0000950116-95-000326.txt : 19950811 0000950116-95-000326.hdr.sgml : 19950811 ACCESSION NUMBER: 0000950116-95-000326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950803 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSS INDUSTRIES INC CENTRAL INDEX KEY: 0000020629 STANDARD INDUSTRIAL CLASSIFICATION: 2771 IRS NUMBER: 131920657 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02661 FILM NUMBER: 95558694 BUSINESS ADDRESS: STREET 1: 1845 WALNUT ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2155699900 FORMER COMPANY: FORMER CONFORMED NAME: CITY STORES CO DATE OF NAME CHANGE: 19851212 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q For the Quarter Ended Commission file number 1-2661 June 30, 1995 - ------------------ CSS INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its Charter) Delaware 13-1920657 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 1845 Walnut Street, Philadelphia, PA 19103 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (215) 569-9900 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of June 30, 1995, there were 10,655,773 shares of Common Stock outstanding which excludes shares which may still be issued upon exercise of stock options. Page 1 of 11 CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- INDEX ----- PART I - FINANCIAL INFORMATION - ------------------------------ In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 1995 and December 31, 1994 and the results of operations and cash flows for the three months and six months ended June 30, 1995 and 1994. The results for the three months and six months ended June 30, 1995 and 1994 are not necessarily indicative of the expected results for the full year. As certain previously reported notes and footnote disclosures have been omitted, these financial statements should be read in conjunction with the latest annual report on Form 10-K, with the March 31, 1995 quarterly report on Form 10-Q and with Part II of this document. PAGE NO. ------- Consolidated Statements of Operations - Three months and six months ended June 30, 1995 and 1994 3 Consolidated Condensed Balance Sheets - June 30, 1995 and December 31, 1994 4 Consolidated Statements of Cash Flows - Six months ended June 30, 1995 and 1994 5 Notes to Consolidated Financial Statements 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II - OTHER INFORMATION - --------------------------- Items 4. Submission of Matters to a Vote of Security Holders 10 SIGNATURE 11 - --------- -2- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Unaudited)
(In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------- 1995 1994 1995 1994 ------- ------- ------- ------- SALES $43,038 $33,222 $85,567 $68,383 ------- ------- ------- ------- COSTS AND EXPENSES Cost of sales 24,432 17,463 47,740 36,349 Selling, general and administrative expenses 16,265 13,894 34,488 28,850 Interest expense (income), net 367 (11) 552 199 Rental and other income, net (359) (329) (592) (599) ------- ------- ------- ------- 40,705 31,017 82,188 64,799 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 2,333 2,205 3,379 3,584 INCOME TAXES 949 903 1,374 1,459 ------- ------- ------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST 1,384 1,302 2,005 2,125 MINORITY INTEREST IN INCOME OF SUBSIDIARIES, NET 124 163 244 290 ------- ------- ------- ------- NET INCOME FROM CONTINUING OPERATIONS 1,260 1,139 1,761 1,835 DISCONTINUED OPERATIONS Income from discontinued operations, net of taxes of $95 -- -- -- 114 Gain on sale of subsidiary, net of taxes of $6,145 -- -- -- 9,661 ------- ------- ------- ------- NET INCOME $ 1,260 $ 1,139 $ 1,761 $11,610 ======= ======= ======= ======= NET INCOME PER COMMON SHARE Continuing operations $ .12 $ .09 $ .16 $ .15 Discontinued operations -- -- -- .01 Gain on sale of subsidiary -- -- -- .80 ------- ------- ------- ------- $ .12 $ .09 $ .16 $ .96 ======= ======= ======= ======= CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ -- $ -- $ -- ======= ======= ======= =======
See notes to consolidated financial statements. -3- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS -------------------------------------
