EX-99.1 2 a5003861ex991.txt CSS INDUSTRIES, INC. EXHIBIT 99.1 Exhibit 99.1 CSS Industries, Inc. Reports Sales and Earnings for the Quarter and Six Months Ended September 30, 2005 PHILADELPHIA--(BUSINESS WIRE)--Oct. 25, 2005--CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the second quarter and six months ended September 30, 2005. For the quarter ended September 30, 2005, sales decreased by 10% to $164,043,000 from $181,711,000 in 2004. Net income decreased 41% to $9,239,000, or $.84 per diluted share, compared to prior year net income of $15,613,000, or $1.24 per diluted share. For the six months ended September 30, 2005, sales decreased by 4% to $221,537,000 from $231,266,000 in 2004. Net income decreased 50% to $5,584,000, or $.51 per diluted share, compared to prior year net income of $11,206,000, or $.89 per diluted share. The Company's highly seasonal business results in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters. The reduction in sales is largely due to customer requested shipment dates of Christmas orders moving from September to October. The reduction in net income is due primarily to the customer requested shift of sales from September into October and lower margins. Gross margins through the second quarter of fiscal 2006 are three percentage points below the same six month period in fiscal 2005. While a portion of this decrease is expected to reverse in the second half of the year, margins will be lower on a year over year basis due primarily to both increased material and fuel costs and to an unfavorable mix of product margins compared to the prior year. "The shortfall in earnings per share through September 30, 2005 as described above is partially attributable to the timing of shipments and the mix of product margins generated compared to the prior year. Notwithstanding these timing issues, our current expectation for the year is now zero to five percent EPS growth over the prior year which is lower than our previous guidance of 13% to 18%," said David Erskine, President and CEO. "Reduced sales and margins expectations for certain non-seasonal product lines account for almost half of the reduced expectation. Other significant factors include higher than expected seasonal production costs, increased fuel costs related to Hurricane Rita and the cost of certain executive changes." "I am pleased to announce the promotion of Christopher J. Munyan to Executive Vice President and Chief Operating Officer of CSS Industries. This change is in line with our objective of increasing the executive bench strength and orderly management of executive succession at CSS," said Mr. Erskine. "For the last six years, Chris has managed the successful growth and increased profitability of our Berwick Offray subsidiary as its President and we look forward to his increased contributions as he assumes this important new role at CSS." This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements relating to expected future earnings and financial performance. Forward-looking statements are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management as to future events and financial performance with respect to the Company's operations. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they were made. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including without limitation, general market conditions, increased competition, increased operating costs, including labor-related and energy costs, the impact to the Company's operations attributable to Hurricanes Katrina and Rita, currency risks and other risks associated with international markets, risks associated with acquisitions, including acquisition integration costs, the Company's ability to integrate and derive the expected benefits from recent acquisitions, the risk that customers may become insolvent, costs of compliance with governmental regulations and government investigations, liability associated with non-compliance with governmental regulations, including regulations pertaining to the environment, Federal and state employment laws, and import and export controls and customs laws, and other factors described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2005 and elsewhere in the Company's SEC filings. As a result of these factors, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company. CSS' consolidated results of operations for the quarters and six months ended September 30, 2005 and 2004 and condensed consolidated balance sheets as of September 30, 2005, March 31, 2005 and September 30, 2004 follow: CSS INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Three Months Ended Six Months Ended September 30, September 30, --------------------- --------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- SALES $164,043 $181,711 $221,537 $231,266 ---------- ---------- ---------- ---------- COSTS AND EXPENSES Cost of sales 125,676 132,553 168,441 168,614 Selling, general and administrative expenses 23,050 24,588 43,035 44,763 Interest expense, net 1,057 709 1,499 1,126 Other income (130) (457) (135) (692) ---------- ---------- ---------- ---------- 149,653 157,393 212,840 213,811 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 14,390 24,318 8,697 17,455 INCOME TAX EXPENSE 5,151 8,705 3,113 6,249 ---------- ---------- ---------- ---------- NET INCOME $9,239 $15,613 $5,584 $11,206 ========== ========== ========== ========== NET INCOME PER COMMON SHARE Basic $.88 $1.31 $.53 $.94 ========== ========== ========== ========== Diluted $.84 $1.24 $.51 $.89 ========== ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 10,496 11,961 10,455 11,919 ========== ========== ========== ========== Diluted 11,017 12,619 10,966 12,641 ========== ========== ========== ========== CASH DIVIDENDS PER SHARE OF COMMON STOCK $.12 $.10 $.24 $.20 ========== ========== ========== ========== ---------------------------------------------------------------------- COMPREHENSIVE INCOME Net income $9,239 $15,613 $5,584 $11,206 Foreign currency translation adjustment 3 3 - 5 ---------- ---------- ---------- ---------- Comprehensive income $9,242 $15,616 $5,584 $11,211 ========== ========== ========== ========== CSS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) September 30, March 31, September 30, 2005 2005 2004 ------------- ------------- ------------- (Unaudited) (Audited) (Unaudited) ASSETS ------ CURRENT ASSETS Cash and cash equivalents $6,937 $57,333 $6,140 Accounts receivable, net 126,723 37,273 151,987 Inventories 177,812 101,867 164,536 Deferred income taxes 8,720 8,199 7,341 Other current assets 17,301 13,945 15,782 ------------- ------------- ------------- Total current assets 337,493 218,617 345,786 ------------- ------------- ------------- PROPERTY, PLANT AND EQUIPMENT, NET 72,766 75,402 76,975 ------------- ------------- ------------- OTHER ASSETS Goodwill 30,952 30,952 30,952 Intangible assets, net 4,469 4,516 4,592 Other 4,151 4,419 4,806 ------------- ------------- ------------- Total other assets 39,572 39,887 40,350 ------------- ------------- ------------- Total assets $449,831 $333,906 $463,111 ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY --------------------- CURRENT LIABILITIES Notes payable $76,400 $- $37,880 Current portion of long- term debt 10,175 10,442 518 Accrued customer programs 13,401 13,628 15,941 Other current liabilities 78,190 42,669 92,691 ------------- ------------- ------------- Total current liabilities 178,166 66,739 147,030 ------------- ------------- ------------- LONG-TERM DEBT, NET OF CURRENT PORTION 40,000 40,000 50,056 ------------- ------------- ------------- LONG-TERM OBLIGATIONS 3,233 3,607 3,513 ------------- ------------- ------------- DEFERRED INCOME TAXES 7,260 7,071 6,323 ------------- ------------- ------------- STOCKHOLDERS' EQUITY 221,172 216,489 256,189 ------------- ------------- ------------- Total liabilities and stockholders' equity $449,831 $333,906 $463,111 ============= ============= ============= CONTACT: CSS Industries, Inc. Clifford E. Pietrafitta, 215-569-9900