.37 per diluted share, relating to the Halloween business. Net income for the first six months of fiscal 2014, including discontinued operations, was $9,291,000, or $0.98 per diluted share, versus $6,017,000, or $0.63 per diluted share, in the first six months of fiscal 2013. Results for the first six months of fiscal 2014 and 2013 excluding income from Halloween operations prior to the divestiture and charges incurred as a result of the divestiture are detailed in the charts below.

 

First Half of Fiscal 2014   Halloween Impact Non GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $13,469,000 $216,000 $- $13,685,000
Income tax expense 4,290,000 79,000 - 4,369,000
Income from continuing operations 9,179,000 137,000 - 9,316,000
Diluted net income per common share - continuing operations $0.96 $0.01 $- $0.98

 

 

First Half of Fiscal 2013   Halloween Impact Non GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $10,926,000 $(2,635,000) $6,764,000 $15,055,000
Income tax expense 4,953,000 (913,000) 1,532,000 5,572,000
Income from continuing operations 5,973,000 (1,722,000) 5,232,000 9,483,000
Diluted net income per common share - continuing operations $0.62 $(0.18) $0.54 $0.99

 

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, 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, 2013 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 and six months ended September 30, 2013 and 2012 and condensed consolidated balance sheets as of September 30, 2013, March 31, 2013 and September 30, 2012 follow:

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(In thousands, except per share amounts)

 

  Three Months Ended   Six Months Ended
  September 30,   September 30,
  2013   2012   2013   2012
               
Sales $112,487   $133,485   $159,604   $194,552
               
Cost and expenses              
   Cost of sales 75,760   92,654   108,418   136,523
   Selling, general and administrative expenses 20,675   22,854   37,679   41,424
   Disposition of product line, net -   5,798   -   5,798
   Interest expense (income), net 50   (14)   70   (67)
   Other expense, net (38)   (66)   (32)   (52)
    96,447   121,226   146,135   183,626
               
Income from continuing operations before income taxes 16,040   12,259   13,469   10,926
               
Income tax expense 5,194   5,419   4,290   4,953
               
Income from continuing operations 10,846   6,840   9,179   5,973
               
Discontinued operations, net of tax 112   81   112   44
               
Net income $10,958   $6,921   $9,291   $6,017
               
Net income per common share              
   Basic:              
   Continuing operations $1.15   $0.71   $0.97   $0.62
   Discontinued operations $0.01   $0.01   $0.01   $0.00
   Total (1) $1.16   $0.72   $0.98   $0.63
               
   Diluted:              
   Continuing operations $1.14   $0.71   $0.96   $0.62
   Discontinued operations $0.01   $0.01   $0.01   $0.00
   Total (1) $1.16   $0.72   $0.98   $0.63
               
Weighted average shares outstanding              
   Basic: 9,458   9,592   9,482   9,617
   Diluted: 9,486   9,621   9,527   9,620
               
Cash dividends per share of common stock $0.15   $0.15   $0.30   $0.30
(1) Total net income per common share my not foot due to rounding.              

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 

  September 30,   March 31,   September 30,
  2013   2013   2012
ASSETS          
       

 

   
Current Assets          
   Cash and cash equivalents $37,094   $ 87,108   $9,843
   Accounts receivable, net 100,925   43,133   123,336
   Inventories 74,508   62,598   85,177
   Deferred income taxes 3,863   4,520   3,810
   Other current assets 14,076   13,073   14,297
   Current assets of discontinued operations -   2   126
           
      Total current assets 230,466   210,434   236,589
           
PROPERTY, PLANT AND EQUIPMENT, NET 27,957   27,956   28,281
           
DEFERRED INCOME TAXES 3,915   3,974   219
           
OTHER ASSETS          
   Goodwill 14,522   14,522   14,522
   Intangible assets, net 27,177   28,004   28,860
   Other 4,143   4,290   6,636
           
      Total other assets 45,842   46,816   50,018
           
      Total assets $308,180   $289,180   $315,107
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES          
   Accrued customer programs 6,862   4,015   7,620
   Other current liabilities 45,245   30,718   57,378
   Current liabilities of discontinued operations 389   644   724
           
      Total current liabilities 52,496   35,377   65,722
           
LONG-TERM OBLIGATIONS 4,767   4,825   5,138
           
STOCKHOLDERS' EQUITY 250,917   248,978   244,247

 

CSS Industries, Inc.
Reconciliation of Certain Non-GAAP Measures
(Unaudited)
(in thousands, except per share amounts)

 

The following is a reconciliation and computation of income from continuing operations before income taxes, income from continuing operations and diluted income per share to exclude income from Halloween operations and charges incurred as a result of the divestiture of the Halloween portion of the Paper Magic Group, Inc. business:

 

Three Months Ended September 30, 2013

 

Income from
Continuing
Operations
Before Income Taxes

 

Income
Tax
Expense

 

Income from
Continuing
Operations

 

Diluted
Income Per
Share,
Continuing
Operations

 

 

 

 

 

 

 

 

As Reported $16,040   $5,194   $10,846   $1.14
   Included in selling, general and administrative 131   48   83   0.01
Non-GAAP Measurement $16,171   $5,242   $10,929   $1.15
 

Three Months Ended September 30, 2012

 

Income from
Continuing
Operations

Before Income
Taxes

 

Income
Tax
Expense

 

Income from
Continuing
Operations

 

Diluted
Income Per
Share,
Continuing
Operations

 

 

 

 

 

 

 

 

As Reported $12,259   $5,419   $6,840   $0.71
   Included in operating results (2,069)   (717)   (1,352)   (0.14)
   Included in cost of sales 966   354   612   0.06
   Included in disposition of product line, net 5,798   1,178   4,620   0.48
Non-GAAP Measurement $16,954   $6,234   $10,720   $1.11
 

Six Months Ended September 30, 2013

 

Income from
Continuing
Operations
Before Income
Taxes

 

Income
Tax
Expense

 

Income from
Continuing
Operations

 

Diluted
Income Per
Share,
Continuing
Operations

 

 

 

 

 

 

 

 

As Reported $13,469   $4,290   $9,179   $0.96
   Included in selling, general and administrative 216   79   137   0.01
Non-GAAP Measurement $13,685   $4,369   $9,316   $0.98
 

Six Months Ended September 30, 2012

 

Income from
Continuing
Operations
Before Income
Taxes

 

Income
Tax
Expense

 

Income from
Continuing
Operations

 

Diluted
Income Per
Share,
Continuing
Operations

 

 

 

 

 

 

 

 

As Reported $10,926   $4,953   $5,973   $0.62
   Included in operating results (2,635)   (913)   (1,722)   (0.18)
   Included in cost of sales 966   354   612   0.06
   Included in disposition of product line, net 5,798   1,178   4,620   0.48
Non-GAAP Measurement $15,055   $5,572   $9,483   $0.99

 

Management believes that presentation of results of operations adjusted for the affects of the disposition of the Halloween product line provides useful information to investors with respect to the Company's operating results for the three- and six months ended September 30, 2013 and 2012 because it enhances comparability between the reporting periods.


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