-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C7S4gir7sXhp869sh93qsVe50V29o3W8atU03FaxF13OvphLBlAxb5jQsQlf474j IjojBslJ8+1+xN9y8nYKeg== 0000950116-00-001171.txt : 20000515 0000950116-00-001171.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950116-00-001171 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSS INDUSTRIES INC CENTRAL INDEX KEY: 0000020629 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [2771] IRS NUMBER: 131920657 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02661 FILM NUMBER: 628558 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q --------- For the Quarter Ended Commission file number 1-2661 March 31, 2000 - --------------------- CSS INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its Charter) Delaware 13-1920657 - ------------------------------- ---------------------- (State or other jurisdiction of (IRS 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 March 31, 2000, there were 9,180,720 shares of Common Stock outstanding which excludes shares which may still be issued upon exercise of stock options. Page 1 of 10 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 March 31, 2000 and December 31, 1999, the results of operations for the three months ended March 31, 2000 and 1999 and the cash flows for the three months ended March 31, 2000 and 1999. The results for the three months ended March 31, 2000 and 1999 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 and with Part II of this document. PAGE NO. ------- Consolidated Statements of Operations - Three months ended March 31, 2000 and 1999 3 Consolidated Condensed Balance Sheets - March 31, 2000 and December 31, 1999 4 Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999 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 1 through 6 - Not applicable SIGNATURE 10 - --------- -2- CSS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Unaudited) (In thousands, except per share amounts)
Three Months Ended March 31, -------------------------------- 2000 1999 -------- -------- SALES $ 24,589 $ 26,367 -------- -------- COSTS AND EXPENSES Cost of sales 17,639 19,356 Selling, general and administrative expenses 16,141 15,328 Interest expense, net 396 570 Rental and other expense (income), net 17 (1,163) -------- -------- 34,193 34,091 -------- -------- LOSS BEFORE INCOME TAXES (9,604) (7,724) INCOME TAX BENEFIT (3,457) (2,889) -------- -------- NET LOSS $ (6,147) $ (4,835) ======== ======== NET LOSS PER COMMON SHARE Basic $ (.66) $ (.48) ======== ======== Diluted $ (.66) $ (.48) ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 9,266 10,094 ======== ======== Diluted 9,266 10,094 ======== ======== CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ -- ======== ========
-3- CSS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)
March 31, December 31, 2000 1999 --------- ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and temporary investments $ 441 $ 3,292 Accounts receivable, net 25,961 165,033 Inventories 105,831 64,884 Deferred income taxes 5,886 5,886 Other current assets 11,950 11,272 -------- -------- Total current assets 150,069 250,367 -------- -------- PROPERTY, PLANT AND EQUIPMENT, NET 56,334 55,916 -------- -------- OTHER ASSETS Intangible assets 39,654 39,971 Other 2,727 3,144 -------- -------- Total other assets 42,381 43,115 -------- -------- Total assets $248,784 $349,398 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ -- $ 62,370 Other current liabilities 29,667 57,108 -------- -------- Total current liabilities 29,667 119,478 -------- -------- LONG-TERM OBLIGATIONS 4,456 5,307 -------- -------- DEFERRED INCOME TAXES 5,086 5,136 -------- -------- SHAREHOLDERS' EQUITY 209,575 219,477 -------- -------- Total liabilities and shareholders' equity $248,784 $349,398 ======== ========
See notes to consolidated financial statements. -4- CSS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) (In thousands)
Three Months Ended March 31, ------------------------------- 2000 1999 --------- --------- Cash flows from operating activities: Net loss $ (6,147) $ (4,835) --------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,527 2,312 Gain on sale of assets (7) (14) Provision for doubtful accounts 133 110 Deferred tax benefit (50) (3,332) Changes in assets and liabilities: Decrease in accounts receivable 138,939 153,027 (Increase) in inventory (40,947) (27,733) (Increase) decrease in other assets (332) 8,930 (Decrease) in other current liabilities (14,877) (10,674) (Decrease) in accrued income taxes (11,751) (6,939) --------- --------- Total adjustments 73,635 115,687 --------- --------- Net cash provided by operating activities 67,488 110,852 --------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (2,586) (4,430) Proceeds on sale of property, plant and equipment 37 26 --------- --------- Net cash used for investing activities (2,549) (4,404) --------- --------- Cash flows from financing activities: Payments on long-term obligations (1,665) (464) Net payments on notes payable (62,370) (95,320) Purchase of treasury stock (3,819) (8,714) Proceeds from exercise of stock options 64 701 --------- --------- Net cash used for financing activities (67,790) (103,797) --------- --------- Net (decrease) increase in cash and temporary investments (2,851) 2,651 Cash and temporary investments at beginning of period 3,292 2,214 --------- --------- Cash and temporary investments at end of period $ 441 $ 4,865 ========= =========
