Company reaffirms outlook for fiscal 2020
adjusted EBITDA and free cash flow; Company revises net sales and
net income guidance
Second Quarter Summary
- Net sales of $96.0 million decreased 15.0% compared to the
prior fiscal year second quarter and was substantially consistent
with our previous guidance.
- Net income of $3.5 million improved by $8.4 million compared to
the prior fiscal year second quarter, primarily driven by a 27.9%
reduction in selling, general and administrative (“SG&A”)
expenses and lower inventory step-up amortization.
- Second quarter results included $0.7 million of restructuring
expenses compared to $2.1 million for prior fiscal year second
quarter associated with the Company’s previously announced
restructuring plans.
- EBITDA improved to $7.8 million compared to ($2.2) million for
the prior fiscal year second quarter.
- Adjusted EBITDA improved to $9.1 million compared to $7.9
million for the prior fiscal year second quarter.
- Net cash used for operating activities improved $19.4 million
compared to the prior fiscal year second quarter, driven by lower
overall spending.
CSS Industries, Inc. (NYSE: CSS), a leading consumer products
company serving the craft, gift and seasonal markets, today
announced results for the quarter ended September 30, 2019,
representing the second quarter of the Company’s fiscal 2020.
Net sales in the second quarter of fiscal 2020 were $96.0
million, compared to $112.9 million for the prior fiscal year
second quarter, impacted by lower craft, gift and seasonal sales.
The lower craft sales were due to lower replenishment orders of
ribbon, needle arts and kids’ crafts, and the timing of a button
program reset. The lower gift sales were primarily due to $4.3
million of lower replenishment orders within the Company’s
specialty gift business, and the lower seasonal sales were
primarily due to lower sales of Christmas cards and bags, and the
previously announced exit of the Company’s sports-licensed
back-to-school product line, partially offset by higher sales of
Christmas ribbons and bows.
Gross profit was $24.7 million for both the current fiscal year
second quarter and prior fiscal year second quarter, and gross
margin was 25.8% in the current fiscal year second quarter,
compared to 21.9% in the prior fiscal year second quarter. The
increase in gross margin was due to substantially lower inventory
step-up amortization in the current fiscal year second quarter and
a non-recurring write-down of inventory and royalty guarantees in
the prior fiscal year second quarter related to the restructuring
of the Company's specialty gift product line, substantially offset
by lower sales volume and mix of sales. Adjusted gross profit was
$25.3 million for the current fiscal year second quarter, compared
to $30.9 million for the prior fiscal year second quarter. Adjusted
gross margin was 26.4% in the current fiscal year second quarter,
compared to 27.3% in the prior fiscal year second quarter. The
decrease in adjusted gross margin was primarily driven by lower
volume as well as mix of sales.
SG&A expenses were $20.4 million for the current fiscal year
second quarter, compared to $28.3 million for the prior fiscal year
second quarter. The decrease was primarily attributable to lower
headcount costs, including salaries, medical benefits and travel
expenses, as a result of the Company’s previously announced
restructuring plans. In addition, the Company also realized a
benefit related to the remeasurement adjustment of the Fitlosophy®
contingent earn-out consideration, as well as lower spending for
consulting costs when compared to the prior fiscal year second
quarter.
Restructuring expenses were $0.7 million for the current fiscal
year second quarter, primarily attributable to severance expenses
resulting from resource alignment related to the Company’s
previously announced restructuring plan. The Company had
restructuring expenses of $2.1 million for the prior fiscal year
second quarter attributable to the consolidation of operation in
the United Kingdom and Australia pursuant to the Company's
previously announced restructuring plan.
