CSS Industries, Inc. Reports Sales And Earnings For The Three And Six Months Ended September 30, 2010
CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the three and six months ended September 30, 2010. For the quarter ended September 30, 2010, sales remained relatively flat at $159,945,000 compared to $160,273,000 in 2009. Net income decreased 5% to $8,465,000, or $.87 per diluted share, compared to prior year net income of $8,892,000, or $.92 per diluted share last year. For the six months ended September 30, 2010, sales remained relatively flat at $213,233,000 compared to $213,950,000 in 2009. Net income for the six months ended September 30, 2010 decreased 38% to $2,728,000, or $.28 per diluted share in 2010 compared to prior year net income of $4,402,000, or $.46 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.
Second Quarter Results
Sales for the second quarter of fiscal 2011 were flat as compared to the prior year. Net income was negatively impacted by higher costs of goods sold which was partially offset by lower selling, general and administrative and interest expenses. The higher costs of goods sold were primarily due to higher material and freight costs. The lower selling, general and administrative expenses were largely payroll related, and the lower interest expense was comprised of a reduction in outstanding debt combined with lower interest rates.
Six Month ResultsSales for the first six months of fiscal 2011 also were flat as compared to the prior year. Net income was negatively impacted by higher costs of goods sold as higher selling, general and administrative expenses were offset by lower interest expense. The higher costs of goods sold were primarily due to higher material and freight costs. Management Comments “We believe that we are past the worst of the current economic downturn and that our business is showing signs of recovery,” said Christopher J. Munyan, CSS’ President and CEO. “While sales are generally flat through the first half of the year, we believe that sales will start to gradually improve. We are working hard to mitigate the higher costs of goods sold through vendor negotiations and reductions in selling, general and administrative expenses which we expect will benefit future periods. The earlier start of our seasonal production caused an increase in net cash used in operating activities for the first half of fiscal 2011. Looking forward, we believe that improved operational efficiencies and processes that we have already implemented, combined with expected higher sales in the second half of fiscal 2011 versus the second half of fiscal 2010, will result in higher earnings in the second half of fiscal 2011 as compared to the second half of fiscal 2010 (before the net impact of the non-cash impairment charge recorded in the fourth quarter of 2010). Additionally, we continue to focus on cash flow generation, and we expect that free cash flow (defined as cash flow from operations reduced by purchases of property, plant and equipment) for fiscal 2011 will be at least $25,000,000.”
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