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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
FORM 10-Q
For the Quarter Ended Commission file number 1-2661
March 31, 1995
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CSS INDUSTRIES, INC.
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(Exact name of registrant as specified in its Charter)
Delaware 13-1920657
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
1845 Walnut Street, Philadelphia, Pa. 19103
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(Address of principal executive offices) (Zip Code)
(215) 569-9900
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
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As of March 31, 1995, there were 10,994,773 shares of Common Stock outstanding
which excludes shares which may still be issued upon exercise of stock options.
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
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INDEX
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PART I - FINANCIAL INFORMATION
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In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments necessary to present fairly the
financial position as of March 31, 1995 and December 31, 1994 and the results of
operations and cash flows for the three months ended March 31, 1995 and 1994.
The results for the three months ended March 31, 1995 and 1994 are not
necessarily indicative of the expected results for the full year. As certain
previously reported notes and footnote disclosures have been omitted, these
financial statements should be read in conjunction with the latest annual report
on Form 10-K.
PAGE NO.
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Consolidated Statements of Operations - Three months ended
March 31, 1995 and 1994 3
Consolidated Condensed Balance Sheets - March 31, 1995 and
December 31, 1994 4
Consolidated Statements of Cash Flows - Three months ended
March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION
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Items 1 through 6 - Not Applicable
SIGNATURE 9
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except
per share amounts)
Three Months Ended
March 31,
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1995 1994
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SALES $42,529 $35,161
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COSTS AND EXPENSES
Cost of sales 23,308 18,886
Selling, general and administrative expenses 18,223 14,956
Interest expense, net 185 210
Rental and other income, net (233) (270)
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41,483 33,782
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INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST 1,046 1,379
INCOME TAXES 425 556
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INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 621 823
MINORITY INTEREST IN INCOME OF
SUBSIDIARIES, NET 120 127
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NET INCOME FROM CONTINUING OPERATIONS 501 696
DISCONTINUED OPERATIONS
Income from discontinued operations, net
of taxes of $95 in 1994 - 114
Gain on sale of subsidiary, net of taxes of $6,145 in 1994 - 9,661
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NET INCOME $ 501 $10,471
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NET INCOME PER COMMON SHARE
Continuing operations $ .05 $ .06
Discontinued operations - .01
Gain on sale of subsidiary - .80
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$ .05 $ .87
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CASH DIVIDENDS PER SHARE OF
COMMON STOCK $ - $ -
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See notes to consolidated financial statements.
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 31, December 31,
1995 1994
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 21,487 $ 8,774
Accounts receivable, net 23,350 52,886
Inventories 47,112 35,862
Deferred taxes 6,170 6,170
Other current assets 5,050 5,729
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Total current assets 103,169 109,421
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PROPERTY, PLANT AND EQUIPMENT, NET 39,866 38,905
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OTHER ASSETS
Intangible assets 54,942 55,404
Other 1,302 1,351
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Total other assets 56,244 56,755
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Total assets $199,279 $205,081
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LIABILITIES AND SHAREHOLDERS' EQUITY
TOTAL CURRENT LIABILITIES $ 36,232 $ 37,346
LONG-TERM OBLIGATIONS 8,968 14,398
MINORITY INTEREST 3,128 3,005
DEFERRED TAXES 7,352 7,352
SHAREHOLDERS' EQUITY 143,599 142,980
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Total liabilities and shareholders' equity $199,279 $205,081
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See notes to consolidated financial statements.
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
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1995 1994
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Cash flows from operating activities:
Net income $ 501 $ 10,471
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Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,966 2,038
(Gain) on sale of assets, net (6) (9,699)
Deferred tax provision - -
Provision for doubtful accounts 253 297
Minority interest in income or loss of subsidiaries 119 146
Changes in assets and liabilities, net of effects of
business combinations and divestitures:
Decrease in accounts receivable 29,283 32,699
(Increase) in inventories (11,250) (11,919)
Decrease in other assets 708 188
(Decrease) increase in current liabilities (5,460) 480
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Total adjustments 15,613 14,230
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Net cash provided by operating activities 16,114 24,701
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Cash flows from investing activities:
Purchase of property, plant and equipment (2,360) (2,241)
Proceeds on sale of business - 30,431
Proceeds on sale of property 13 56
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Net cash (used for) provided by
investing activities (2,347) 28,246
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Cash flows from financing activities:
Payments on long-term obligations (1,337) (231)
Borrowing on (repayment of) note payable 253 (10,198)
Dividends paid to minority shareholders of subsidiaries - (169)
Redemption of treasury stock - (94)
Redemption of subsidiary stock from minority shareholder - (59)
Proceeds from exercise of stock options 4 279
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Net cash used for financing activities (1,080) (10,472)
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Effect of foreign currency translation adjustment 26 16
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Net increase in cash and temporary investments 12,713 42,491
Cash and temporary investments at beginning of period 8,774 12,473
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Cash and temporary investments at end of period $ 21,487 $ 54,964
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See notes to consolidated financial statements.
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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March 31, 1995
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation-
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The consolidated financial statements include the accounts of the Company
and all subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation and all adjustments are
of a normal recurring nature. Translation adjustments of a foreign
subsidiary are charged or credited to a separate component of
shareholders' equity.
