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FOR IMMEDIATE RELEASE
October 25, 2005
CSS INDUSTRIES, INC. REPORTS SALES AND EARNINGS FOR THE QUARTER AND SIX MONTHS ENDED SEPTEMBER 30, 2005
CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the second quarter and six months ended September 30, 2005. For the quarter ended September 30, 2005, sales decreased by 10% to $164,043,000 from $181,711,000 in 2004. Net income decreased 41% to $9,239,000, or $.84 per diluted share, compared to prior year net income of $15,613,000, or $1.24 per diluted share. For the six months ended September 30, 2005, sales decreased by 4% to $221,537,000 from $231,266,000 in 2004. Net income decreased 50% to $5,584,000, or $.51 per diluted share, compared to prior year net income of $11,206,000, or $.89 per diluted share. The Company’s highly seasonal business results in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.
The reduction in sales is largely due to customer requested shipment dates of Christmas orders moving from September to October. The reduction in net income is due primarily to the customer requested shift of sales from September into October and lower margins. Gross margins through the second quarter of fiscal 2006 are three percentage points below the same six month period in fiscal 2005. While a portion of this decrease is expected to reverse in the second half of the year, margins will be lower on a year over year basis due primarily to both increased material and fuel costs and to an unfavorable mix of product margins compared to the prior year.
“The shortfall in earnings per share through September 30, 2005 as described above is partially attributable to the timing of shipments and the mix of product margins generated compared to the prior year. Notwithstanding these timing issues, our current expectation for the year is now zero to five percent EPS growth over the prior year which is lower than our previous guidance of 13% to 18%,” said David Erskine, President and CEO. “Reduced sales and margins expectations for certain non-seasonal product lines account for almost half of the reduced expectation. Other significant factors include higher than expected seasonal production costs, increased fuel costs related to Hurricane Rita and the cost of certain executive changes.”
“I am pleased to announce the promotion of Christopher J. Munyan to Executive Vice President and Chief Operating Officer of CSS Industries. This change is in line with our objective of increasing the executive bench strength and orderly management of executive succession at CSS,” said Mr. Erskine. “For the last six years, Chris has managed the successful growth and increased profitability of our Berwick Offray subsidiary as its President and we look forward to his increased contributions as he assumes this important new role at CSS.”
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. 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, the impact to the Company’s operations attributable to Hurricanes Katrina and Rita, currency risks and other risks associated with international markets, risks associated with acquisitions, including acquisition integration costs, the Company’s ability to integrate and derive the expected benefits from recent acquisitions, 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, 2005 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 results of operations for the quarters and six months ended September 30, 2005 and 2004 and condensed consolidated balance sheets as of September 30, 2005, March 31, 2005 and September 30, 2004 follow:
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
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| (In thousands, except per share amounts) | Three Months Ended September 30,
| | Three Months Ended September 30,
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| 2005
| | 2004
| | 2005
| | 2004
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| SALES | $164,043 | | $181,711 | | $221,537 | | $231,266 | | |
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| COSTS AND EXPENSES |
| Cost of sales | 125,676 | | 132,553 | | 168,441 | | 168,614 | |
| Selling, general and administrative expenses | 23,050 | | 24,588 | | 43,035 | | 44,763 | |
| Interest expense, net | 1,057 | | 709 | | 1,499 | | 1,126 | |
| Other income | (130 | ) | (457 | ) | (135 | ) | (692 | ) | |
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| 149,653 | | $157,393 | | $212,840 | | $213,811 | | |
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| INCOME BEFORE INCOME TAXES | 14,390 | | 24,318 | | 8,697 | | 17,455 | |
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| INCOME TAX EXPENSE | 5,151 | | 8,705 | | 3,113 | | 6,249 | | |
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| NET INCOME | $ 9,239 | | $ 15,613 | | $ 5,584 | | $ 11,206 | | |
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| NET INCOME PER COMMON SHARE |
| Basic | $.88 | | $1.31 | | $.53 | | $.94 | | |
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| Diluted | $.84 | | $1.24 | | $.51 | | $.89 | | |
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| WEIGHTED AVERAGE SHARES OUTSTANDING |
| Basic | 10,496 | | 11,961 | | 10,455 | | 11,919 | | |
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| Diluted | 11,017 | | 12,619 | | 10,966 | | 12,641 | | |
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| CASH DIVIDENDS PER SHARE OF COMMON STOCK | $.12 | | $.10 | | $.24 | | $.20 | | |
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| COMPREHENSIVE INCOME |
| Net income | $9,239 | | $15,613 | | $5,584 | | $11,206 | |
| Foreign currency translation adjustment | 3 | | 3 | | | | 5 | | |
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| Comprehensive income | $9,242 | | $15,616 | | $5,584 | | $11,211 | | |
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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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| (In thousands) | Sept 30, 2005 (Unaudited) | | Mar 31, 2005 (Audited) | | Sept 30, 2004 (Unaudited) | |
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| ASSETS |
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| CURRENT ASSETS |
| Cash and cash equivalents | $ 6,937 | | $ 57,333 | | $ 6,140 | |
| Accounts receivable, net | 126,723 | | 37,273 | | 151,987 | |
| Inventories | 177,812 | | 101,867 | | 164,536 | |
| Deferred income taxes | 8,720 | | 8,199 | | 7,341 | |
| Other current assets | 17,301 | | 13,945 | | 15,782 | | |
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| Total current assets | 337,493 | | 218,617 | | 345,786 | | |
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| PROPERTY, PLANT AND EQUIPMENT, NET | 72,766 | | 75,402 | | 76,975 | | |
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| OTHER ASSETS |
| Goodwill | 30,952 | | 30,952 | | 30,952 | |
| Intangible assets, net | 4,469 | | 4,516 | | 4,592 | |
| Other | 4,151 | | 4,419 | | 4,806 | | |
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| Total other assets | 39,572 | | 39,887 | | 40,350 | | |
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| Total assets | $449,831 | | $333,906 | | $463,111 | | |
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| | | LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| CURRENT LIABILITIES |
| Notes payable | $ 76,400 | | $ | | $ 37,880 | |
| Current portion of long-term debt | 10,175 | | 10,442 | | 518 | |
| Accrued customer programs | 13,401 | | 13,628 | | 15,941 | |
| Other current liabilities | 78,190 | | 42,669 | | 92,691 | | |
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| Total current liabilities | 178,166 | | 66,739 | | 147,030 | | |
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| LONG-TERM DEBT, NET OF CURRENT PORTION | 40,000 | | 40,000 | | 50,056 | | |
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| LONG-TERM OBLIGATIONS | 3,233 | | 3,607 | | 3,513 | | |
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| DEFERRED INCOME TAXES | 7,260 | | 7,071 | | 6,323 | | |
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| STOCKHOLDERS' EQUITY | 221,172 | | 216,489 | | 256,189 | | |
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| Total liabilities and stockholders' equity | $449,831 | | $333,906 | | $463,111 | | |
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FOR FURTHER INFORMATION CONTACT:
Vincent A. Paccapaniccia
Chief Financial Officer
tele: (215) 569-9900
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