Operating income in the current fiscal year second quarter was
$3.5 million, compared to an operating loss in the prior fiscal
year second quarter of $5.8 million. Adjusted operating income was
$5.9 million for the current fiscal year second quarter and $4.5
million for the prior fiscal year second quarter. Net income was
$3.5 million for the current fiscal year second quarter, compared
to a net loss of $4.9 million for the prior fiscal year second
quarter. Adjusted net income was $5.2 million for the current
fiscal year second quarter, compared to $2.9 million for the prior
fiscal year second quarter. Diluted net income per share was $0.39
for the current fiscal year second quarter compared to diluted net
loss per share of $0.54 for the prior fiscal year second quarter.
Adjusted diluted net income per share was $0.59 for the current
fiscal year second quarter compared to adjusted diluted net income
per share of $0.32 for the prior fiscal year second quarter.
Adjusted EBITDA was $9.1 million for the current fiscal year second
quarter, compared to $7.9 million for the prior fiscal year second
quarter.
Strategic Initiatives
Update
The Company’s near-term strategy is to return to profitability
by focusing on its previously announced restructuring and cost
savings initiatives. After completion of such initiatives, the
Company will continue to focus on profitable sales growth through
five strategic pillars: defend the base, identify adjacent product
categories with a focus on brands, build an omni-channel business
model, improve ROIC and build a collaborative “One CSS” culture.
Second quarter highlights related to these objectives included:
Debt & Liquidity
- The Company remains focused on managing debt and liquidity
throughout fiscal 2020 and beyond. At September 30, 2019, our total
net debt position was $45.3 million compared to $9.4 million at
March 31, 2019 and $46.4 million at September 30, 2018. The
increase in net debt compared to March 31, 2019 was substantially
consistent with our prior projections and primarily relates to the
working capital cycle of our seasonal business.
- Despite operating at a net loss, free cash flow in the first
six months of the current fiscal year improved $17.4 million
compared to the first six months of the prior fiscal year, driven
by the cost savings initiatives.
Cost Savings Initiatives
- During the current fiscal year second quarter, the Company
implemented a resource alignment restructuring plan that is
expected to drive an expense reduction of approximately $6 million
on an annualized basis.
- Location consolidation initiatives executed during the current
fiscal year second quarter included ceasing use of one of the
Company’s New York City offices, as well as shifting distribution
of craft ribbon and buttons from the Company’s Florence, Alabama
facility to the Company’s more technologically advanced and
efficient Shorewood, Illinois facility.
- The Company continues to look for additional areas for spending
reductions. Additionally, the Company continues to review
underperforming product lines, specifically focusing on profit
improvement initiatives to drive performance improvement within our
gift business in fiscal 2020.
“Our second quarter results were slightly below our prior
expectations,” commented Christopher J. Munyan, President and Chief
Executive Officer. “Although we did experience lower sales, the
second quarter results reflected the impact of our previously
announced cost savings initiatives. As indicated in the reduction
of SG&A, our efforts to focus on the cost savings plans we have
implemented have been successful thus far. We will continue to
focus on these cost savings plans, and to work on additional
business improvement plans during the remainder of fiscal
2020.”
The following is a summary of net sales by
product category (dollars in thousands):
Three Months Ended September
30,
2019
2018
Change
Craft
$
35,001
$
42,472
(17.6
)%
Gift
23,630
30,614
(22.8
)%
Seasonal
37,343
39,815
(6.2
)%
$
95,974
$
112,901
(15.0
)%
Craft
The craft product category consists of products used for craft
activities including sewing patterns, ribbons, trims, buttons,
needle arts and kids’ crafts. These products are sold to mass
market and specialty retailers on a replenishment basis.
Craft net sales decreased by 17.6% in the current fiscal year
second quarter compared to the prior fiscal year second quarter,
driven by lower ribbon, button, needle arts and kids’ crafts. These
declines were driven by lower replenishment orders of ribbon,
needle arts and kids’ crafts, further increased by lower button
sales due to the timing of a button program reset from the prior
fiscal year second quarter.
Gift
The gift product category consists of products which are
designed to celebrate certain life events or special occasions,
with a focus on packaging items, such as ribbons, bows, bags and
wrap, as well as stationery, baby gift items and party and
entertaining products. Products in this category are generally
ordered on a replenishment basis throughout the year.