(In thousands) June 30, December 31, 1995 1994 ----------- ------------ (Unaudited) ASSETS ------ CURRENT ASSETS Cash and temporary investments $ 1,922 $ 8,774 Marketable securities 2,708 -- Accounts receivable, net 25,006 52,886 Inventories 76,145 35,862 Deferred taxes 6,170 6,170 Other current assets 6,818 5,729 -------- -------- Total current assets 118,769 109,421 -------- -------- PROPERTY, PLANT AND EQUIPMENT, NET 41,148 38,905 -------- -------- OTHER ASSETS Intangible assets 58,621 55,404 Other 1,568 1,351 -------- -------- Total other assets 60,189 56,755 -------- -------- Total assets $220,106 $205,081 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ TOTAL CURRENT LIABILITIES $60,853 $37,346 LONG-TERM OBLIGATIONS 8,210 14,398 MINORITY INTEREST 3,254 3,005 DEFERRED TAXES 7,352 7,352 SHAREHOLDERS' EQUITY 140,437 142,980 -------- -------- Total liabilities and shareholders' equity $220,106 $205,081 ======== ========
See notes to consolidated financial statements. -4- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited)
(In thousands) Six Months Ended June 30, --------------------------- 1995 1994 ------- ------- Cash flows from operating activities: Net income $ 1,761 $11,610 ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,928 3,661 Gain on sale of assets, net (107) (9,692) Provision for doubtful accounts 493 510 Minority interest in income or loss of subsidiaries 244 309 Changes in assets and liabilities, net of effects of business combinations and divestitures: Decrease in accounts receivable 27,248 33,800 (Increase) in inventories (35,520) (32,155) (Increase) in other assets (682) (1,115) (Decrease) in current liabilities (3,817) (4,018) ------- ------- Total adjustments (8,213) (8,700) ------- ------- Net cash (used for) provided by operating activities (6,452) 2,910 ------- ------- Cash flows from investing activities: Purchase of marketable securities (2,080) -- Purchase of businesses (8,740) -- Purchase of property, plant and equipment (5,042) (3,343) Proceeds on sale of marketable securities 349 -- Proceeds on sale of business -- 30,431 Proceeds on sale of property, plant and equipment 28 56 ------- ------- Net cash (used for) provided by investing activities (15,485) 27,144 ------- ------- Cash flows from financing activities: Payments on long-term obligations (1,655) (585) Borrowings on (repayment of) note payable 21,961 (10,193) Dividends paid -- (169) Purchase of treasury stock (5,254) (94) Purchase of subsidiary stock and options from minority shareholders -- (615) Proceeds from exercise of stock options 4 402 ------- ------- Net cash provided by (used for) financing activities 15,056 (11,254) ------- ------- Effect of foreign currency translation adjustment 29 33 ------- ------- Net (decrease) increase in cash and temporary investments (6,852) 18,833 Cash and temporary investments at beginning of period 8,774 12,473 ------- ------- Cash and temporary investments at end of period $ 1,922 $31,306 ======= =======
See notes to consolidated financial statements. -5- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ June 30, 1995 ------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------- Principles of Consolidation- --------------------------- The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation and all adjustments are of a normal recurring nature. Translation adjustments of a foreign subsidiary are charged or credited to a separate component of shareholders' equity. Inventories- ----------- Inventories are stated primarily at the lower of first-in, first-out (FIFO) cost or market. The remaining portion of the inventory is valued at the lower of last-in, first-out cost or market. Inventories consisted of the following: June 30, December 31, 1995 1994 ----------- ----------- Raw material............... $12,335,000 $ 8,192,000 Work-in-process............ 13,548,000 5,820,000 Finished goods............. 50,262,000 21,850,000 ----------- ----------- $76,145,000 $35,862,000 =========== =========== Revenue Recognition- ------------------- The Company recognizes revenues in accordance with its shipping terms. Returns and allowances are reserved for based on the Company's historical experience. Net Income Per Common Share- --------------------------- Fully diluted net income per common share is based on the weighted average number of common and common equivalent shares outstanding during the second quarter and six months ended June 30, 1995 and 1994 - 10,895,245 and 11,024,911 in 1995 and 12,019,097 and 12,050,174 in 1994. Average outstanding shares used in the computation of primary net income per share were not materially different and did not have an impact on net income per common share as presented in the consolidated statements of operations. Statements of Cash