See notes to consolidated financial statements. -5- CSS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (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. Nature of Business - ------------------ CSSis a consumer products company primarily engaged in the manufacture and sale to mass market retailers of seasonal, social expression products, including gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper, paper and vinyl decorations, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties and Easter egg dyes and novelties. Due to the seasonality of the Company's business, the majority of sales occur in the third and fourth quarters and a material portion of the Company's trade receivables are due in December and January of each year. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. Inventories - ----------- Inventories are generally stated 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 (LIFO) cost or market. Inventories consisted of the following:
March 31, December 31, 2000 1999 ------------------ ----------- Raw material................... $ 29,160,000 $19,848,000 Work-in-process................ 20,246,000 15,967,000 Finished goods................. 56,425,000 29,069,000 ------------- ----------- $105,831,000 $64,884,000 ============ ===========
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. -6- Net Income Per Common Share - --------------------------- Basic and diluted net loss per common shares are based on the weighted average number of common shares outstanding during the first quarter - 9,266,053 in 2000 and 10,094,183 in 1999. As of March 31, 2000, the numerator and denominator in the basic and diluted earnings per share computations are equal as the Company has a net loss for the three months ended March 31, 2000. Common stock equivalents are not used in the computation of diluted earnings per share as they would have an anti-dilutive effect in the periods presented. 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. Reclassifications - ----------------- Certain prior period amounts have been reclassified to conform with current year classifications. (2) BUSINESS ACQUISITIONS AND DIVESTITURES: --------------------------------------- On August 18, 1999, the Company acquired certain assets and the business of Party Professionals, Inc. Party Professionals designs and markets highly crafted latex masks, helmets and accessories sold to mass merchandisers, drug chains, party and gift shops. In consideration, the Company paid $6,000,000 in cash and assumed and repaid $1,606,000 of outstanding debt. The acquisition was accounted for as a purchase and the excess of cost over fair market value of $6,532,000 was recorded as goodwill in the accompanying balance sheet and is being amortized over twenty years. The final purchase price is subject to adjustment based on an audit of the closing balance sheet by an independent public accounting firm. As of December 31, 1999, the operations of Party Professionals, now known as Don Post Studios, Inc., were consolidated into existing operations of the Company. (3) TREASURY STOCK TRANSACTIONS: ---------------------------- On February 19, 1998, the Company announced that its Board of Directors had authorized the purchase of up to 1,000,000 shares of the Company's Common Stock. On subsequent dates, the Executive Committee of the Board of Directors authorized additional repurchases totaling 1,500,000 shares on terms acceptable to management. Any such buy back is subject to compliance with regulatory requirements and relevant covenants of the Company's $300,000,000 unsecured revolving credit facility. As of March 31, 2000, the Company had repurchased 2,121,851 shares for $54,095,000, including 193,000 shares for $3,819,000 in the first quarter of 2000. As of March 31, 1999, the Company had repurchased 1,338,800 shares for $37,485,000, including 352,400 shares for $8,714,000 in the first quarter of 1999. (4) FUTURE ACCOUNTING CHANGES: -------------------------- The FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" in 1998, which establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. SFAS No. 133 was scheduled to be effective for fiscal quarters of all fiscal years beginning after June 15, 1999; however, in June of 1999 the FASB issued SFAS No. 137 which deferred the effective date of SFAS No. 133 one year to years beginning after June 15, 2000. Based on current operations, the Company does not expect the adoption of this statement to have a material effect on its financial position and results of operations. -7- CSS INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Seasonality - ----------- The seasonal nature of CSS' business results in low sales and operating losses for the first two quarters and high shipment levels and operating profits for the second half of the year, thereby causing significant fluctuations in the quarterly results of operations of the Company. Stock Repurchase Program - ------------------------ On February 19, 1998, the Company announced that its Board of Directors had authorized the purchase of up to 1,000,000 shares of the Company's Common Stock. On subsequent dates, the Executive Committee of the Board of Directors authorized additional repurchases totaling 1,500,000 shares on terms acceptable to management. Any such buy back is subject to compliance with regulatory requirements and