Gift net sales decreased 22.8% in the current fiscal year second
quarter compared to the prior fiscal year second quarter. The
decline was primarily due to lower replenishment orders of social
stationery products within our specialty gift business, as well as
declines in packaging and wholesale products and everyday
trim-a-package products. Additionally, the decline was impacted by
a placement of a new program within the drug channel in the prior
fiscal year second quarter.
Seasonal
The seasonal product category consists of products sold to
mass-market retailers for holidays and seasonal events, including
Christmas, Valentine’s Day and Easter. Sales and production
forecasts for these products are known well in advance of shipment.
The seasonal nature of this business has historically resulted in
lower sales levels in the first and fourth quarters of the
Company’s fiscal year, and higher sales levels in the second and
third quarters.
Seasonal net sales decreased 6.2% in the current fiscal year
second quarter compared to the prior fiscal year second quarter.
The decline was primarily due to lower sales of Christmas cards and
bags, and the previously announced exit of the Company’s
sports-licensed back-to-school product line, partially offset by
higher sales of Christmas ribbons and bows.
Balance Sheet and Cash
Flow
The Company ended the quarter with $5.2 million of cash and cash
equivalents, compared to $15.1 million at the end of the prior
fiscal year second quarter. The lower balance was primarily due to
funding of working capital needs for our overall business.
Inventory decreased to $105.0 million at the end of the current
fiscal year second quarter from $116.4 million at the end of the
prior fiscal year second quarter, partially related to lower fair
value step-up adjustments of inventories relating to previously
acquired inventory. Excluding the effect of the lower step-up
inventory, inventory levels were $9.4 million lower at the end of
the current fiscal year second quarter than at the end of the prior
fiscal year second quarter, driven by our inventory management
improvements. Accounts receivable decreased $20.1 million from
$101.8 million at the end of the prior fiscal year second quarter
to $81.7 million at September 30, 2019, primarily attributable to
the decrease in net sales. Accounts payable decreased to $36.7
million as of September 30, 2019, compared to $37.7 million at the
end of the prior fiscal year second quarter. The Company ended the
quarter with operating lease right-of-use assets and operating
lease liabilities of $46.9 million and $46.2 million, respectively,
which were recognized commencing in fiscal 2020 as a result of the
adoption of a new lease accounting standard.
Cash used for operating activities was $28.4 million for the six
months ended September 30, 2019, compared to $45.8 million for the
first six months of the prior fiscal year. The decrease was
primarily due to lower build-up of accounts receivable attributable
to lower sales volume. Cash used for investing activities was $5.8
million for the first six months of the current fiscal year,
compared to $11.6 million for the first six months of the prior
fiscal year. Capital expenditures were $6.0 million for the first
six months of the current fiscal year, compared to $5.9 million for
the first six month of the prior fiscal year. Cash provided by
financing activities was $22.2 million for the first six months of
the current fiscal year compared to $14.0 million for the first six
months of the prior fiscal year. Free cash flow was a use of $13.5
million for the current fiscal year second quarter, compared to a
use of $33.1 million for the prior fiscal year second quarter, and
$34.3 million for the first six months in the current fiscal year,
compared to $51.7 for the first six months in the prior fiscal
year.
Outlook
“Our improvement in EBITDA and adjusted EBITDA, even with lower
sales volume, is the direct result of the Company’s commitment to
driving cost out of our business,” commented Mr. Munyan. “Planning
for expected declines in revenue, we expect to offset the declines
by cost savings initiatives already implemented, as well as
additional cost saving measures. Our overall message remains the
same - we aggressively work to maximize cost cuts, drive working
capital improvements, aggressively pay down debt and drive improved
profitability and free cash flow.”