Flows- ------------------------ For purposes of the statements of cash flows, the Company considers all holdings of highly liquid debt instruments with original maturity of less than three months to be temporary investments. See Note 2 for supplemental disclosure of noncash investing activities. -6- (2) BUSINESS ACQUISITIONS AND DIVESTITURES: -------------------------------------- On June 6, 1995, Paper Magic acquired substantially all of the assets and the businesses of Topstone Industries, Inc. ( Topstone ) and Illusive Concepts, Inc. ( Illusive Concepts ). Topstone designs, markets and distributes Halloween masks, wigs, costumes, accessories and novelties sold to mass merchandisers, drug chains and party stores. Illusive Concepts designs and markets highly crafted latex masks, accessories and decorative displays sold primarily to party and gift shops. In consideration for the purchase of these businesses, Paper Magic assumed and paid off $8,740,000 of outstanding debt. The acquisition was accounted for as a purchase and the excess of cost over fair market value of $4,255,000 was recorded as goodwill in the accompanying balance sheet and is being amortized over forty years. On December 22, 1994, Rapidforms acquired certain assets and the business of Business Envelope Manufacturers, Inc. ( Business Envelope ), a direct marketer of envelopes, business forms, stationery, labels and other office supplies for $4,743,000 in cash. The acquisition was accounted for as a purchase and the excess of cost over fair market value of $4,731,000 was recorded as goodwill and other intangible assets in the accompanying balance sheet and is being amortized over 20 to 40 years. On November 4, 1994, Rapidforms acquired substantially all of the assets and business of Histacount Corporation ( Histacount ), for $14,598,000 in cash. Histacount is a direct marketer of customized business forms, stationery and other related office products sold primarily to the healthcare, legal and accounting professions. The acquisition was accounted for as a purchase and the excess cost over fair market value of $15,391,000 was recorded as goodwill and other intangible assets in the accompanying balance sheet and is being amortized over 20 to 40 years. (3) COMMON STOCK: ------------- On May 12, 1995, the Company repurchased 339,000 shares of its common stock for approximately $5,255,000, or $15.50 per share. On June 20, 1994, the Company repurchased 810,900 shares of its common stock for approximately $12,975,000, or $16.00 per share. -7- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- RESULTS OF OPERATIONS - --------------------- On June 6, 1995, Paper Magic acquired substantially all of the assets and the business of Topstone and Illusive Concepts. Topstone designs, markets and distributes Halloween masks, wigs, costumes, accessories and novelties sold to mass merchandisers, drug chains and party stores. Illusive Concepts designs and markets highly crafted latex masks, accessories and decorative displays sold primarily to party and gift shops. In the fourth quarter of 1994, Rapidforms acquired certain assets and the businesses of Histacount and Business Envelope. Histacount is a direct marketer of customized business forms, stationery and other related office products sold primarily to the healthcare, legal and accounting professions. Business Envelope is a direct marketer of envelopes, business forms, stationery, labels and other office supplies. First Six Months of 1994 Compared to First Six Months of 1993 - ------------------------------------------------------------- Consolidated sales for the six months ended June 30, 1995 increased by 25% to $85,567,000 from $68,383,000 in 1994. This increase was primarily attributable to incremental sales of companies acquired since June 30,1994. Net of the incremental sales of Topstone, Illusive Concepts, Histacount and Business Envelope, sales for the six month period increased 6% due to increased sales at Berwick and Paper Magic. Cost of sales, as a percentage of sales, was 56% in 1995 and 53% in 1994, while selling, general and administrative expenses were 40% in 1995 and 42% in 1994. The increase in cost of sales reflects the acquisition of lower margin businesses and margin compression brought on by competitive pricing and changes in product mix at Paper Magic. The reduction in selling, general and administrative expenses was due primarily to cost cutting measures at Paper Magic. The increase in