CSS Industries, Inc. Reports Results of Operations for the Quarter and Year Ended March 31, 2016

~ Posts Full Year Increases in Sales and Diluted Earnings per Share

~ Consolidated Sales and Product Development Functions

~ Completed Third Acquisition in Two Years

PLYMOUTH MEETING, Pa.--()--CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the quarter and year ended March 31, 2016. “Fiscal 2016 was a positive year for CSS,” said Christopher J. Munyan, CSS’ President and Chief Executive Officer. “Sales and profits were slightly higher than the prior year as we integrated the acquisition of Hollywood Ribbon Industries, Inc. which we acquired in February 2015. We also positioned our company for future growth as we consolidated our sales and product development functions to better focus on broad sales opportunities across our product lines, drive efficiencies and improve customer service. Additionally, the recent acquisition of Blumenthal Lansing Company, LLC ("Blumenthal") marked our third acquisition since May 2014, and reflects our strategy of growing our business through strategic acquisitions."

“Fiscal 2016 was a positive year for CSS”

"The strategy of CSS," continued Mr. Munyan, "is to build on existing relationships with craft, seasonal and celebrations customers by expanding and diversifying the product lines and thereby growing presence in the largest retailers in North America. This will include acquiring companies which fit into appropriate acquisition parameters. We actively meet with craft, seasonal and celebrations companies to review and assess potential acquisition targets.”

As previously announced, the Company acquired substantially all of the business and assets of Blumenthal on February 2, 2016. As part of this transaction, during the fourth quarter of fiscal 2016, the Company incurred $1,109,000 pretax, or $0.08 per diluted share, of transaction and transition costs to integrate the business into our existing operations. The Company expects the transaction to be accretive to earnings per diluted share for the Company’s fiscal year ending March 31, 2017.

Sales for the fourth quarter of fiscal 2016 increased 5.7% to $56,744,000 from $53,702,000 in the fourth quarter of fiscal 2015, largely due to sales attributable to the Blumenthal acquisition mentioned above and higher sales of all occasion stationery products. Loss before income taxes for the fourth quarter of fiscal 2016 was $(1,465,000), compared to $(1,928,000) in the fourth quarter of fiscal 2015. Net loss for the fourth quarter of fiscal 2016 was $(589,000), or $(0.06) per diluted share, versus $(1,336,000), or $(0.14) per diluted share, in the fourth quarter of fiscal 2015. Results for the fourth quarter of fiscal 2016 include an increase in the tax benefit related to the domestic manufacturing tax deduction under Section 199 of the Internal Revenue Code and the previously mentioned $1,109,000 of pretax transaction and transition costs from the acquisition of Blumenthal. Results for the fourth quarter of fiscal 2015 include $881,000 of pretax transaction and transition costs from the previously announced acquisition of substantially all of the assets and business of Hollywood Ribbon Industries, Inc. ("Hollywood Ribbon"). These amounts are detailed in the charts below.

             

Fourth Quarter Fiscal 2016

 

As Reported

 

Blumenthal
Charges

 

Non-GAAP
Results

 

     
(Loss) income before income taxes $ (1,465,000 ) $ 1,109,000 $ (356,000 )
Income tax (benefit) provision (876,000 ) 391,000 (485,000 )
Net (loss) income (589,000 ) 718,000 129,000
Diluted net (loss) income per common share   $ (0.06 )   $ 0.08   $ 0.02  
             
Fourth Quarter Fiscal 2015

As Reported

Hollywood
Ribbon
Charges

Non-GAAP
Results

       
(Loss) income before income taxes $ (1,928,000 ) $ 881,000 $ (1,047,000 )
Income tax (benefit) provision (592,000 ) 320,000 (272,000 )
Net (loss) income (1,336,000 ) 561,000 (775,000 )
Diluted net (loss) income per common share   $ (0.14 )   $ 0.06   $ (0.08 )
 

Sales for full year fiscal 2016 increased 1.3% to $317,017,000 from $313,044,000 in full year fiscal 2015, primarily due to higher sales of Christmas bows and ribbon, largely due to the Hollywood Ribbon acquisition, and new sales from the Blumenthal acquisition mentioned above, partially offset by lower sales of Christmas tags and cards. Income before income taxes for the full year fiscal 2016 and fiscal 2015 was $26,641,000. Net income for full year fiscal 2016 was $17,236,000, or $1.87 per diluted share, versus $16,954,000, or $1.80 per diluted share, in the prior fiscal year. Results for full year fiscal 2016 include an increase in the tax benefit related to the domestic manufacturing tax deduction under Section 199 of the Internal Revenue Code and the previously mentioned $1,109,000 of pretax transaction and transition costs from the Blumenthal acquisition. Results for full year fiscal 2015 include $881,000 of pretax transaction and transition costs from the Hollywood Ribbon acquisition. These amounts are detailed in the charts below.

             
Full Year Fiscal 2016   As Reported  

Blumenthal
Charges

 

Non-GAAP
Results

       
Income before income taxes $ 26,641,000 $ 1,109,000 $ 27,750,000
Income tax expense 9,405,000 391,000 9,796,000
Net income 17,236,000 718,000 17,954,000
Diluted net income per common share   $ 1.87     $ 0.08   $ 1.95
             
Full Year Fiscal 2015 As Reported

Hollywood
Ribbon
Charges

Non-GAAP
Results

       
Income before income taxes $ 26,641,000 $ 881,000 $ 27,522,000
Income tax expense 9,687,000 320,000 10,007,000
Net income 16,954,000 561,000 17,515,000
Diluted net income per common share   $ 1.80     $ 0.06   $ 1.86
 

The Company's seasonal orientation has historically resulted in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

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, classroom exchange Valentines, infant products, journals, buttons, boxed greeting cards, gift tags, gift card holders, gift bags, gift wrap, decorations, floral accessories, craft and educational products, Easter egg dyes and novelties, memory books, scrapbooks, stickers, stationery, and other 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 the Company's expectation that the Blumenthal acquisition will be accretive to earnings per diluted share for the fiscal year ended March 31, 2017. 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, risks associated with the acquisition of the Blumenthal business, including the risk that the Company may not be able to successfully manage and integrate the Blumenthal business and/or obtain the accretive financial benefits currently expected from the acquisition of the Blumenthal business; 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); information technology risks, such as cyber attacks and data breaches; 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 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 months and twelve months ended March 31, 2016 and 2015 and condensed consolidated balance sheets as of March 31, 2016 and March 31, 2015 follow:

 
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
   
Three Months Ended Twelve Months Ended
March 31, March 31,
2016   2015 2016   2015
 
Net sales $ 56,744   $ 53,702   $ 317,017   $ 313,044  
 
Costs and expenses
Cost of sales 39,894 38,319 214,746 211,342
Selling, general and administrative expenses 18,680 17,308 76,047 75,062
Interest (income) expense, net (69 ) (32 ) (112 ) 7
Other (income) expense, net (296 ) 35   (305 ) (8 )
58,209   55,630   290,376   286,403  
 
(Loss) income before income taxes (1,465 ) (1,928 ) 26,641 26,641
 
Income tax (benefit) expense (876 ) (592 ) 9,405   9,687  
 
Net (loss) income $ (589 ) $ (1,336 ) $ 17,236   $ 16,954  
 
Net (loss) income per common share
Basic $ (0.06 ) $ (0.14 ) $ 1.88   $ 1.82  
Diluted $ (0.06 ) $ (0.14 ) $ 1.87   $ 1.80  
 
Weighted average shares outstanding
Basic 9,063   9,343   9,147   9,326  
Diluted 9,063   9,343   9,239   9,410  
 
Cash dividends per share of common stock $ 0.20   $ 0.18   $ 0.74   $ 0.63  
 
 
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
   
March 31, March 31,
2016 2015

ASSETS

Current assets:
Cash and cash equivalents $ 19,927 $ 36,429
Short-term investments 59,806 69,845
Accounts receivable, net 45,144 42,052
Inventories 73,022 65,491
Other current assets 12,792   11,235
 
Total current assets 210,691   225,052
 
Property, plant and equipment, net 27,053   25,493
 
Deferred income taxes 3,193   4,957
 
Other assets:
Goodwill 19,974 15,820
Intangible assets, net 42,183 33,048
Other 6,832   5,103
 
Total other assets 68,989   53,971
 
Total assets $ 309,926   $ 309,473
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accrued customer programs $ 3,275 $ 4,042
Other current liabilities 30,530   30,963
 
Total current liabilities 33,805   35,005
 
Long-term obligations 4,631   4,213
 
Stockholders' equity 271,490   270,255
 
Total liabilities and stockholders’ equity $ 309,926   $ 309,473
 
 
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 (loss) before income taxes, income tax expense (benefit), net income (loss) and diluted net income (loss) per common share to exclude charges incurred as a result of the Blumenthal acquisition in the fourth quarter of fiscal 2016 and the Hollywood Ribbon acquisition in the fourth quarter of fiscal 2015:
 
Three Months Ended March 31, 2016

Loss Before
Income Taxes

 

Income Tax
Benefit

 

Net (Loss)
Income

 

Diluted Net
(Loss) Income
Per Common
Share

As Reported $ (1,465 ) $ (876 ) $ (589 ) $ (0.06 )
Blumenthal Charges 1,109   391   718   0.08  
Non-GAAP Measurement $ (356 ) $ (485 ) $ 129   $ 0.02  
 
 
Twelve Months Ended March 31, 2016

Income Before
Income Taxes

Income Tax
Expense

Net Income

Diluted Net
Income Per
Common
Share

As Reported $ 26,641 $ 9,405 $ 17,236 $ 1.87
Blumenthal Charges 1,109   391   718   0.08  
Non-GAAP Measurement $ 27,750   $ 9,796   $ 17,954   $ 1.95  
 
 
Three Months Ended March 31, 2015

Loss Before
Income Taxes

Income Tax
Benefit

Net Loss

Diluted Net
(Loss) Income
Per Common
Share

As Reported $ (1,928 ) $ (592 ) $ (1,336 ) $ (0.14 )
Hollywood Ribbon Charges 881   320   561   0.06  
Non-GAAP Measurement $ (1,047 ) $ (272 ) $ (775 ) $ (0.08 )
 
 
Twelve Months Ended March 31, 2015

Income Before
Income Taxes

Income Tax
Expense

Net Income

Diluted Net
Income Per
Common
Share

As Reported $ 26,641 $ 9,687 $ 16,954 $ 1.80
Hollywood Ribbon Charges 881   320   561   0.06  
Non-GAAP Measurement $ 27,522   $ 10,007   $ 17,515   $ 1.86  
 

Management believes that presentation of results of operations adjusted for the affects of the Blumenthal transaction and transition costs in fiscal 2016 and the Hollywood Ribbon acquisition in fiscal 2015 provides useful information to investors with respect to the Company’s operating results for the three months and twelve months ended March 31, 2016 and 2015 because it enhances comparability between the reporting periods.

Contacts

CSS Industries, Inc.
Vincent A. Paccapaniccia
Chief Financial Officer
610-729-3750

Recent Stories

RSS feed for CSS Industries, Inc.

CSS Industries, Inc.