relevant covenants of the Company's $300,000,000 unsecured revolving credit facility. As of March 31, 2000, the Company had repurchased 2,121,851 shares for $54,095,000, including 193,000 shares for $3,819,000 in the first quarter of 2000. As of March 31, 1999, the Company had repurchased 1,338,800 shares for $37,485,000, including 352,400 shares for $8,714,000 in the first quarter of 1999. First Quarter 2000 Compared to First Quarter 1999 - ------------------------------------------------- Consolidated sales for the three months ended March 31, 2000 were $24,589,000 or 7% below 1999 sales of $26,367,000. The decrease in sales was primarily attributable to lower sales of classroom exchange Valentine cards as improved production efficiencies allowed for the shipment of product related to the 2000 holiday in late 1999. Additionally, the discontinuation of certain ancillary product lines and lower closeout sales volume due to improved inventory management also contributed to the reduction in sales volume. These decreases were partially offset by increased sales of ribbons and bows to the wholesale distribution channel and by increased sales of educational products. Cost of sales, as percentage of sales, was 72% in 2000 and 73% in 1999. The decrease in cost of sales, as a percentage of sales, was due to the reduction in lower margin closeout sales volume. Selling, general and administrative ("SG&A") expenses increased 5% to $16,141,000 in 2000 from $15,328,000 in 1999. The increase in SG&A expenses was due to increased costs associated with product and marketing initiatives. Interest expense, net decreased to $396,000 from $570,000 in 1999. The decrease in interest expense was due to lower borrowing levels as a result of the cash generated from operations. The Company incurred rental and other expense of $17,000 in 2000 compared to income of $1,163,000 in 1999. The change from the prior year was primarily due to the absence of a pre-tax gain related to the restructuring of a portion of the Company's deferred compensation liability in 1999. Income taxes, as a percentage of income before taxes, were 36% in 2000 and 37% in 1999. -8- The net loss for the three months ended March 31, 2000 was $6,147,000, or $.66 per share compared to a net loss of $4,835,000, or $.48 per share, in 1999. The increased loss was due to the impact of the Company's stock repurchase plan, the absence of non-recurring other income and increased costs to support product and marketing initiatives. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At March 31, 2000, the Company had working capital of $120,402,000 and shareholders' equity of $209,575,000. The decrease in accounts receivable and the increase in inventories from December 31, 1999 reflected seasonal collections of Christmas accounts receivables net of current year billings and normal seasonal inventory increases necessary for the 2000 shipping season. The decrease in other current liabilities reflected payment of income taxes, sales commissions, royalties and employee benefits. The decrease in shareholders' equity was primarily attributable to the repurchase of 193,000 shares of the Company's common stock for $3,819,000 and to the first quarter net loss. The Company relies primarily on cash generated from operations and seasonal borrowings to meet its liquidity requirements. Historically, most revenues are seasonal with over 80% of sales generated in the second half of the year. Payment for Christmas related products is usually not received until after the holiday in accordance with general industry practice. As a result, short-term borrowing needs decreased to $0 in the first quarter but will increase through the remainder of the year, peaking prior to Christmas. Seasonal borrowings are made under a $300,000,000 unsecured revolving credit facility with thirteen banks and financial institutions. The credit facility is available to fund the seasonal borrowing needs and to provide the Company with a source of capital for general corporate purposes. As of March 31, 2000, the Company had no borrowings outstanding under this facility. Based on its current operating plan, the Company believes its sources of available capital are adequate to meet its ongoing cash needs for the foreseeable future. YEAR 2000 - --------- As of the date of this filing, the Company has not incurred any significant business disruptions as a result of Year 2000 issues. However, while no such occurrence has developed as of the date of this filing, Year 2000 issues that may arise related to material third parties may not become apparent immediately and therefore, there is no assurance that the Company will not be affected by third party noncompliance in the future. The Company will continue to monitor the issue vigilantly and work to remediate any issues that may arise. -9- 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: May 12, 2000 By: /s/ Clifford E. Pietrafitta ----------------------------- Clifford E. Pietrafitta Vice President - Finance, Chief Financial Officer and Principal Accounting Officer -10- EX-27 2
5 0000020629 CSS INDUSTRIES 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 411 462 26,919 958 105,831 17,374 111,668 55,334 248,784 29,667 434 1,237 0 0 208,338 248,784 24,589 24,589 17,639 17,639 16,025 133 396 (9,604) (3,457) (6,147) 0 0 0 (6,147) (.66) (.66)
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