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CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013

CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013


CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the three and nine months ended December 31, 2013. As previously announced, the Company divested the Halloween portion of its Paper Magic Group, Inc. business during fiscal 2013. Halloween sales in the three and nine months ended December 31, 2012 totaled approximately $1,415,000 and $29,345,000, 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 third quarter of fiscal 2014 decreased to $106,295,000 from $116,020,000 in the third quarter of fiscal 2013. Approximately $1,299,000 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 Christmas products and narrow woven ribbon. Income from continuing operations before income taxes for the third quarter of fiscal 2014 was $16,316,000 compared to $17,019,000 in the third quarter of fiscal 2013. Income from continuing operations for the third quarter of fiscal 2014 was $10,988,000, or $1.18 per diluted share, versus $11,600,000, or $1.21 per diluted share, in the third quarter of the prior fiscal year. Net income for the third quarter of fiscal 2014, including discontinued operations, was $11,007,000, or $1.18 per diluted share, versus $11,611,000, or $1.22 per diluted share, in the third quarter of fiscal 2013. Results for the third quarter of fiscal 2014 and 2013 include income from Halloween operations and charges incurred as a result of the divestiture as detailed in the charts below.

 

 

 

Third Quarter of Fiscal 2014   Halloween Impact Non-GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $16,316,000 $123,000 $- $16,193,000
Income tax expense 5,328,000 44,000 $- 5,284,000
Income from continuing operations 10,988,000 79,000 $- 10,909,000
Diluted net income per common share - continuing operations $1.18 $0.01 $- $1.17
 
 
Third Quarter of Fiscal 2013   Halloween Impact Non-GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $17,019,000 $(223,000) $- $17,242,000
Income tax expense 5,419,000 (82,000) $- 5,501,000
Income from continuing operations 11,600,000 (141,000) $- 11,741,000
Diluted net income per common share - continuing operations $1.21 $(0.01) $- $1.23

 

Sales for the first nine months of fiscal 2014 decreased to $265,899,000 from $310,572,000 in the first nine months of fiscal 2013. Approximately $28,063,000 of the lower sales level is due to the divestiture of the Halloween business in the second quarter of fiscal 2013, with the balance primarily due to lower sales of All Occasion stationery products, Christmas products and narrow woven ribbon. Income from continuing operations before income taxes for the first nine months of fiscal 2014 was $29,785,000 compared to $27,945,000 in the first nine months of fiscal 2013. Results for the first nine months of fiscal 2013 include a pretax loss of $4,352,000 relating to the Halloween business. This loss was comprised of $2,412,000 of income from Halloween operations offset by $6,764,000 of charges incurred as a result of the divestiture. Income from continuing operations for the first nine months of fiscal 2014 was $20,167,000, or $2.13 per diluted share, versus $17,573,000, or $1.83 per diluted share, in the first nine months of the prior fiscal year. Results in the first nine months of fiscal 2013 include a net loss of $3,651,000, or $0.39 per diluted share, relating to the Halloween business. Net income for the first nine months of fiscal 2014, including discontinued operations, was $20,298,000, or $2.14 per diluted share, versus $17,628,000, or $1.84 per diluted share, in the first nine months of fiscal 2013. Results for the first nine months of fiscal 2014 and 2013 include income from Halloween operations and charges incurred as a result of the divestiture as detailed in the charts below.

 

 

 

First Nine Months of Fiscal 2014   Halloween Impact Non-GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $29,785,000 $(93,000) $- $29,878,000
Income tax expense 9,618,000 (35,000) $- 9,653,000
Income from continuing operations 20,167,000 (58,000) $- 20,225,000
Diluted net income per common share - continuing operations $2.13 $(0.01) $- $2.14
 
 
First Nine Months of Fiscal 2013   Halloween Impact Non-GAAP
  As Reported Operations Charges Results
Income from continuing operations before income taxes $27,945,000 $2,412,000 $(6,764,000) $32,297,000
Income tax expense 10,372,000 831,000 (1,532,000) 11,073,000
Income from continuing operations 17,573,000 1,581,000 (5,232,000) 21,224,000
Diluted net income per common share - continuing operations $1.83 $0.16 $(0.55) $2.21

CSS is a consumer products company primarily engaged in the design, manufacture, procurement, distribution and sale of all occasion and seasonal social expression products, principally to mass market retailers. These all occasion and seasonal 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 nine months ended December 31, 2013 and 2012 and condensed consolidated balance sheets as of December 31, 2013, March 31, 2013 and December 31, 2012 follow:

 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)
  Three Months Ended   Nine Months Ended
  December 31,   December 31,
  2013   2012   2013   2012
 
Sales $106,295   $116,020   $265,899   $310,572
 
Costs and expenses  
          Cost of sales 70,029   78,407   178,447   214,930
          Selling, general and administrative expenses 19,865   20,510   57,544   61,934
          Disposition of product line, net -   -   -   5,798
          Interest expense (income), net 82   (1)   152   (68)
          Other income, net 3   85   (29)   33
  89,979   99,001   236,114   282,627
 
