Exhibit 99.1
CSS Industries, Inc. Reports Sales and Earnings for the Nine Months and Quarter Ended December 31, 2007
PHILADELPHIA--(BUSINESS WIRE)--CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the nine months and third quarter ended December 31, 2007. For the nine months ended December 31, 2007, sales decreased by 9% to $441,854,000 from $485,428,000 in 2006 while net income increased 8% to $31,962,000, or $2.88 per diluted share compared to prior year net income of $29,486,000, or $2.71 per diluted share. For the quarter ended December 31, 2007, sales decreased by 16% to $222,170,000 from $264,065,000 in the prior year. Net income for the quarter decreased 2% to $22,854,000, or $2.07 per diluted share, compared to prior year net income of $23,290,000, or $2.13 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.
The 9% decrease in sales for the nine months ended December 31, 2007 was primarily due to expected lower sales of Christmas items to warehouse clubs and lower sales of Christmas gift wrap, tissue and gift bags and educational products, partially offset by incremental sales of C.R. Gibson (less than 1% of year to date sales), which was acquired on December 3, 2007. The increase in net income is primarily related to current year savings and the absence of prior year costs associated with a restructuring plan implemented in November 2006. Under this plan, the Company combined the operations of the its Berwick Offray LLC and Cleo Inc subsidiaries, closed a production facility and exited a non-material, non-core business. Improved gross margins in certain Christmas product lines and reduced interest expense also added to the increase in earnings for the year, while reduced sales volume offset a large portion of the earnings improvement.
Sales declined 16% for the quarter ended December 31, 2007, largely as a result of the earlier timing of Christmas shipments in the second quarter compared to a year ago and lower sales of Christmas gift wrap, tissue and gift bags and educational products. The sales declines were partially offset by incremental sales of newly acquired C.R. Gibson (less than 2% of sales in the quarter). The decline in net income was due to reduced sales volume, partially offset by improved gross margins on certain Christmas product lines, lower interest expense and savings and the absence of costs in the prior year quarter associated with the restructuring plan implemented in fiscal 2007.
The Company also announced that its Cleo subsidiary has reached an agreement with the labor union representing approximately 600 production and maintenance employees at Cleo’s Memphis, TN facility concerning the provisions of a new collective bargaining agreement to replace the prior agreement, which expired on December 31, 2007. The term of the new labor agreement extends until December 31, 2010.
“Despite the sales challenges, including the previously disclosed reduction in warehouse club sales, we are encouraged with the progress we are making in several areas. The combination of Cleo and Berwick Offray has proceeded according to plan, and we are pleased that we have reached an agreement on a new labor contract with Cleo’s Memphis-based production and maintenance employees. In addition, the recent acquisition of C.R. Gibson, the restructuring announced on January 4, 2008 related to several Pennsylvania-based facilities and the previously announced systems integration plan, are important steps for the future growth of the Company,” said Christopher J. Munyan, President and CEO. “We anticipate that the restructuring plan related to closing our Elysburg, PA and Troy, PA facilities will reduce earnings per diluted share by approximately $.23 for the fourth quarter and full fiscal year. Exclusive of these restructuring costs, we continue to expect earnings to be in line with our previous guidance of $2.45 to $2.60 per diluted share this fiscal year.”
CSS is a consumer products company primarily engaged in the design and sale of seasonal and all occasion products, principally to mass market retailers. These products include gift wrap, gift bags, gift boxes, boxed greeting cards, gift tags, decorative tissue paper, decorations, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties, Easter egg dyes and novelties, craft and educational products, memory books, stationery, journals and notecards, infant and wedding photo albums and 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, including, among others, statements relating to expected future earnings and financial performance, future growth of the Company and expected future costs associated with the project relating to the closure of the Company’s Elysburg, Pennsylvania and Troy, Pennsylvania facilities. 