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 Results

Sales 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.”

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 gift wrap, gift bags, gift boxes, gift card holders, boxed greeting cards, gift tags, decorative tissue paper, decorations, classroom exchange Valentines, decorative ribbons and bows, floral accessories, Halloween masks, costumes, make-up and novelties, Easter egg dyes and novelties, craft and educational products, memory books, stationery, journals, notecards, infant and wedding photo albums, scrapbooks, and other gift items that commemorate life’s celebrations.

Forward-Looking and Cautionary Statements

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 earnings and minimum free cash flow, expected future sales and profit improvements, potential benefits from actions to mitigate higher costs of goods sold, and expected future benefits from the earlier start of seasonal production and from already-implemented operational efficiencies and processes. 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, 2010 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, 2010 and 2009 and condensed consolidated balance sheets as of September 30, 2010, March 31, 2010 and September 30, 2009 follow:

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
 

CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
 
(In thousands, except per share amounts)

 
 

Three Months Ended
  Six Months Ended

 

September 30,
September 30,

2010
 

2009

2010
 

2009
 
SALES $ 159,945   $ 160,273   $ 213,233 $ 213,950  
 
COSTS AND EXPENSES
Cost of sales 120,731 119,630 160,286 158,695
Selling, general and administrative expenses 25,629 26,238 48,022 47,599
Interest expense, net 384 661 593 1,029
Other (income) expense, net   (19 )   (138 )   49   (251 )
 
  146,725     146,391     208,950   207,072  
 
INCOME BEFORE INCOME TAXES 13,220 13,882 4,283 6,878
 
INCOME TAX EXPENSE   4,755     4,990     1,555   2,476  
 
NET INCOME $ 8,465   $ 8,892   $ 2,728 $ 4,402  
 
NET INCOME PER COMMON SHARE
Basic $ .87   $ .92   $ .28 $ .46  
Diluted $ .87   $ .92   $ .28 $ .46  
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic   9,696     9,628     9,690   9,617  
Diluted   9,702     9,683     9,702   9,666  
 

CASH DIVIDENDS PER SHARE OF COMMON STOCK

$

.15
 

$

.15
 

$

.30

$

.30
 
 

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 
   

September 30,
    March 31,     September 30,

 

2010
2010 2009

 

(Unaudited)
(Audited) (Unaudited)
 

ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $ 2,086 $ 27,217 $ 2,830
Accounts receivable, net 140,538 45,711 132,212
Inventories 122,095 78,851 122,422
Deferred income taxes 5,890 6,165 6,227
Assets held for sale 1,323 1,363 1,363
Other current assets   13,194   15,986   16,370
 
Total current assets   285,126   175,293   281,424
 
PROPERTY, PLANT AND EQUIPMENT, NET   47,575   47,786   52,691
 
DEFERRED INCOME TAXES   5,000   5,439   -
 
OTHER ASSETS
Goodwill 17,233 17,233 49,258
Intangible assets, net 32,394 32,027 44,996
Other   3,913   3,984   3,971
 
Total other assets   53,540   53,244   98,225
 
Total assets $ 391,241 $ 281,762 $ 432,340
 

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
CURRENT LIABILITIES
Notes payable $ 55,690 $ - $ 69,000
Current portion of long-term debt 264 481 10,517
Accrued customer programs 10,111 8,380 9,655
Other current liabilities   83,799   35,535   71,405
 
Total current liabilities   149,864   44,396   160,577
 
LONG-TERM DEBT, NET OF CURRENT PORTION   -   66   264
 
LONG-TERM OBLIGATIONS   7,240   4,255   4,568
 
DEFERRED INCOME TAXES   -   -   4,399
 
STOCKHOLDERS’ EQUITY   234,137   233,045   262,532
 
Total liabilities and stockholders’ equity $ 391,241 $ 281,762 $ 432,340
 

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX