x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-1920657 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
450 Plymouth Road, Suite 300, Plymouth Meeting, PA | 19462 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $.10 par value | CSS | New York Stock Exchange |
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | x | Smaller reporting company | x |
Emerging growth company | ¨ |
PAGE NO. | |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 95,974 | $ | 112,901 | $ | 153,511 | $ | 177,028 | |||||||
Cost of sales | 71,255 | 88,220 | 116,686 | 140,700 | |||||||||||
Gross profit | 24,719 | 24,681 | 36,825 | 36,328 | |||||||||||
Selling, general and administrative expenses | 20,439 | 28,348 | 43,486 | 57,277 | |||||||||||
Restructuring expenses | 741 | 2,127 | 2,795 | 2,127 | |||||||||||
Impairment of goodwill | — | — | — | 1,390 | |||||||||||
Operating income (loss) | 3,539 | (5,794 | ) | (9,456 | ) | (24,466 | ) | ||||||||
Interest expense (income), net | 721 | 434 | 1,649 | 696 | |||||||||||
Other expense (income), net | (989 | ) | (166 | ) | (1,076 | ) | (283 | ) | |||||||
Income (loss) before income taxes | 3,807 | (6,062 | ) | (10,029 | ) | (24,879 | ) | ||||||||
Income tax expense (benefit) | 325 | (1,152 | ) | 737 | (1,493 | ) | |||||||||
Net income (loss) | $ | 3,482 | $ | (4,910 | ) | $ | (10,766 | ) | $ | (23,386 | ) | ||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | 0.39 | $ | (0.54 | ) | $ | (1.22 | ) | $ | (2.57 | ) | ||||
Diluted | $ | 0.39 | $ | (0.54 | ) | $ | (1.22 | ) | $ | (2.57 | ) | ||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 8,875 | 9,057 | 8,857 | 9,088 | |||||||||||
Diluted | 8,892 | 9,057 | 8,857 | 9,088 | |||||||||||
Net income (loss) | $ | 3,482 | $ | (4,910 | ) | $ | (10,766 | ) | $ | (23,386 | ) | ||||
Other comprehensive income (loss), net: | |||||||||||||||
Currency translation adjustments: | (304 | ) | (246 | ) | (519 | ) | (966 | ) | |||||||
Total currency translation gain (loss) | (304 | ) | (246 | ) | (519 | ) | (966 | ) | |||||||
Interest rate swap agreement: | |||||||||||||||
Fair value adjustment, net of tax $124 for the three months, and $183 for the six months ended September 30, 2018 | — | 211 | — | 476 | |||||||||||
Total effects of interest rate swap agreement | — | 211 | — | 476 | |||||||||||
Other comprehensive income (loss), net: | (304 | ) | (35 | ) | (519 | ) | (490 | ) | |||||||
Comprehensive income (loss) | $ | 3,178 | $ | (4,945 | ) | $ | (11,285 | ) | $ | (23,876 | ) |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 5,155 | $ | 17,100 | $ | 15,112 | |||||
Accounts receivable, net of allowances of $231, $2,198 and $1,757 | 81,658 | 53,835 | 101,762 | ||||||||
Inventories | 105,009 | 96,231 | 116,350 | ||||||||
Asset held for sale | 131 | 131 | 2,391 | ||||||||
Prepaid expenses and other current assets | 10,351 | 12,568 | 13,660 | ||||||||
Total current assets | 202,304 | 179,865 | 249,275 | ||||||||
Property, plant and equipment, net | 50,482 | 50,920 | 49,657 | ||||||||
Operating lease right-of-use assets | 46,948 | — | — | ||||||||
Deferred income taxes | — | — | 12,486 | ||||||||
Intangible assets, net | 35,821 | 40,285 | 56,494 | ||||||||
Other assets | 14,949 | 14,525 | 10,487 | ||||||||
Total assets | $ | 350,504 | $ | 285,595 | $ | 378,399 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | 50,381 | $ | 26,139 | $ | 21,185 | |||||
Current portion of long-term debt | 39 | 316 | 231 | ||||||||
Accounts payable | 36,652 | 27,916 | 37,696 | ||||||||
Accrued payroll and other compensation | 6,485 | 6,962 | 11,164 | ||||||||
Accrued customer programs | 11,870 | 12,101 | 16,171 | ||||||||
Accrued income taxes | 349 | — | — | ||||||||
Accrued other expenses | 13,190 | 14,468 | 16,050 | ||||||||
Current portion of operating lease liabilities | 7,304 | — | — | ||||||||
Total current liabilities | 126,270 | 87,902 | 102,497 | ||||||||
Long-term debt, net of current portion | 7 | 13 | 40,111 | ||||||||
Deferred income taxes | 618 | 619 | 1,218 | ||||||||
Operating lease liabilities | 38,878 | — | — | ||||||||
Other long-term obligations | 5,863 | 7,130 | 10,964 | ||||||||
Total liabilities | 171,636 | 95,664 | 154,790 | ||||||||
Commitments and contingencies (Note 8) | |||||||||||
Stockholders' equity: | |||||||||||
Preferred stock, Class 2, $.01 par, 1,000,000 shares authorized, no shares issued | — | — | — | ||||||||
Common stock, $.10 par, 25,000,000 shares authorized, 14,703,084 shares issued at September 30, 2019, March 31, 2019 and September 30, 2018 | 1,470 | 1,470 | 1,470 | ||||||||
Additional paid-in capital | 61,185 | 60,921 | 59,934 | ||||||||
Retained earnings | 265,147 | 277,613 | 311,387 | ||||||||
Accumulated other comprehensive income (loss), net of tax | (54 | ) | 465 | 673 | |||||||
Common stock in treasury, 5,824,025 shares at September 30, 2019, 5,865,846 shares at March 31, 2019 and 5,813,926 shares at September 30, 2018, at cost | (148,880 | ) | (150,538 | ) | (149,855 | ) | |||||
Total stockholders' equity | 178,868 | 189,931 | 223,609 | ||||||||
Total liabilities and stockholders' equity | $ | 350,504 | $ | 285,595 | $ | 378,399 |
Six Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (10,766 | ) | $ | (23,386 | ) | |
Adjustments to reconcile net income (loss) to net cash used for operating activities: | |||||||
Depreciation and amortization | 6,481 | 6,721 | |||||
Amortization of operating lease right-of-use assets | 4,603 | — | |||||
Amortization of inventory step-up | 284 | 8,889 | |||||
Amortization of financing transaction costs | 252 | 20 | |||||
Accretion of asset retirement obligation | 64 | 62 | |||||
Accretion of contingent earn-out consideration | 26 | — | |||||
Change in valuation of contingent earn-out consideration | (1,392 | ) | — | ||||
Write-off of deferred financing transaction costs | 344 | — | |||||
Impairment of property, plant and equipment | — | 1,570 | |||||
Impairment of goodwill | — | 1,390 | |||||
Provision for accounts receivable allowances | 1,318 | 1,867 | |||||
Deferred tax (benefit) provision | (10 | ) | (2,414 | ) | |||
Share-based compensation expense | 264 | 1,057 | |||||
Loss (gain) on sale or disposal of assets | — | 4 | |||||
Changes in assets and liabilities, net of effects of purchase of a business: | |||||||
Accounts receivable | (29,280 | ) | (40,323 | ) | |||
Inventories | (9,263 | ) | (22,661 | ) | |||
Prepaid expenses and other assets | 2,376 | (2,283 | ) | ||||
Accounts payable | 10,303 | 17,022 | |||||
Lease liabilities | (4,064 | ) | — | ||||
Accrued expenses and long-term obligations | 106 | 6,644 | |||||
Net cash used for operating activities | (28,354 | ) | (45,821 | ) | |||
Cash flows from investing activities: | |||||||
Final payment of purchase price for a business previously acquired | — | (2,500 | ) | ||||
Purchase of a business | — | (2,500 | ) | ||||
Purchase of property, plant and equipment | (5,985 | ) | (5,891 | ) | |||
Purchase of company owned life insurance policy | — | (750 | ) | ||||
Proceeds from sale of fixed assets | 140 | — | |||||
Net cash used for investing activities | (5,845 | ) | (11,641 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings on credit facility | 104,292 | 21,185 | |||||
Payments on credit facility | (80,050 | ) | — | ||||
Payments on long-term debt | (283 | ) | (114 | ) | |||
Dividends paid | — | (3,633 | ) | ||||
Purchase of treasury stock | — | (3,393 | ) | ||||
Payment of financing transaction costs | (1,699 | ) | (33 | ) | |||
Tax effect on stock awards | (42 | ) | — | ||||
Net cash provided by financing activities | 22,218 | 14,012 | |||||
Effect of exchange rate changes on cash | 36 | 2 | |||||
Net decrease in cash and cash equivalents | (11,945 | ) | (43,448 | ) | |||
Cash and cash equivalents at beginning of period | 17,100 | 58,560 | |||||
Cash and cash equivalents at end of period | $ | 5,155 | $ | 15,112 |
Accumulated | |||||||||||||||||||||||||||||
Additional | Other | Common Stock | |||||||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | in Treasury | |||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | Total | ||||||||||||||||||||||
Balance, March 31, 2019 | 14,703,084 | $ | 1,470 | $ | 60,921 | $ | 277,613 | $ | 465 | (5,865,846 | ) | $ | (150,538 | ) | $ | 189,931 | |||||||||||||
Share-based compensation expense | — | — | 73 | — | — | — | — | 73 | |||||||||||||||||||||
Issuance of common stock under equity plan | — | — | — | (782 | ) | — | 15,611 | 740 | (42 | ) | |||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (215 | ) | — | — | (215 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | (14,248 | ) | — | — | — | (14,248 | ) | |||||||||||||||||||
Balance, June 30, 2019 | 14,703,084 | 1,470 | 60,994 | 262,583 | 250 | (5,850,235 | ) | (149,798 | ) | 175,499 | |||||||||||||||||||
Share-based compensation expense | — | — | 191 | — | — | — | — | 191 | |||||||||||||||||||||
Issuance of common stock under equity plan | — | — | — | (918 | ) | — | 26,210 | 918 | — | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (304 | ) | — | — | (304 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | 3,482 | — | — | — | 3,482 | |||||||||||||||||||||
Balance, September 30, 2019 | 14,703,084 | $ | 1,470 | $ | 61,185 | $ | 265,147 | $ | (54 | ) | (5,824,025 | ) | $ | (148,880 | ) | $ | 178,868 |
Accumulated | |||||||||||||||||||||||||||||
Additional | Other | Common Stock | |||||||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | in Treasury | |||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | Total | ||||||||||||||||||||||
Balance, March 31, 2018 | 14,703,084 | $ | 1,470 | $ | 58,877 | $ | 339,088 | $ | 1,163 | (5,583,338 | ) | $ | (146,903 | ) | $ | 253,695 | |||||||||||||
Share-based compensation expense | — | — | 471 | — | — | — | — | 471 | |||||||||||||||||||||
Cash dividends ($.20 per common share) | — | — | — | (1,827 | ) | — | — | — | (1,827 | ) | |||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (455 | ) | — | — | (455 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | (18,476 | ) | — | — | — | (18,476 | ) | |||||||||||||||||||
Balance, June 30, 2018 | 14,703,084 | 1,470 | 59,348 | 318,785 | 708 | (5,583,338 | ) | (146,903 | ) | 233,408 | |||||||||||||||||||
Share-based compensation expense | — | — | 586 | — | — | — | — | 586 | |||||||||||||||||||||
Purchase of treasury shares | — | — | — | — | — | (249,908 | ) | (3,628 | ) | (3,628 | ) | ||||||||||||||||||
Issuance of common stock under equity plan | — | — | — | (676 | ) | — | 19,320 | 676 | — | ||||||||||||||||||||
Cash dividends ($.20 per common share) | — | — | — | (1,812 | ) | — | — | — | (1,812 | ) | |||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (35 | ) | — | — | (35 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | (4,910 | ) | — | — | — | (4,910 | ) | |||||||||||||||||||
Balance, September 30, 2018 | 14,703,084 | $ | 1,470 | $ | 59,934 | $ | 311,387 | $ | 673 | (5,813,926 | ) | $ | (149,855 | ) | $ | 223,609 |
(1) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||
Raw material | $ | 13,898 | $ | 14,246 | $ | 14,212 | |||||
Work-in-process | 18,258 | 16,816 | 15,616 | ||||||||
Finished goods | 72,853 | 65,169 | 86,522 | ||||||||
$ | 105,009 | $ | 96,231 | $ | 116,350 |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||
Land | $ | 5,738 | $ | 5,738 | $ | 6,372 | |||||
Buildings, leasehold interests and improvements | 40,125 | 40,893 | 42,345 | ||||||||
Machinery, equipment and other | 119,157 | 113,946 | 108,595 | ||||||||
165,020 | 160,577 | 157,312 | |||||||||
Less - Accumulated depreciation and amortization | (114,538 | ) | (109,657 | ) | (107,655 | ) | |||||
Net property, plant and equipment | $ | 50,482 | $ | 50,920 | $ | 49,657 |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Craft | $ | 35,001 | $ | 42,472 | 70,660 | 77,760 | |||||||||
Gift | 23,630 | 30,614 | 43,459 | 54,654 | |||||||||||
Seasonal | 37,343 | 39,815 | 39,392 | 44,614 | |||||||||||
Total | $ | 95,974 | $ | 112,901 | $ | 153,511 | $ | 177,028 |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Accumulated effect of currency translation adjustment: | |||||||||||||||
Balance at beginning of period | $ | (203 | ) | $ | 268 | $ | 12 | $ | 988 | ||||||
Currency translation adjustment during period | (304 | ) | (246 | ) | (519 | ) | (966 | ) | |||||||
Balance at end of period | $ | (507 | ) | $ | 22 | $ | (507 | ) | $ | 22 | |||||
Accumulated effect of pension and postretirement benefits: | |||||||||||||||
Balance at beginning and end of period | $ | 453 | $ | 259 | $ | 453 | $ | 259 | |||||||
Accumulated effect interest rate swap agreement: | |||||||||||||||
Balance at beginning of period | $ | — | $ | 181 | $ | — | $ | (84 | ) | ||||||
Fair value adjustment | — | 211 | — | 476 | |||||||||||
Balance at end of period | $ | — | $ | 392 | $ | — | $ | 392 |
(2) | ACQUISITIONS |
Cash | $ | 2,500 | |
Contingent earn-out consideration | 1,600 | ||
Purchase price | $ | 4,100 |
Accounts receivable | $ | 389 | |
Inventory | 452 | ||
Other assets | 5 | ||
Total current assets | 846 | ||
Intangible assets | 2,032 | ||
Goodwill | 1,390 | ||
Total assets acquired | 4,268 | ||
Current liabilities | (168 | ) | |
Net assets acquired | $ | 4,100 |
(3) | RESTRUCTURING PLANS |
Employee Termination Costs | Facility Exit Costs | Other Costs | Total | ||||||||||||
Restructuring reserve as of March 31, 2019 | $ | 1 | $ | 24 | $ | 14 | $ | 39 | |||||||
Charges (reversals) to expense | (1 | ) | (24 | ) | 3 | (22 | ) | ||||||||
Cash paid | — | — | (6 | ) | (6 | ) | |||||||||
Restructuring reserve as of June 30, 2019 | — | — | 11 | 11 | |||||||||||
Cash paid | — | — | (2 | ) | (2 | ) | |||||||||
Restructuring reserve as of September 30, 2019 | $ | — | $ | — | $ | 9 | $ | 9 |
Employee Termination Costs | Facility Exit Costs | Other Costs | Total | ||||||||||||
Initial reserve | $ | 297 | $ | 127 | $ | 133 | $ | 557 | |||||||
Cash paid | — | (13 | ) | (41 | ) | (54 | ) | ||||||||
Restructuring reserve as of September 30, 2018 | $ | 297 | $ | 114 | $ | 92 | $ | 503 |
Employee Termination Costs | |||
Restructuring reserve as of March 31, 2019 | $ | 634 | |
Cash paid | (212 | ) | |
Restructuring reserve as of June 30, 2019 | 422 | ||
Cash paid | (196 | ) | |
Charges (reversals) to expense | (3 | ) | |
Restructuring reserve as of September 30, 2019 | $ | 223 |
Employee Termination Costs | |||
Initial reserve | $ | 2,076 | |
Cash paid | (490 | ) | |
Restructuring reserve as of June 30, 2019 | 1,586 | ||
Cash paid | (461 | ) | |
Charges (reversals) to expense | (305 | ) | |
Restructuring reserve as of September 30, 2019 | $ | 820 |
Employee Termination Costs | |||
Initial reserve | $ | 1,049 | |
Cash paid | (20 | ) | |
Restructuring reserve as of September 30, 2019 | $ | 1,029 |
(4) | SHARE-BASED COMPENSATION |
(5) | LEASES |
Three Months Ended | Six Months Ended | ||||||
September 30, 2019 | September 30, 2019 | ||||||
Lease costs: | |||||||
Operating lease costs | $ | 2,865 | $ | 5,753 | |||
Variable operating lease costs | 77 | 154 | |||||
Total | $ | 2,942 | $ | 5,907 |
Three Months Ended | Six Months Ended | ||||||
September 30, 2019 | September 30, 2019 | ||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows for operating leases | $ | 2,061 | $ | 4,064 | |||
Total | $ | 2,061 | $ | 4,064 |
Three Months Ended | Six Months Ended | ||||||
September 30, 2019 | September 30, 2019 | ||||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||
Operating leases | $ | — | $ | 51,597 | |||
Total | $ | — | $ | 51,597 |
Remainder of fiscal 2020 | $ | 9,298 | |
Fiscal 2021 | 8,542 | ||
Fiscal 2022 | 7,859 | ||
Fiscal 2023 | 6,600 | ||
Fiscal 2024 | 5,973 | ||
Thereafter | 18,514 | ||
Total lease payments | 56,786 | ||
Less: Interest | (10,604 | ) | |
Present value of lease liabilities | $ | 46,182 |
Fiscal 2020 | $ | 10,520 | |
Fiscal 2021 | 9,360 | ||
Fiscal 2022 | 8,446 | ||
Fiscal 2023 | 7,364 | ||
Fiscal 2024 | 6,200 | ||
Thereafter | 21,818 | ||
Total lease payments | $ | 63,708 |
September 30, 2019 | ||
Weighted-average remaining lease term (years) of operating leases | 7.0 | |
Weighted-average discount rate of operating leases | 5.8 | % |
(6) | GOODWILL, OTHER INTANGIBLE ASSETS AND LONG-LIVED ASSETS |
Balance as of March 31, 2018 | $ | — | |
Acquisition of Fitlosophy | 1,390 | ||
Impairment charge | (1,390 | ) | |
Balance as of September 30, 2018 | $ | — |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||
Tradenames and trademarks | $ | 15,054 | $ | — | $ | 15,054 | $ | — | $ | 24,353 | $ | — | |||||||||||
Customer relationships | 44,037 | 25,288 | 44,037 | 23,942 | 48,657 | 21,968 | |||||||||||||||||
Favorable lease contracts | — | — | 3,882 | 1,016 | 3,882 | 657 | |||||||||||||||||
Trademarks | 2,435 | 790 | 2,435 | 645 | 2,435 | 499 | |||||||||||||||||
Patents | 1,466 | 1,124 | 1,466 | 1,059 | 1,164 | 999 | |||||||||||||||||
Covenants not to compete | 530 | 499 | 530 | 457 | 530 | 404 | |||||||||||||||||
$ | 63,522 | $ | 27,701 | $ | 67,404 | $ | 27,119 | $ | 81,021 | $ | 24,527 |
Remainder of fiscal 2020 | $ | 1,586 | |
Fiscal 2021 | 2,997 | ||
Fiscal 2022 | 2,900 | ||
Fiscal 2023 | 2,604 | ||
Fiscal 2024 | 2,518 |
(7) | SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||
Current portion of long-term debt | $ | 12 | $ | 145 | $ | 73 | |||||
Long-term debt, net of current portion | 7 | 13 | 84 | ||||||||
$ | 19 | $ | 158 | $ | 157 |
September 30, 2019 | March 31, 2019 | September 30, 2018 | |||||||||
Current portion of long-term debt | $ | 27 | $ | 173 | $ | 158 | |||||
Long-term debt, net of current portion | — | — | 27 | ||||||||
$ | 27 | $ | 173 | $ | 185 |
(8) | COMMITMENTS AND CONTINGENCIES |
(9) | FAIR VALUE MEASUREMENTS |
Contingent Earn-out Consideration | |||
Estimated fair value as of June 1, 2018 | $ | 1,600 | |
Accretion | 64 | ||
Remeasurement adjustment | (298 | ) | |
Contingent Earn-out Consideration as of March 31, 2019 | 1,366 | ||
Accretion | 16 | ||
Contingent Earn-out Consideration as of June 30, 2019 | 1,382 | ||
Accretion | 10 | ||
Remeasurement adjustment | (1,392 | ) | |
Contingent Earn-out Consideration as of September 30, 2019 | $ | — |
September 30, 2019 | Quoted Prices In Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Cash surrender value of life insurance policies | $ | 2,828 | $ | — | $ | 2,828 | $ | — | |||||||
Total assets | $ | 2,828 | $ | — | $ | 2,828 | $ | — | |||||||
Liabilities: | |||||||||||||||
Deferred compensation plan | $ | 1,339 | $ | 1,339 | $ | — | $ | — | |||||||
Total liabilities | $ | 1,339 | $ | 1,339 | $ | — | $ | — |
March 31, 2019 | Quoted Prices In Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Cash surrender value of life insurance policies | $ | 2,765 | $ | — | $ | 2,765 | $ | — | |||||||
Total assets | $ | 2,765 | $ | — | $ | 2,765 | $ | — | |||||||
Liabilities: | |||||||||||||||
Contingent earn-out consideration | $ | 1,366 | $ | — | $ | — | $ | 1,366 | |||||||
Interest rate swap agreement | 580 | — | 580 | — | |||||||||||
Deferred compensation plan | 1,156 | 1,156 | — | — | |||||||||||
Total liabilities | $ | 3,102 | $ | 1,156 | $ | 580 | $ | 1,366 |
(10) | INCOME TAXES |
(11) | TREASURY STOCK TRANSACTIONS |
(12) | RECENT ACCOUNTING PRONOUNCEMENTS |
(13) | SUBSEQUENT EVENTS |
* | Expand to adjacent categories with a focus on brands - Focus on fragmented markets, brands, omni-channel |
* | Improve ROIC by maximizing margins while minimizing capital investment - Streamline and focus on economic value add and working capital |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 95,974 | $ | 112,901 | $ | 153,511 | $ | 177,028 | |||||||
Gross Profit | 24,719 | 24,681 | 36,825 | 36,328 | |||||||||||
Selling, general and administrative expenses | 20,439 | 28,348 | 43,486 | 57,277 | |||||||||||
Restructuring expenses | 741 | 2,127 | 2,795 | 2,127 | |||||||||||
Impairment of goodwill | — | — | — | 1,390 | |||||||||||
Interest expense (income), net | 721 | 434 | 1,649 | 696 | |||||||||||
Other expense (income), net | (989 | ) | (166 | ) | (1,076 | ) | (283 | ) | |||||||
Income tax expense (benefit) | 325 | (1,152 | ) | 737 | (1,493 | ) | |||||||||
Net income (loss) | $ | 3,482 | $ | (4,910 | ) | $ | (10,766 | ) | $ | (23,386 | ) |
Less than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | Total | ||||||||||||
Letters of credit | $ | 2,582 | — | — | — | $ | 2,582 |
(a) | Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. |
(a) | Changes in Internal Controls. There was no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) as promulgated by the Securities and Exchange Commission under the Exchange Act) during the second quarter of fiscal 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. |
Exhibit 3.1 | |
Exhibit 4.1 | |
*Exhibit 31.1 | |
*Exhibit 31.2 | |
*Exhibit 32.1 | |
*Exhibit 32.2 | |
*101.INS | XBRL Instance Document. |
*101.SCH | XBRL Schema Document. |
*101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
*101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
*101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
*101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
CSS Industries, Inc. | |||
(Registrant) | |||
Date: November 14, 2019 | By: | /s/ Christopher J. Munyan | |
Christopher J. Munyan | |||
President and Chief Executive Officer | |||
(principal executive officer and principal financial officer) | |||
/s/ Christopher J. Munyan |
Christopher J. Munyan, |
President and Chief Executive Officer |
(principal executive officer) |
/s/ Christopher J. Munyan |
Christopher J. Munyan, |
President and Chief Executive Officer |
(principal financial officer) |
/s/ Christopher J. Munyan |
Christopher J. Munyan |
President and Chief Executive Officer |
(principal executive officer) |
/s/ Christopher J. Munyan |
Christopher J. Munyan |
President and Chief Executive Officer |
(principal financial officer) |
Summary of Significant Accounting Policies - Segment Reporting (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Segment Reporting Information [Line Items] | ||||
Net sales | $ 95,974 | $ 112,901 | $ 153,511 | $ 177,028 |
Craft | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 35,001 | 42,472 | 70,660 | 77,760 |
Gift | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 23,630 | 30,614 | 43,459 | 54,654 |
Seasonal | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | $ 37,343 | $ 39,815 | $ 39,392 | $ 44,614 |
Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) |
Sep. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Jun. 01, 2018 |
Mar. 31, 2018 |
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Business Acquisition [Line Items] | ||||||
Goodwill | $ 0 | $ 0 | $ 0 | $ 0 | ||
Fitlosophy, Inc. | ||||||
Business Acquisition [Line Items] | ||||||
Accounts receivable | $ 389,000 | |||||
Inventory | 452,000 | |||||
Other assets | 5,000 | |||||
Total current assets | 846,000 | |||||
Intangible assets | 2,032,000 | |||||
Goodwill | $ 1,390,000 | 1,390,000 | ||||
Total assets acquired | 4,268,000 | |||||
Current liabilities | (168,000) | |||||
Net assets acquired | $ 4,100,000 |
Income Taxes |
6 Months Ended |
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Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Management assesses all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize existing deferred tax assets. A significant piece of objective negative evidence evaluated in fiscal 2019 was the cumulative U.S. pretax loss incurred over the then most recent three-year period. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future taxable income. On the basis of that evaluation, as of December 31, 2018, a full valuation allowance was recorded to fully offset the U.S. net deferred tax assets, as they more likely than not will not be realized. Management updated this assessment as of September 30, 2019, and concluded that the full valuation allowance for U.S. net deferred tax assets is still required. The Company recognizes the impact of an uncertain tax position if it is more likely than not that such position will be sustained on audit, based solely on the technical merits of the position. The income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. Management estimates the annual effective tax rate quarterly based on the forecasted pretax income (loss) results of its U.S. and non-U.S. jurisdictions. Items unrelated to current fiscal year ordinary income (loss) are recognized entirely in the period identified as a discrete item of tax. These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, and adjustments to previously recorded reserves for uncertain tax positions. |
Goodwill, Other Intangible Assets And Long-Lived Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Other Intangible Assets And Long-Lived Assets | GOODWILL, OTHER INTANGIBLE ASSETS AND LONG-LIVED ASSETS During the first quarter of fiscal 2019, the Fitlosophy acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. During the first quarter of fiscal 2019, the Company determined that a triggering event occurred due to the fact that the Company’s total stockholders’ equity was in excess of the Company's market capitalization. Given this circumstance, the Company bypassed the option to assess qualitative factors to determine the existence of impairment and proceeded directly to the quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $1,390,000. As of September 30, 2019, March 31, 2019 and September 30, 2018, the Company had no goodwill. The change in the carrying amount of goodwill during the six months ended September 30, 2018 is as follows (in thousands):
The gross carrying amount and accumulated amortization of other intangible assets is as follows (in thousands):
Amortization expense related to intangible assets was $797,000 and $1,300,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $1,598,000 and $2,567,000 for the six months ended September 30, 2019 and 2018. Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2020 and each of the succeeding four years is projected to be as follows (in thousands):
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Acquisitions |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS On June 1, 2018, a subsidiary of the Company completed the acquisition of substantially all of the business and net assets of Fitlosophy for $2,500,000 in cash. In addition to the $2,500,000 paid at closing, the Company may pay up to an additional $10,500,000 of contingent earn-out consideration, in cash, if net sales of certain products meet or exceed five different thresholds during the period from the acquisition date through March 31, 2023. If earned, the contingent consideration payments will be paid, generally within 20 days after the end of each rolling twelve-month measurement period (quarterly through March 31, 2023). No such payments of contingent consideration have been earned or paid as of September 30, 2019. At the date of acquisition, the estimated fair value of the contingent earn-out consideration was $1,600,000. The estimated fair value of the contingent earn-out consideration was determined using a Monte Carlo simulation discounted to a present value. See further discussion of subsequent adjustments to the fair value of the contingent earn-out consideration in Note 9 to the consolidated financial statements. The following table summarizes the purchase price at the date of acquisition (in thousands):
Fitlosophy is devoted to creating, marketing, and distributing innovative products that inspire people to develop healthy habits by focusing on effective goal-setting through journaling. Products include a complete line of fitness and wellness planning products all sold under the fitlosophyTM, live life fitTM and fitbookTM brands. The acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. This goodwill was subsequently deemed impaired as a result of the continued discrepancy between the Company's stockholders' equity balance and its market capitalization, and therefore, was expensed during the first quarter of fiscal 2019. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
Pro forma results of operations for this acquisition have not been presented as the financial impact to our consolidated results of operations is not material. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results for the full year. 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 2020” refers to the fiscal year ending March 31, 2020. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation. Nature of Business CSS is a creative consumer products company, focused on the craft, gift and seasonal categories. For these design-driven categories, the Company engages in the creative development, manufacture, procurement, distribution and sale of our products with an omni-channel approach focused primarily on mass market retailers. Craft The craft category includes sewing patterns, ribbons and trims, buttons, knitting needles, needle arts and kids' crafts. These products are sold to mass market, specialty, and online retailers, and are generally ordered on a replenishment basis throughout the year. Gift The gift category includes products designed to celebrate certain life events or special occasions, such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Products include ribbons and bows, floral accessories, infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, and other items that commemorate life's celebrations. Products in this category are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year. Seasonal The seasonal category includes holiday gift packaging items such as ribbon, bows, greeting cards, bags, tags and gift card holders, in addition to specific holiday-themed decorations, accessories, and activities, such as Easter egg dyes and novelties and Valentine's Day classroom exchange cards. These products are sold to mass market retailers, and production forecasts for these products are generally known well in advance of shipment. CSS’ product breadth provides its retail customers the opportunity to use a single vendor for much of their craft, gift and seasonal product requirements. A substantial portion of CSS’ products are manufactured and packaged in the United States and warehoused and distributed from facilities in the United States, the United Kingdom and Australia, with the remainder sourced from foreign suppliers, primarily in Asia. The Company also has a manufacturing facility in India that produces certain craft products, including trims, braids and tassels, and also has a distribution facility in India. The Company’s products are sold to its customers by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers’ representatives. CSS maintains purchasing offices in Hong Kong and China to administer Asian sourcing opportunities. Foreign Currency Translation and Transactions The Company's foreign subsidiaries generally use the local currency as the functional currency. The Company translates all assets and liabilities at period end exchange rates and all income and expense accounts at average rates during the period. Translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses on foreign currency transactions (denominated in currencies other than the local currency) are not material and are included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to revenue recognition, the valuation of inventory and accounts receivable, the assessment of the recoverability of other intangible and long-lived assets and resolution of litigation and other proceedings. Actual results could differ from these estimates. Inventories The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or net realizable value. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or net realizable value. Inventories consisted of the following (in thousands):
In connection with the acquisitions of substantially all of the net assets and business of The McCall Pattern Company on December 13, 2016, Simplicity Creative Group ("Simplicity") on November 3, 2017 and Fitlosophy, Inc. ("Fitlosophy") on June 1, 2018, the Company recorded a step-up to fair value of the inventory acquired of $21,773,000, $10,214,000, and $312,000, respectively, at the date of each such acquisition. This was a result of the acquired inventory being marked up to an estimated net selling price in purchase accounting and is recognized through cost of sales as the inventory is sold. The amount of step-up to fair value of the acquired inventory remaining as of September 30, 2019, March 31, 2019 and September 30, 2018 was $0, $284,000 and $2,076,000, respectively. Asset Held for Sale Asset held for sale of $131,000 as of September 30, 2019 and March 31, 2019 represents a distribution facility in Danville, Pennsylvania, which the Company sold on October 29, 2019 for $750,000. On the closing date, the Company received cash proceeds of $708,000 after closing costs. The Company also incurred additional legal costs of approximately $24,000 to sell the facility. Asset held for sale of $2,391,000 as of September 30, 2018, which represented a distribution facility in Havant, England, was sold in the fourth quarter of fiscal 2019. Property, Plant and Equipment Property, plant and equipment are stated at cost and include the following (in thousands):
Depreciation expense was $2,469,000 and $2,124,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $4,883,000 and $4,154,000 for the six months ended September 30, 2019 and 2018, respectively. Leases Effective April 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842") using the modified retrospective transition approach. See Note 5 for more information. The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are not material to the Company’s consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of future payments. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, adjusted for any prepaid or accrued rent payments, lease incentives and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections for all asset classes: (1) the Company will not separate lease and non-lease components by class of underlying asset, (2) the Company will apply the short-term lease exemption by class of underlying asset, and, (3) the Company will apply the portfolio approach to the development of its discount rates for the leases to be recorded in accordance with ASC 842. The Company has chosen not to elect the hindsight practical expedient for its transition to ASC 842. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. Long-Lived Assets including Other Intangible Assets and Property, Plant and Equipment The Company performs an annual impairment test of the carrying amount of indefinite-lived intangible assets in the fourth quarter of its fiscal year. Additionally, the Company would perform its impairment testing at an interim date if events or circumstances indicate that intangibles might be impaired. Other indefinite lived intangible assets consist of tradenames which are required to be tested annually for impairment. An entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, an entity must identify and evaluate changes in economic, industry and entity-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If the result of the qualitative analysis indicates it is more likely than not that an indefinite-lived intangible asset is impaired, a more detailed fair value calculation will need to be performed which is used to identify potential impairments and to measure the amount of impairment losses to be recognized, if any. The fair value of the Company’s tradenames is calculated using a “relief from royalty payments” methodology. This approach involves first estimating reasonable royalty rates for each trademark and then applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine the fair value. The royalty rate is estimated using both a market and income approach. The market approach relies on the existence of identifiable transactions in the marketplace involving the licensing of tradenames similar to those owned by the Company. The income approach uses a projected pretax profitability rate relevant to the licensed income stream. The Company believes the use of multiple valuation techniques results in a more accurate indicator of the fair value of each tradename. This fair value is then compared with the carrying value of each tradename to determine if impairment exists. Long-lived assets (including property, plant and equipment), except for indefinite lived intangible assets, are reviewed for impairment when events or circumstances indicate the carrying value of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value. There were no triggering events identified during the six months ended September 30, 2019 that required interim impairment testing for long-lived assets. The Company recorded an impairment of property, plant and equipment of $1,570,000 in the second quarter of fiscal 2019 related to a restructuring plan to combine its operations in the United Kingdom. See Note 3 for further discussion of this restructuring and Note 6 for further information on other intangible assets. Revenue Recognition Revenue from the sale of the Company's products is recognized when control of the promised goods is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to receive from its customers in exchange for those goods. The Company's revenue is recognized using the five-step model identified in ASC 606, "Revenue from Contracts with Customers." These steps are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the performance obligations are satisfied. The Company's contracts with customers generally include one performance obligation under the revenue recognition standard. For most product sales, the performance obligation is the delivery of a specified product, and is satisfied at the point in time when control of the product has transferred to the customer, which takes place when title and risk of loss transfer in accordance with the applicable shipping terms, typically either at shipping point or at delivery to a specified destination. The Company has certain limited products, primarily sewing patterns, that are sold on consignment at mass market retailers. The Company recognizes revenue on these products as they are sold to end consumers as recorded at point-of-sale terminals, which is the point in time when control of the product is transferred to the customer. Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which the Company expects to be entitled to receive in exchange for transferring the goods. When applicable, the transaction price includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variable consideration consists of revenues that are subject to reductions to the transaction price for customer programs, which may include special pricing arrangements for specific customers, volume incentives and other promotions. The Company has significant historical experience with customer programs and estimates the expected consideration considering historical trends. The related reserves are included in accrued customer programs in the consolidated balance sheets. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. In limited cases, the Company may provide the right to return product to certain customers. The Company also records estimated reductions to revenue, based primarily on known claims, for customer returns and chargebacks that may arise as a result of shipping errors, product damaged in transit or for other reasons that become known subsequent to recognizing the revenue. These provisions are recorded in the period that the related sale is recognized and are reflected as a reduction from gross sales. The related reserves are included in accrued customer programs in the September 30, 2019 consolidated balance sheet and in accounts receivable, net of allowances in the March 31, 2019 and September 30, 2018 consolidated balance sheets. If the amount of actual customer returns and chargebacks were to increase or decrease from the estimated amount, revisions to the estimated reserve would be recorded. The Company treats shipping and handling activities that occur until the customer has obtained control of a good as an activity to fulfill the promise to transfer the product. Costs related to shipping of product are recorded as incurred and classified in cost of sales in the consolidated statements of operations and comprehensive income (loss). Payment terms with customers vary by customer, but generally range from 30 to 90 days. Certain seasonal revenues have extended payment terms in accordance with general industry practice. Since the term between invoicing and expected payment is less than one year, the Company does not adjust the transaction price for the effects of a financing component. Sales commissions are earned and recognized as expense as the related revenue is recognized at a point in time. These costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate governmental agencies. The Company operates as a single reporting segment, engaged in the creative development, manufacture, procurement, distribution, and sale of craft, gift and seasonal products, primarily to mass market retailers in the United States. The following represents our net sales disaggregated by product category (in thousands):
Net Income (Loss) Per Common Share Due to the Company's net losses for the six months ended September 30, 2019 and the three- and six months ended September 30, 2018, potentially dilutive securities of 587,000 shares, 525,000 shares and 525,000 shares, respectively, consisting of outstanding stock options and unearned time-based restricted stock units, were excluded from the diluted net loss per common share calculation due to their antidilutive effect. The Company excluded 275,000 shares, consisting of outstanding stock options, from the diluted net income per common share calculation for the three months ended September 30, 2019 due to their antidilutive effect. Market-based and performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted-average shares until the market or performance conditions are met even when the Company is profitable for the respective period. Components of Accumulated Other Comprehensive Income (Loss), Net
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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|---|
Statement of Financial Position [Abstract] | |||
Allowances for accounts receivable | $ 231 | $ 2,198 | $ 1,757 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 25,000,000 | 25,000,000 | 25,000,000 |
Common stock, shares issued | 14,703,084 | 14,703,084 | 14,703,084 |
Treasury stock, shares | 5,824,025 | 5,865,846 | 5,813,926 |
Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Remainder of fiscal 2020 | $ 9,298 |
Fiscal 2021 | 8,542 |
Fiscal 2022 | 7,859 |
Fiscal 2023 | 6,600 |
Fiscal 2024 | 5,973 |
Thereafter | 18,514 |
Total lease payments | 56,786 |
Less: Interest | (10,604) |
Present value of lease liabilities | $ 46,182 |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Nov. 11, 2019 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | CSS INDUSTRIES INC | |
Entity Central Index Key | 0000020629 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Non-accelerated Filer | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Smaller Reporting Company | true | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 8,880,297 |
Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | The components of lease costs are as follows (in thousands):
Supplemental cash flow information is as follows (in thousands):
Weighted-average lease terms and discount rates are as follows:
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Lessee, Operating Lease, Liability, Maturity | The aggregate future lease payments for operating leases as of September 30, 2019 is projected to be as follows (in thousands):
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Schedule of Future Minimum Rental Payments for Operating Leases | The future minimum lease payments associated with all non-cancelable lease obligations under ASC 840 as of March 31, 2019 is as follows (in thousands):
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Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results for the full year. 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 2020” refers to the fiscal year ending March 31, 2020. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation. |
Nature of Business | Nature of Business CSS is a creative consumer products company, focused on the craft, gift and seasonal categories. For these design-driven categories, the Company engages in the creative development, manufacture, procurement, distribution and sale of our products with an omni-channel approach focused primarily on mass market retailers. Craft The craft category includes sewing patterns, ribbons and trims, buttons, knitting needles, needle arts and kids' crafts. These products are sold to mass market, specialty, and online retailers, and are generally ordered on a replenishment basis throughout the year. Gift The gift category includes products designed to celebrate certain life events or special occasions, such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Products include ribbons and bows, floral accessories, infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, and other items that commemorate life's celebrations. Products in this category are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year. Seasonal The seasonal category includes holiday gift packaging items such as ribbon, bows, greeting cards, bags, tags and gift card holders, in addition to specific holiday-themed decorations, accessories, and activities, such as Easter egg dyes and novelties and Valentine's Day classroom exchange cards. These products are sold to mass market retailers, and production forecasts for these products are generally known well in advance of shipment. CSS’ product breadth provides its retail customers the opportunity to use a single vendor for much of their craft, gift and seasonal product requirements. A substantial portion of CSS’ products are manufactured and packaged in the United States and warehoused and distributed from facilities in the United States, the United Kingdom and Australia, with the remainder sourced from foreign suppliers, primarily in Asia. The Company also has a manufacturing facility in India that produces certain craft products, including trims, braids and tassels, and also has a distribution facility in India. The Company’s products are sold to its customers by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers’ representatives. CSS maintains purchasing offices in Hong Kong and China to administer Asian sourcing opportunities. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The Company's foreign subsidiaries generally use the local currency as the functional currency. The Company translates all assets and liabilities at period end exchange rates and all income and expense accounts at average rates during the period. Translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses on foreign currency transactions (denominated in currencies other than the local currency) are not material and are included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to revenue recognition, the valuation of inventory and accounts receivable, the assessment of the recoverability of other intangible and long-lived assets and resolution of litigation and other proceedings. Actual results could differ from these estimates. |
Inventories | Inventories The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or net realizable value. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or net realizable value. |
Leases | Leases Effective April 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842") using the modified retrospective transition approach. See Note 5 for more information. The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are not material to the Company’s consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of future payments. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, adjusted for any prepaid or accrued rent payments, lease incentives and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections for all asset classes: (1) the Company will not separate lease and non-lease components by class of underlying asset, (2) the Company will apply the short-term lease exemption by class of underlying asset, and, (3) the Company will apply the portfolio approach to the development of its discount rates for the leases to be recorded in accordance with ASC 842. The Company has chosen not to elect the hindsight practical expedient for its transition to ASC 842. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. |
Long-Lived Assets including Goodwill and Other Intangible Assets | Long-Lived Assets including Other Intangible Assets and Property, Plant and Equipment The Company performs an annual impairment test of the carrying amount of indefinite-lived intangible assets in the fourth quarter of its fiscal year. Additionally, the Company would perform its impairment testing at an interim date if events or circumstances indicate that intangibles might be impaired. Other indefinite lived intangible assets consist of tradenames which are required to be tested annually for impairment. An entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, an entity must identify and evaluate changes in economic, industry and entity-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If the result of the qualitative analysis indicates it is more likely than not that an indefinite-lived intangible asset is impaired, a more detailed fair value calculation will need to be performed which is used to identify potential impairments and to measure the amount of impairment losses to be recognized, if any. The fair value of the Company’s tradenames is calculated using a “relief from royalty payments” methodology. This approach involves first estimating reasonable royalty rates for each trademark and then applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine the fair value. The royalty rate is estimated using both a market and income approach. The market approach relies on the existence of identifiable transactions in the marketplace involving the licensing of tradenames similar to those owned by the Company. The income approach uses a projected pretax profitability rate relevant to the licensed income stream. The Company believes the use of multiple valuation techniques results in a more accurate indicator of the fair value of each tradename. This fair value is then compared with the carrying value of each tradename to determine if impairment exists. Long-lived assets (including property, plant and equipment), except for indefinite lived intangible assets, are reviewed for impairment when events or circumstances indicate the carrying value of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value. |
Revenue Recognition | Revenue Recognition Revenue from the sale of the Company's products is recognized when control of the promised goods is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to receive from its customers in exchange for those goods. The Company's revenue is recognized using the five-step model identified in ASC 606, "Revenue from Contracts with Customers." These steps are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the performance obligations are satisfied. The Company's contracts with customers generally include one performance obligation under the revenue recognition standard. For most product sales, the performance obligation is the delivery of a specified product, and is satisfied at the point in time when control of the product has transferred to the customer, which takes place when title and risk of loss transfer in accordance with the applicable shipping terms, typically either at shipping point or at delivery to a specified destination. The Company has certain limited products, primarily sewing patterns, that are sold on consignment at mass market retailers. The Company recognizes revenue on these products as they are sold to end consumers as recorded at point-of-sale terminals, which is the point in time when control of the product is transferred to the customer. Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which the Company expects to be entitled to receive in exchange for transferring the goods. When applicable, the transaction price includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variable consideration consists of revenues that are subject to reductions to the transaction price for customer programs, which may include special pricing arrangements for specific customers, volume incentives and other promotions. The Company has significant historical experience with customer programs and estimates the expected consideration considering historical trends. The related reserves are included in accrued customer programs in the consolidated balance sheets. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. In limited cases, the Company may provide the right to return product to certain customers. The Company also records estimated reductions to revenue, based primarily on known claims, for customer returns and chargebacks that may arise as a result of shipping errors, product damaged in transit or for other reasons that become known subsequent to recognizing the revenue. These provisions are recorded in the period that the related sale is recognized and are reflected as a reduction from gross sales. The related reserves are included in accrued customer programs in the September 30, 2019 consolidated balance sheet and in accounts receivable, net of allowances in the March 31, 2019 and September 30, 2018 consolidated balance sheets. If the amount of actual customer returns and chargebacks were to increase or decrease from the estimated amount, revisions to the estimated reserve would be recorded. The Company treats shipping and handling activities that occur until the customer has obtained control of a good as an activity to fulfill the promise to transfer the product. Costs related to shipping of product are recorded as incurred and classified in cost of sales in the consolidated statements of operations and comprehensive income (loss). Payment terms with customers vary by customer, but generally range from 30 to 90 days. Certain seasonal revenues have extended payment terms in accordance with general industry practice. Since the term between invoicing and expected payment is less than one year, the Company does not adjust the transaction price for the effects of a financing component. Sales commissions are earned and recognized as expense as the related revenue is recognized at a point in time. These costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate governmental agencies. The Company operates as a single reporting segment, engaged in the creative development, manufacture, procurement, distribution, and sale of craft, gift and seasonal products, primarily to mass market retailers in the United States. |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefits Plans" ("ASU 2018-14"), which is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit pension or other postretirement plans. ASU 2018-14 is required to be applied on a retrospective basis to all periods presented and is effective for the Company in its fiscal year ending March 31, 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," ("ASU 2018-15"). ASU 2018-15 aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the updated guidance requires an entity to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in order to determine whether those costs should be expensed as incurred or capitalized. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements. |
Leases - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
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Sep. 30, 2019 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Lease costs: | |||
Operating lease costs | $ 2,865 | $ 5,753 | |
Variable operating lease costs | 77 | 154 | |
Total lease costs | 2,942 | 5,907 | |
Operating cash flows for operating leases | 2,061 | 4,064 | $ 0 |
Right-of-use assets obtained in exchange for lease obligations | $ 0 | $ 51,597 | |
Weighted-average remaining lease term (years) of operating leases | 7 years | 7 years | |
Weighted-average discount rate of operating leases | 5.80% | 5.80% |
Goodwill, Other Intangible Assets And Long-Lived Assets - Goodwill Rollforward (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Goodwill [Roll Forward] | ||||
Beginning balance | $ 0 | $ 0 | ||
Acquisition of Fitlosophy | 1,390,000 | |||
Impairment charge | $ 0 | $ 0 | 0 | (1,390,000) |
Ending balance | $ 0 | $ 0 | $ 0 | $ 0 |
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
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Sep. 30, 2018 |
Jun. 30, 2018 |
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Statement of Stockholders' Equity [Abstract] | ||
Cash dividends (in dollars per share) | $ 0.20 | $ 0.20 |
Goodwill, Other Intangible Assets And Long-Lived Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The change in the carrying amount of goodwill during the six months ended September 30, 2018 is as follows (in thousands):
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Gross Carrying Amount and Accumulated Amortization of Other Intangible Assets | The gross carrying amount and accumulated amortization of other intangible assets is as follows (in thousands):
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Schedule of Future Amortization Expense | Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2020 and each of the succeeding four years is projected to be as follows (in thousands):
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following (in thousands):
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Property, Plant and Equipment | Property, plant and equipment are stated at cost and include the following (in thousands):
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Schedule of Segment Reporting | The following represents our net sales disaggregated by product category (in thousands):
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Schedule of Accumulated Other Comprehensive Income (Loss) | Components of Accumulated Other Comprehensive Income (Loss), Net
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Summary of Significant Accounting Policies - Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
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Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | $ 165,020 | $ 160,577 | $ 157,312 |
Less - Accumulated depreciation and amortization | (114,538) | (109,657) | (107,655) |
Net property, plant and equipment | 50,482 | 50,920 | 49,657 |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | 5,738 | 5,738 | 6,372 |
Buildings, leasehold interests and improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | 40,125 | 40,893 | 42,345 |
Machinery, equipment and other | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | $ 119,157 | $ 113,946 | $ 108,595 |
Acquisitions - Schedule of Acquisition (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
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Jun. 01, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Business Acquisition [Line Items] | |||
Cash | $ 0 | $ 2,500 | |
Fitlosophy, Inc. | |||
Business Acquisition [Line Items] | |||
Cash | $ 2,500 | ||
Contingent earn-out consideration | 1,600 | ||
Purchase price | $ 4,100 |
Short-Term Borrowings And Credit Arrangements |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Borrowings And Credit Arrangements | SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS On March 7, 2019, the Company entered into a $125,000,000 asset based senior secured credit facility with three banks (the “ABL Credit Facility”). The Company used the proceeds from borrowings under the ABL Credit Facility to repay in full the Company’s prior credit facility with two banks (the “Prior Credit Facility”), under which the maximum credit available to the Company at any one time (the “Committed Amount”) was $50,000,000 at the time the Prior Credit Facility was repaid and terminated on March 7, 2019. The ABL Credit Facility has a maturity date of March 7, 2024, unless earlier terminated. On May 23, 2019, the Company entered into a Second Amendment (the “Amendment”) to the ABL Credit Facility. The Amendment reduced the maximum amount available under the revolving credit facility from $125,000,000 to $100,000,000. Availability under the Amendment is equal to the lesser of $100,000,000 or a Borrowing Base (as defined in the Amendment), in each case minus (i) revolving loans outstanding and (ii) $15,000,000 until the Agent’s receipt of a compliance certificate demonstrating compliance with the amended financial covenants. The Amendment requires the Company to not permit the Fixed Charge Coverage Ratio (as defined in the Amendment), as of the end of any calendar month (commencing with the twelve-month period ending March 31, 2020), to be less than 1.00 to 1.00. In addition, commencing with the month ending April 30, 2019 and continuing until the month ending March 31, 2020, the Company is required to have, at the end of each calendar month during such period, EBITDA for the corresponding period (which such period shall be based on a cumulative monthly build-up commencing with the month ending April 30, 2019) then ending of not less than the corresponding amount set forth in the Amendment. The Amendment also limits Capital Expenditures (as defined in the Amendment) for fiscal 2020 to $8,000,000 or less. The $15,000,000 availability block mentioned above was reduced to $10,000,000 for the period beginning August 20, 2019 to September 10, 2019, $11,000,000 for the period beginning September 10, 2019 to September 24, 2019, and $12,500,000 for the period beginning September 24, 2019 to October 4, 2019. Permitted Acquisitions (as defined in the ABL Credit Facility) are no longer permitted under the Amendment, and certain Restricted Payments (as defined in the ABL Credit Facility), including dividends previously allowed based upon meeting certain leverage ratio and average Availability (as defined in the ABL Credit Facility) criteria, are no longer allowed. At the Company’s election, loans made under the ABL Credit Facility will bear interest at either: (i) a base rate (“Base Rate”) plus an applicable rate or (ii) an “Adjusted LIBO Rate” (as defined in the ABL Credit Facility) plus an applicable rate, subject to adjustment if an event of default under the ABL Credit Facility has occurred and is continuing. The Base Rate means the highest of (a) the Agent’s “prime rate,” (b) the federal funds effective rate plus 0.50% and (c) the Adjusted LIBO Rate for an interest period of one month plus 1%. During the period prior to March 31, 2020, Adjusted LIBO Rate loans made under the ABL Credit Facility will bear interest at the Adjusted LIBO Rate plus an applicable rate of 2.50%, and Base Rate loans made under the ABL Credit Facility will bear interest at the Base Rate plus an applicable rate of 1.50%. After March 31, 2020, the applicable rate will be adjusted based on the Company’s Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) as further set forth in the ABL Credit Facility. Additionally, the Company is subject to a commitment fee equal to 0.25% per annum on the average daily unused portion of the revolving commitment, payable monthly to the Agent for the ratable benefit of the lenders. The ABL Credit Facility is secured by a first priority perfected security interest in substantially all of the assets of the Company, including certain real estate, subject to certain exceptions and exclusions as set forth in the ABL Credit Facility and other loan documents, including the Pledge and Security Agreement (the “Pledge Agreement”) entered into by the Company and the Agent contemporaneously with their execution of the ABL Credit Facility. The ABL Credit Facility contains certain affirmative and negative covenants that are binding on the Company, including, but not limited to, restrictions (subject to specified exceptions and qualifications) on the ability of the Company to incur indebtedness, to create liens, to merge or consolidate, to make dispositions, to make restricted payments such as dividends, distributions or equity repurchases, to make investments or undertake acquisitions, to prepay other indebtedness, to enter into certain transactions with affiliates, to enter into sale and leaseback transactions, or to enter into any restrictive agreements. In addition, the ABL Credit Facility requires the Company to abide by certain financial covenants calculated for the Company and its subsidiaries as noted above. The ABL Credit Facility contains customary events of default (which are in some cases subject to certain exceptions, thresholds, notice requirements and grace periods), including, but not limited to, non-payment of principal or interest or other amounts, misrepresentations, failure to perform or observe covenants, cross-defaults with certain other material indebtedness, certain change in control events, voluntary or involuntary bankruptcy proceedings, certain judgments or decrees, failure of the ABL Credit Facility or other loan documents to be in full force and effect, certain ERISA events and judgments. The ABL Credit Facility also contains certain prepayment provisions, representations, warranties and conditions. As of September 30, 2019, the Company was in compliance with all debt covenants under the ABL Credit Facility. Under the ABL Credit Facility, all collections on account of collateralized accounts receivable are required to be deposited into lock boxes that are subject to the control of the administrative agent (“Agent”) for the ABL Credit Facility (“Agent-Controlled Lock Boxes”). All funds deposited into Agent-Controlled Lock Boxes are swept daily and are required to be applied by the Agent as repayments of amounts owed by the Company under the ABL Credit Facility. Accordingly, the Company has classified its outstanding loan balance under the ABL Credit Facility as a current liability. The outstanding balance under the ABL Credit Facility as of September 30, 2019 and March 31, 2019 was $50,381,000 and $26,139,000, respectively. As of September 30, 2018, there was $61,185,000 outstanding under the Company's Prior Credit Facility classified as a long term liability. The Company leases certain equipment under finance leases which are classified in the accompanying consolidated balance sheets as follows (in thousands):
The Company also finances certain equipment which is classified in the accompanying consolidated balance sheets as follows (in thousands):
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Restructuring Plans |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Plans | RESTRUCTURING PLANS Business Restructuring In the first quarter of fiscal 2019, the Company announced a restructuring plan to combine its operations in the United Kingdom and Australia, respectively. This restructuring was undertaken in order to improve profitability and efficiency through the elimination of (i) redundant back office functions; (ii) certain staffing positions and (iii) excess distribution and warehouse capacity, and was substantially completed in the second quarter of fiscal 2019. Commencing in the second quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments as part of this restructuring plan. Also, in connection with this restructuring plan, the Company recorded an impairment of property, plant and equipment at one of the affected facilities in the United Kingdom of $1,398,000 in the second quarter of fiscal 2019, which was included in restructuring expenses. As of September 30, 2019 and September 30, 2018, the remaining liability of $9,000 and $503,000, respectively, was classified in accrued other expenses in the accompanying consolidated balance sheets. Selected information relating to the aforementioned restructuring follows (in thousands):
Selected information relating to the aforementioned restructuring follows (in thousands):
Strategic Business Initiative In the third quarter of fiscal 2019, the Company announced that it engaged an international consulting firm to perform a comprehensive review of its operating structure with the goal of improving the alignment of processes across the business, as the Company continues to integrate recent acquisitions and evaluate its portfolio. Commencing in the third quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $223,000 was classified in accrued other expenses in the accompanying consolidated balance sheet. Selected information relating to the aforementioned restructuring follows (in thousands):
Performance Improvement Initiative In the first quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company’s cost base to improve business performance, profitability and cash flow generation. Commencing in the first quarter of fiscal 2020, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $820,000 was classified in accrued other expenses in the accompanying consolidated balance sheet. Selected information relating to the aforementioned restructuring follows (in thousands):
Resource Alignment Initiative In the second quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company's cost base by improving the alignment of resources with the current operating structure. Commencing in the second quarter of fiscal 2020, the Company recorded an initial restructuring reserve and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $1,029,000 was classified in accrued other expenses in the accompanying consolidated balance sheet. Selected information relating to the aforementioned restructuring follows (in thousands):
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Treasury Stock Transactions |
6 Months Ended |
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Sep. 30, 2019 | |
Equity [Abstract] | |
Treasury Stock Transactions | TREASURY STOCK TRANSACTIONS Under a stock repurchase program that had been previously authorized by the Company's Board of Directors, the Company repurchased 249,908 shares of the Company's common stock for $3,628,000 during the six months ended September 30, 2018. As payment for stock repurchases occurs upon settlement two business days after the applicable trading transaction, $235,000 of this amount was paid by the Company subsequent to September 30, 2018. There were no repurchases of the Company's common stock by the Company during the six months ended September 30, 2019. As of September 30, 2019, the Company had no shares remaining available for repurchase under the Board's authorized repurchase program. |
Treasury Stock Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
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Equity [Abstract] | ||||
Number of shares repurchased (in shares) | 249,908 | 0 | 249,908 | |
Value of shares repurchased | $ 3,628 | $ 3,628 | ||
Purchase of treasury stock | $ 0 | $ 3,393 | $ 235 | |
Number of remaining shares authorized to be repurchased (in shares) | 0 | 0 |
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