The Company is adjusting its previous outlook for fiscal 2020
full year net sales and net income. Net sales are expected to be in
the range of $346 million to $352 million, primarily driven by
retail customers reducing orders as a result of the impact of U.S.
tariffs imposed on certain goods imported from China. Net loss is
expected to be in the range of $2 million to $4 million compared to
a net loss of $53.5 million for fiscal 2019.
Adjusted EBITDA is still expected to be in the range of $21
million to $23 million, compared to $15.0 million for fiscal 2019.
The expected growth in adjusted EBITDA is primarily driven by the
realization of cost savings initiatives, partially offset by lower
sales volumes.
Free cash flow, defined as net cash provided by operating
activities minus purchases of property, plant and equipment, for
fiscal 2020 is expected to be in the range of $14 million to $16
million, compared to fiscal 2019 free cash flow of ($9.6) million.
The anticipated improvement is driven by cost savings initiatives,
improvements in working capital primarily as a result of inventory
reductions, and reduced capital expenditures.
The Company will hold a conference call for investors on
November 15, 2019 at 8:30 a.m. ET. The call can be accessed in the
following ways:
- By telephone: For both "listen-only" participants and those
participants who wish to take part in the question-and-answer
portion of the call, the dial-in number in the United States is
(844) 458-8735, and for international callers, the dial-in number
is (647) 253-8639. The conference ID for all callers is
4616318.
- By webcast: http://www.cssindustries.com/investor-relations.
The webcast will be archived for those unable to participate
live.
About CSS Industries,
Inc.
CSS is a creative consumer products company, focused on the
craft, gift and seasonal categories. For these design-driven
categories, we engage in the creative development, manufacture,
procurement, distribution and sale of our products with an
omni-channel approach focused primarily on mass market retailers.
Our core products within the craft category include sewing
patterns, ribbons, trims, buttons, needle arts and kids’ crafts.
For the gift category, our core products are designed to celebrate
certain life events or special occasions, with a focus on packaging
items, such as ribbons, bows, bags and wrap, as well as stationery,
baby gift items, and party and entertaining products. For the
seasonal category, we focus on holiday gift packaging items
including ribbons, bows, bags, tags and gift card holders, in
addition to specific holiday-themed decorations and activities,
including Easter egg dyes and Valentine’s Day classroom exchange
cards. In keeping with our corporate mission, all of our products
are designed to help make life memorable.
Forward-looking
Statements
Any statements contained in this report that do not describe
historical facts, including estimates, the Company’s outlook for
fiscal 2020 net sales, net income and adjusted EBITDA, other
statements regarding matters that are to occur in the future, as
well as statements regarding future operations, are neither
promises nor guarantees and may constitute “forward-looking
statements” as that term is defined in the U.S. Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may
include words such as “may,” “might,” “will,” “should,” “expects,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential” or “continue,” the negative of these terms and other
comparable terminology. Any such forward-looking statements
contained herein are based on current assumptions, estimates and
expectations, but are subject to a number of known and unknown
risks and significant business, economic and competitive
uncertainties that may cause actual results to differ materially
from expectations. Numerous factors could cause actual future
results to differ materially from current expectations expressed or
implied by such forward-looking statements, including the risks and
other risk factors detailed in various publicly available documents
filed by CSS from time to time with the Securities and Exchange
Commission (SEC), which are available at www.sec.gov, including but
not limited to, such information appearing under the caption “Risk
Factors” in CSS’ Annual Report on Form 10-K filed with the SEC on
May 31, 2019. Any forward-looking statements should be considered
in light of those risk factors. CSS cautions readers not to rely on
any such forward-looking statements, which speak only as of the
date they are made. CSS disclaims any intent or obligation to
publicly update or revise any such forward-looking statements to
reflect any change in Company expectations or future events,
conditions or circumstances on which any such forward-looking
statements may be based, or that may affect the likelihood that
actual results may differ from those set forth in such
forward-looking statements.
