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 amounts)
 
  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
(Unaudited) (Audited) (Unaudited)

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
      Diluted
Income from Income Per
Continuing Income Income from Share,
Operations Before Tax Continuing Continuing
Income Taxes Expense Operations Operations
 
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
      Diluted
Income from Income Per
Continuing Income Income from Share,
Operations Before Tax Continuing Continuing
Income Taxes Expense Operations Operations
 
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
      Diluted
Income from Income Per
Continuing Income Income from Share,
Operations Before Tax Continuing Continuing
Income Taxes Expense Operations Operations
 
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
      Diluted
Income from Income Per
Continuing Income Income from Share,
Operations Before Tax Continuing Continuing
Income Taxes Expense Operations Operations
 
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.

Copyright Business Wire 2010

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