Inventories-
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Inventories are stated primarily at the lower of first-in, first-out
(FIFO) cost or market. The remaining portion of the inventory is valued
at the lower of last-in, first-out cost or market. Inventories
consisted of the following:
March 31, December 31,
1995 1994
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Raw material................... $11,925,000 $ 8,192,000
Work-in-process................ 11,115,000 5,820,000
Finished goods................. 24,072,000 21,850,000
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$47,112,000 $35,862,000
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Revenue Recognition-
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The Company recognizes revenues in accordance with its shipping terms.
Returns and allowances are reserved for based on the Company's
historical experience.
Net Income Per Common Share-
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Primary net income per common share is based on the weighted average
number of common and common equivalent shares outstanding during the
first quarter - 11,048,561 in 1995 and 12,080,518 in 1994. Average
outstanding shares used in the computation of fully diluted net income
per share were not materially different and did not have an impact on
net income per common share as presented in the consolidated statements
of operations.
Statements of Cash Flows-
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For purposes of the statements of cash flows, the Company considers all
holdings of highly liquid debt instruments with original maturity of
less than three months to be temporary investments.
See Note 2 for supplemental disclosure of noncash investing activities.
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(2) BUSINESS ACQUISITIONS AND DIVESTITURES:
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On December 22, 1994, Rapidforms acquired certain assets and the business
of Business Envelope Manufacturers, Inc. ("Business Envelope"), a
direct marketer of envelopes, business forms, stationery, labels and
other office supplies for $4,743,000 in cash. The acquisition was
accounted for as a purchase and the excess of cost over fair market
value of $4,731,000 was recorded as goodwill and other intangible
assets in the accompanying balance sheet and is being amortized over 20
to 40 years.
On November 4, 1994, Rapidforms acquired substantially all of the assets
and business of Histacount Corporation ("Histacount"), for $14,598,000
in cash. Histacount is a direct marketer of customized business forms,
stationery and other related office products sold primarily to the
healthcare, legal and accounting professions. The acquisition was
accounted for as a purchase and the excess cost over fair market value
of $15,391,000 was recorded as goodwill and other intangible assets in
the accompanying balance sheet and is being amortized over 20 to 40
years.
On March 30, 1994, the Company sold its 96% interest in its Ellisco Inc.
subsidiary to United States Can Company for total proceeds to the
Company of $34,553,000, including consideration of $30,431,000 for the
sale of the stock and a dividend by Ellisco prior to the sale of
$4,122,000. The after tax gain of $9,661,000, or $.80 per share, and
the operating results of Ellisco have been accounted for as
discontinued operations and, accordingly, have been segregated on the
1993 statement of operations.
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Three Months of 1995 Compared to Three Months of 1994
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Consolidated sales for the three months ended March 31, 1995 increased by
21% to $42,529,000 from $35,161,000 in 1994. The increase was primarily the
result of incremental sales of Histacount and Business Envelope, acquired by
Rapidforms in the fourth quarter of 1994. Net of these incremental sales, the
Company reported a sales increase of 4% resulting from the later timing of Paper
Magic Easter and spring product shipments in 1995 and higher sales at
Rapidforms.
Cost of sales, as a percentage of sales, was 55% in 1995 compared to 54% in
1994. The increase in the percentage of cost of sales was caused by (1) higher
raw material costs and margin pressures on certain Paper Magic Easter and spring
seasonal sales and (2) higher labor and overhead costs as a percentage of sales
on the incremental Histacount sales. Selling, general and administrative
expenses were 43% in 1995 and 1994.
Interest expense, net of $185,000 decreased from $210,000 in 1994
reflecting the impact of higher interest rates on invested cash. Rental and
other income, net decreased to $233,000 from $270,000 in 1994 due to the absence
of a currency exchange gain in 1995.
Income taxes as a percentage of income from continuing operations before
income taxes and minority interest was 41% in 1995 representing a slight
increase over 1994. The effective tax rate differs from the statutory rate of
35% primarily due to state and foreign income taxes and goodwill and other
charges not deductible for tax purposes.
Net income from continuing operations for the three months ended March 31,
1995 decreased to $501,000, or $.05 per common share from $696,000, or $.06 per
common share in 1994.
LIQUIDITY AND CAPITAL RESOURCES
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At March 31, 1995, the Company had working capital of $66,937,000 and
shareholders' equity of $143,599,000.
The Company relies primarily on cash generated from its operations and
seasonal borrowings to meet its liquidity requirements. Most Paper Magic and
Berwick revenues are seasonal with almost half of Paper Magic and two-thirds of
Berwick sales being Christmas related. As payment for Christmas related products
is usually not received until after the holiday in accordance with general
industry practice, short-term borrowing needs increase throughout the second and
third quarters, peaking prior to Christmas and dropping thereafter. Seasonal
borrowings at Paper Magic are made under a $40,000,000 line of credit facility
with four banks. Berwick seasonal cash needs are being funded by the Company's
excess cash and its $15,000,000 demand line of credit. At March 31, 1995, there
were no borrowings under either facility.
Based on its current operating plan, the Company believes its sources of
available capital are adequate to meet its ongoing cash needs for the
foreseeable future.
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SIGNATURE
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSS INDUSTRIES, INC.
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(Registrant)
Date: May 8, 1995 By: /s/James G. Baxter
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James G. Baxter
Vice President - Finance
Chief Financial Officer and
Principal Accounting Officer
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SIGNATURE
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSS INDUSTRIES, INC.
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(Registrant)
Date: May 8, 1995 By:
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James G. Baxter
Vice President - Finance
Chief Financial Officer and
Principal Accounting Officer
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