interest expense, net was attributable to the utilization of cash to purchase and fund four acquisitions since June 30, 1994 and to fund the repurchase of treasury shares. Income taxes as a percentage of income before taxes and minority interest was 41% in 1995 and 1994. These rates differ from the Federal statutory rate of 35% primarily due to state and foreign income taxes, goodwill and other charges not deductible for tax purposes. Net income from continuing operations decreased 4% to $1,761,000, or $.16 per common share in 1995 from $1,835,000, or $.15 per common share in 1994. The improvement in earnings per share on slightly lower earnings reflects the repurchase of CSS common stock in 1995 and 1994. Second Quarter 1995 Compared to Second Quarter 1994 - --------------------------------------------------- Second quarter 1995 sales compared to the prior year increased by 30% to $43,038,000 from $33,222,000. The increase was primarily due to incremental sales related to the companies acquired since June 30, 1994. Net of these incremental sales, revenues of the Company increased 9% due to stronger sales at Berwick and Paper Magic. During the second quarter, cost of sales as a percentage of sales was 57% in 1995 and 53% in 1994, while selling, general and administrative expenses as a percentage of sales were 38% in 1995 and 42% in 1994. The reasons for the changes in operating percentages are explained above in the six month narrative. -8- The increase in interest income, net; rental and other income, net and income taxes are explained above in the six month comparison section. Net income from continuing operations increased 11% to $1,260,000, or $.12 per common share in 1995 from $1,139,000, or $.09 per common share in 1994. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At June 30, 1995, the Company had working capital of $57,916,000 and shareholders' equity of $140,437,000. The Company relies primarily on cash generated from its operations and seasonal borrowings to meet its liquidity requirements. Most Paper Magic and Berwick revenues are seasonal with almost half of Paper Magic and two-thirds of Berwick sales being Christmas related. As payment for Christmas related products is usually not received until after the holiday in accordance with general industry practice, short-term borrowing needs increase throughout the second and third quarters, peaking prior to Christmas and dropping thereafter. Seasonal borrowings at Paper Magic are made under a $40,000,000 line of credit facility with four banks. Berwick seasonal cash needs are being funded by the Company's excess cash and its $15,000,000 demand line of credit. At June 30, 1995, Paper Magic had borrowed $16,402,000 and the Company had borrowed $4,887,000 under their respective lines. Based on its current operating plan, the Company believes its sources of available capital are adequate to meet its ongoing cash needs for the foreseeable future. -9- CSS INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- PART II - OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The annual meeting of shareholders of the Registrant was held on May 2, 1995. (b) The following were elected to serve as Directors of the Registrant until the next annual meeting and until their successors shall be elected and qualify: SHARES OF VOTING STOCK ----------------------- FOR WITHHELD --- -------- Willard M. Bright 9,286,806 26,244 James H. Bromley 9,287,138 25,912 John R. Bunting, Jr. 9,278,938 34,112 Jack Farber 9,287,201 25,849 Richard G. Gilmore 9,281,338 31,712 Leonard E. Grossman 9,287,338 25,712 James E. Ksansnak 9,287,338 25,712 Michael L. Sanyour 9,287,338 25,712 William C. Warren 9,286,806 26,244 (c) The result of the rates of the shareholders on the proposal to approve the 1994 Equity Compensation Plan was as follows: For 8,198,125 Against 721,732 Withheld 8,188 -10- SIGNATURE --------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CSS INDUSTRIES, INC. -------------------- (Registrant) Date: August 3, 1995 By: /s/James G. Baxter ------------------ James G. Baxter Vice President - Finance Chief Financial Officer and Principal Accounting Officer -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 0000020629 CSS INDUSTRIES 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1,922 2,708 25,006 2,035 76,145 118,769 80,724 39,576 220,106 60,853 5,858 1,210 0 0 139,227 220,106 85,567 85,567 47,740 47,740 33,403 493 552 3,379 1,374 1,761 0 0 0 1,761 .16 .16