Income from continuing operations before income taxes 16,316   17,019   29,785   27,945
 
Income tax expense 5,328   5,419   9,618   10,372
 
Income from continuing operations 10,988   11,600   20,167   17,573
 
Discontinued operations, net of tax 19   11   131   55
 
Net income $11,007   $11,611   $20,298   $17,628
 
Net income per common share  
     Basic:  
     Continuing operations $1.18   $1.21   $2.14   $1.83
     Discontinued operations $0.00   $0.00   $0.01   $0.01
     Total (1) $1.18   $1.22   $2.15   $1.84
 
     Diluted:  
     Continuing operations $1.18   $1.21   $2.13   $1.83
     Discontinued operations $0.00   $0.00   $0.01   $(0.01)
     Total (1) $1.18   $1.22   $2.14   $1.84
 
Weighted average shares outstanding  
     Basic: 9,296   9,548   9,420   9,594
     Diluted: 9,341   9,554   9,467   9,597
Cash dividends per share of common stock $0.15   $0.15   $0.45   $0.45
 
(1) Total net income per common share may not foot due to rounding.
 

 

 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
  December 31,   March 31,   December 31,  
  2013
  2013
  2012
 
ASSETS  
 
Current assets  
     Cash and cash equivalents $68,551   $87,108   $53,347  
     Accounts receivable, net 88,934   43,133   94,445  
     Inventories 65,156   62,598   66,087  
     Deferred income taxes 3,873   4,520   4,834  
     Other current assets 12,410   13,073   13,704  
     Current assets of discontinued operations -   2   -  
 
        Total current assets 238,924   210,434   232,417  
 
PROPERTY, PLANT AND EQUIPMENT, NET 27,553   27,956   28,164  
 
DEFERRED INCOME TAXES 3,314   3,974   195  
 
OTHER ASSETS  
     Goodwill 14,522   14,522   14,522  
     Intangible assets, net 26,763   28,004   28,446  
     Other 4,156   4,290   7,046  
 
        Total other assets 45,441   46,816   50,014  
 
        Total assets $315,232   $289,180   $310,790  
 
LIABILITIES AND STOCKHOLDERS' EQUITY  
 
CURRENT LIABILITIES  
     Accrued customer programs 6,188   4,015   7,089  
     Other current liabilities 44,363   30,718   45,717  
     Current liabilities of discontinued operations 314   644   499  
 
        Total current liabilities 50,865   35,377   53,305  
 
LONG-TERM OBLIGATIONS 4,814   4,825   5,020  
 
STOCKHOLDERS' EQUITY 259,553   248,978   252,465  
 
        Total liabilities and stockholders' equity $315,232   $289,180   $310,790  
 

 

 

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 tax expense, income from continuing operations and diluted income per share from continuing operations 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 December 31, 2013
  Income from
Continuing
Operations
Before Income
Taxes
  Income
Tax
Expense
  Income from
Continuing
Operations
  Diluted
Income Per
Share,
Continuing
Operations (1)
 
As Reported $16,316   $5,328   $10,988   $1.18
  Included in selling, general and administrative (123)   (44)   (79)   (0.01)
Non-GAAP Measurement $16,193   $5,284   $10,909   $1.17
  Three Months Ended December 31, 2012
  Income from
Continuing
Operations
Before Income
Taxes
  Income
Tax
Expense
  Income from
Continuing
Operations
  Diluted
Income Per
Share,
Continuing
Operations (1)
 
As Reported $17,019   $5,419   $11,600   $1.21
  Included in operating results 223   82   141   0.01
  Included in cost of sales -   -   -   -
  Included in disposition of product line, net -   -   -   -
Non-GAAP Measurement $17,242   $5,501   $11,741   $1.23
  Nine Months Ended December 31, 2013
  Income from
Continuing
Operations
Before Income
Taxes
  Income
Tax
Expense
  Income from
Continuing
Operations
  Diluted
Income Per
Share,
Continuing
Operations (1)
 
As Reported $29,785   $9,618   $20,167   $2.13
  Included in selling, general and administrative 93   35   58   0.01
Non-GAAP Measurement $29,878   $9,653   $20,225   $2.14
  Nine Months Ended December 31, 2012
  Income from
Continuing
Operations
Before Income
Taxes
  Income
Tax
Expense
  Income from
Continuing
Operations
  Diluted
Income Per
Share,
Continuing
Operations (1)
 
As Reported $27,945   $10,372   $17,573   $1.83
  Included in operating results (2,412)   (831)   (1,581)   (0.16)
  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 $32,297   $11,073   $21,224   $2.21

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 nine months ended December 31, 2013 and 2012 because it enhances comparability between the reporting periods.

 


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