CSS’ consolidated results of operations for the three- and six
months ended September 30, 2019 and 2018, condensed consolidated
balance sheets as of September 30, 2019, March 31, 2019 and
September 30, 2018, and condensed consolidated statements of cash
flows for the six months ended September 30, 2019 and 2018
follow:
CSS INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Unaudited
(in thousands, except per share
data)
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
CSS INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(in thousands)
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
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
Stockholders' equity
178,868
189,931
223,609
Total liabilities and stockholders'
equity
$
350,504
$
285,595
$
378,399
CSS INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
Unaudited
(in thousands)
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 costs
344
—
Impairment of plant, property 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
(29,822
)
(41,601
)
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
CSS Industries, Inc. Reconciliation of Certain
Non-GAAP Measures (Unaudited) (in thousands, except per share
amounts)
In addition to the results reported in accordance with
accounting principles generally accepted in the United States
(“U.S. GAAP”) in this release, the Company has provided certain
non-GAAP financial information, specifically adjusted diluted
income (loss) per share, adjusted EBITDA, adjusted gross profit,
adjusted gross margin %, adjusted operating income (loss), adjusted
operating income (loss) % and adjusted net income (loss). These
measures are non-GAAP metrics that exclude various items that are
detailed in the accompanying financial tables reconciling U.S. GAAP
results to non-GAAP results that are included in this release. We
also present free cash flow, which we define as net cash provided
by operating activities minus purchases of property, plant and
equipment as shown in the consolidated statement of cash flows.
Management believes that the presentation of these non-GAAP
financial measures provides useful information to investors because
the information may allow investors to better evaluate ongoing
business performance and certain components of the Company’s
results. In addition, the Company believes that the presentation of
these financial measures enhances an investor’s ability to make
period to period comparisons of the Company’s operating results.
The presentation of our non-GAAP measures is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
U.S. GAAP. The Company has reconciled the non-GAAP information
included in this release to the nearest U.S. GAAP measures, as
required under the rules of the Securities and Exchange Commission
regarding the use of non-GAAP financial measures.
The following provides a listing of approved adjustments related
to non-GAAP measures, as defined by the CSS Board of Directors:
- Acquisition inventory step-up amortization
- Adjustments related to contingent payments associated with an
acquisition or disposition
- Asset write-downs or write-ups
- Costs and expenses related to Board-approved actions
- Gain or loss associated with an acquisition or divestiture of a
business or assets
- Material restructuring costs, plant or facility closures or
consolidations including headcount reductions
- Post-closing acquisition and disposition costs and expenses
(within 2 years of transaction), such as systems integration
projects, consulting, accounting, severance or stay bonuses, lease
amendments or terminations and other transaction related
non-recurring costs
- Third party acquisition and disposition transaction costs and
expenses, such as investment banker, legal, accounting and due
diligence fees and expenses
- Unusual or extraordinary legal expenses
Three Months Ended
September 30,
Six Months Ended
September 30,
2019
2018
2019
2018
Diluted income (loss) per share
$
0.39
$
(0.54
)
$
(1.22
)
$
(2.57
)
Inventory step-up amortization
—
0.42
0.03
0.98
Inventory and licensing write-down related
to product line exit
(0.01
)
0.20
(0.02
)
0.20
Goodwill impairment
—
—
—
0.15
Restructuring expenses
0.08
0.23
0.32
0.23
Acquisition costs, integration and
other
0.19
0.28
0.28
0.52
Tax impact on adjustments (1)
(0.06
)
(0.27
)
(0.14
)
(0.50
)
Adjusted diluted income (loss) per
share
$
0.59
$
0.32
$
(0.75
)
$
(0.99
)
CSS Industries, Inc.