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 conditions, increased competition, 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 the closure of the Company’s Elysburg, Pennsylvania and Troy, Pennsylvania facilities, including the risk that the cost of the project will exceed expectations and that the restructuring related savings may not meet the expected amounts, risks associated with the Company’s ERP 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, 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 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007 and elsewhere in the Company’s SEC filings. 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 statements of operations for the three and nine months ended December 31, 2007 and 2006 and condensed consolidated balance sheets as of December 31, 2007, March 31, 2007 and December 31, 2006 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, |
| | 2007 | | 2006 | | 2007 | | 2006 |
| | | | | | | | |
| SALES | | $ | 222,170 | | | $ | 264,065 | | | $ | 441,854 | | | $ | 485,428 | |
| | | | | | | | |
| COSTS AND EXPENSES | | | | | | | | |
| Cost of sales | | | 160,788 | | | | 197,695 | | | | 320,990 | | | | 360,761 | |
| Selling, general and administrative expenses | | | 25,545 | | | | 26,424 | | | | 71,493 | | | | 73,917 | |
| Restructuring expenses | | | 105 | | | | 1,745 | | | | (2 | ) | | | 1,745 | |
| Interest expense, net | | | 810 | | | | 1,446 | | | | 720 | | | | 2,663 | |
| Other income, net | | | (51 | ) | | | (130 | ) | | | (452 | ) | | | (358 | ) |
| | | | | | | | |
| | | 187,197 | | | | 227,180 | | | | 392,749 | | | | 438,728 | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 34,973 | | | | 36,885 | | | | 49,105 | | | | 46,700 | |
| | | | | | | | |
| INCOME TAX EXPENSE | | | 12,119 | | | | 13,595 | | | | 17,143 | | | | 17,214 | |
| | | | | | | | |
| NET INCOME | | $ | 22,854 | | | $ | 23,290 | | | $ | 31,962 | | | $ | 29,486 | |
| | | | | | | | |
| NET INCOME PER COMMON SHARE | | | | | | | | |
| Basic | | $ | 2.12 | | | $ | 2.19 | | | $ | 2.95 | | | $ | 2.79 | |
| Diluted | | $ | 2.07 | | | $ | 2.13 | | | $ | 2.88 | | | $ | 2.71 | |
| | | | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDING | | | | | | | | |
| Basic | | | 10,759 | | | | 10,641 | | | | 10,833 | | | | 10,565 | |
| Diluted | | | 11,036 | | | | 10,931 | | | | 11,115 | | | | 10,863 | |
| | | | | | | | |
CASH DIVIDENDS PER SHARE OF COMMON STOCK | | $ | .14 | | | $ | .12 | | | $ | .42 | | | $ | .36 | |
CSS INDUSTRIES, INC. AND SUBSIDIARIES |
| |
CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Unaudited) |
| |
| (In thousands) |
| | December 31, | | March 31, | | December 31, |
| | 2007 | | 2007 | | 2006 |
ASSETS | | | | | | |
| | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 26,892 | | $ | 100,091 | | $ | 10,303 |
| Accounts receivable, net | | | 163,350 | | | 37,169 | | | 223,944 |
| Inventories | | | 92,017 | | | 82,138 | | | 66,455 |
| Deferred income taxes | | | 8,498 | | | 8,645 | | | 7,718 |
| Asset held for sale | | | 2,564 | | | 2,564 | | | 2,796 |
| Other current assets | | | 13,370 | | | 13,665 | | | 13,234 |
| | | | | | |
| Total current assets | | | 306,691 | | | 244,272 | | | 324,450 |
| | | | | | |
| PROPERTY, PLANT AND EQUIPMENT, NET | | | 54,234 | | | 58,897 | | | 61,307 |
| | | | | | |
| OTHER ASSETS | | | | | | |
| Intangible assets, net | | | 91,215 | | | 35,280 | | | 35,304 |
| Other | | | 3,632 | | | 4,621 | | | 3,806 |
| | | | | | |
| Total other assets | | | 94,847 | | | 39,901 | | | 39,110 |
| | | | | | |
| Total assets | | $ | 455,772 | | $ | 343,070 | | $ | 424,867 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Notes payable | | $ | 50,000 | | $ | - | | $ | 42,400 |
| Current portion of long-term debt | | | 10,244 | | | 10,195 | | | 10,195 |
| Accrued customer programs | | | 17,419 | | | 10,290 | | | 16,516 |
| Accrued restructuring expenses | | | 264 | | | 1,456 | | | 1,232 |
| Other current liabilities | | | 74,779 | | | 34,022 | | | 61,498 |
| | | | | | |
| Total current liabilities | | | 152,706 | | | 55,963 | | | 131,841 |
| | | | | | |
| LONG-TERM DEBT, NET OF CURRENT PORTION | | | 10,255 | | | 20,392 | | | 20,441 |
| | | | | | |
| LONG-TERM OBLIGATIONS | | | 6,158 | | | 3,221 | | | 3,300 |
| | | | | | |
| DEFERRED INCOME TAXES | | | 2,521 | | | 2,384 | | | 5,080 |
| | | | | | |
| STOCKHOLDERS’ EQUITY | | | 284,132 | | | 261,110 | | | 264,205 |
| | | | | | |
| Total liabilities and stockholders’ equity | | $ | 455,772 | | $ | 343,070 | | $ | 424,867 |
CONTACT:
CSS Industries, Inc.
Clifford E. Pietrafitta
Chief Financial Officer
215-569-9900