Reconciliation of Certain
Non-GAAP Measures
(Unaudited)
(in thousands)
Three Months Ended September
30,
Six Months Ended September
30,
2019
2018
2019
2018
Net income (loss)
$
3,482
$
(4,910
)
$
(10,766
)
$
(23,386
)
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
)
Depreciation and amortization
3,266
3,424
6,481
6,721
Inventory step-up amortization
—
3,845
284
8,889
Inventory and licensing write-down related
to product line exit
(67
)
1,772
(214
)
1,772
Goodwill impairment
—
—
—
1,390
Restructuring expenses
741
2,127
2,795
2,127
Acquisition costs, integration and
other
1,646
2,522
2,457
4,733
Adjusted EBITDA
$
9,125
$
7,896
$
2,347
$
1,166
Gross profit
$
24,719
$
24,681
$
36,825
$
36,328
Gross margin %
25.8
%
21.9
%
24.0
%
20.5
%
Inventory step-up amortization
—
3,845
284
8,889
Inventory and licensing write-down related
to product line exit
(67
)
1,772
(214
)
1,772
Acquisition costs, integration and
other
648
556
879
986
Adjusted gross profit
$
25,300
$
30,854
$
37,774
$
47,975
Adjusted gross margin %
26.4
%
27.3
%
24.6
%
27.1
%
Operating income (loss)
$
3,539
$
(5,794
)
$
(9,456
)
$
(24,466
)
Operating income (loss) %
3.7
%
(5.1
)%
(6.2
)%
(13.8
)%
Inventory step-up amortization
—
3,845
284
8,889
Inventory and licensing write-down related
to product line exit
(67
)
1,772
(214
)
1,772
Goodwill impairment
—
—
—
1,390
Restructuring expenses
741
2,127
2,795
2,127
Acquisition costs, integration and
other
1,646
2,522
2,457
4,733
Adjusted operating income (loss)
$
5,859
$
4,472
$
(4,134
)
$
(5,555
)
Adjusted operating income (loss) %
6.1
%
4.0
%
(2.7
)%
(3.1
)%
Net income (loss)
$
3,482
$
(4,910
)
$
(10,766
)
$
(23,386
)
Inventory step-up amortization
—
3,845
284
8,889
Inventory and licensing write-down related
to product line exit
(67
)
1,772
(214
)
1,772
Goodwill impairment
—
—
—
1,390
Restructuring expenses
741
2,127
2,795
2,127
Acquisition costs, integration and
other
1,646
2,522
2,457
4,733
Tax impact on adjustments (1)
(557
)
(2,463
)
(1,277
)
(4,539
)
Adjusted net income (loss)
$
5,245
$
2,893
$
(6,721
)
$
(9,014
)
(1) Tax impact determined using combined
federal and state statutory rates of 24% for the three- and six
months ended September 30, 2019 and September 30, 2018.
CSS Industries, Inc.
Reconciliation of Certain
Non-GAAP Measures
(Unaudited)
(in thousands)
The following table sets forth a
reconciliation of free cash flow, a non-GAAP financial measure, to
net cash used for operating activities, which we believe to be the
most directly comparable GAAP financial measure.
Three Months Ended September
30,
Six Months Ended September
30,
2019
2018
2019
2018
Net cash provided by (used for) operating
activities
$
(11,019
)
$
(30,417
)
$
(28,354
)
$
(45,821
)
Purchase of property, plant and
equipment
(2,521
)
(2,732
)
(5,985
)
(5,891
)
Free cash flow
$
(13,540
)
$
(33,149
)
$
(34,339
)
$
(51,712
)
CSS Industries, Inc.
Adjusted EBITDA Guidance
Non-GAAP Measures
(Unaudited)
(in millions)
FY 2020
Net income (loss)
($4.0) - ($2.0
)
Income tax expense (benefit)
(1.2
)
Interest expense (income), net
2.6
Other expense (income), net
(1.5
)
Depreciation and amortization
13.2
Inventory step-up amortization
0.3
Restructuring expense
4.2
Acquisition costs, integration and
other
7.4
Adjusted EBITDA
$21.0 - $23.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191114005848/en/
CHRISTOPHER J. MUNYAN - PRESIDENT AND CHIEF EXECUTIVE OFFICER
610-729-3740 Chris.Munyan@cssindustries.com
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