x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
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.)
|
1845
Walnut Street, Philadelphia, PA
|
19103
|
|||
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer
|
Accelerated
filer x
|
Non-accelerated
filer
|
PAGE
NO.
|
||
3
|
||
4
|
||
5
|
||
6-13
|
||
14-19
|
||
19
|
||
20
|
||
21
|
||
21
|
||
23
|
||
24
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
SALES
|
$
|
264,065
|
$
|
251,796
|
$
|
485,428
|
$
|
473,333
|
|||||
COSTS
AND EXPENSES
|
|||||||||||||
Cost
of sales
|
197,695
|
189,367
|
360,761
|
357,808
|
|||||||||
Selling,
general and administrative expenses
|
26,424
|
23,867
|
73,917
|
66,868
|
|||||||||
Restructuring
expenses
|
1,745
|
3
|
1,745
|
37
|
|||||||||
Interest
expense, net
|
1,446
|
1,483
|
2,663
|
2,982
|
|||||||||
Other
income, net
|
(130
|
)
|
(47
|
)
|
(358
|
)
|
(182
|
)
|
|||||
227,180
|
214,673
|
438,728
|
427,513
|
||||||||||
INCOME
BEFORE INCOME TAXES
|
36,885
|
37,123
|
46,700
|
45,820
|
|||||||||
INCOME
TAX PROVISION
|
13,595
|
13,199
|
17,214
|
16,312
|
|||||||||
NET
INCOME
|
$
|
23,290
|
$
|
23,924
|
$
|
29,486
|
$
|
29,508
|
|||||
NET
INCOME PER COMMON SHARE
|
|||||||||||||
Basic
|
$
|
2.19
|
$
|
2.27
|
$
|
2.79
|
$
|
2.81
|
|||||
Diluted
|
$
|
2.13
|
$
|
2.18
|
$
|
2.71
|
$
|
2.69
|
|||||
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|||||||||||||
Basic
|
10,641
|
10,538
|
10,565
|
10,483
|
|||||||||
Diluted
|
10,931
|
10,979
|
10,863
|
10,967
|
|||||||||
CASH
DIVIDENDS PER SHARE OF COMMON STOCK
|
$
|
.12
|
$
|
.12
|
$
|
.36
|
$
|
.36
|
|||||
COMPREHENSIVE
INCOME
|
|||||||||||||
Net
income
|
$
|
23,290
|
$
|
23,924
|
$
|
29,486
|
$
|
29,508
|
|||||
Foreign
currency translation adjustment
|
-
|
-
|
3
|
-
|
|||||||||
Comprehensive
income
|
$
|
23,290
|
$
|
23,924
|
$
|
29,489
|
$
|
29,508
|
December
31,
|
March
31,
|
||||||
2006
|
2006
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
10,303
|
$
|
57,656
|
|||
Accounts
receivable, net
|
223,944
|
35,582
|
|||||
Inventories
|
66,455
|
103,770
|
|||||
Deferred
income taxes
|
7,718
|
7,898
|
|||||
Assets
held for sale
|
2,796
|
-
|
|||||
Other
current assets
|
13,234
|
18,906
|
|||||
Total
current assets
|
324,450
|
223,812
|
|||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
61,307
|
70,868
|
|||||
OTHER
ASSETS
|
|||||||
Goodwill
|
30,952
|
30,952
|
|||||
Intangible
assets, net
|
4,351
|
4,422
|
|||||
Other
|
3,807
|
4,095
|
|||||
Total
other assets
|
39,110
|
39,469
|
|||||
Total
assets
|
$
|
424,867
|
$
|
334,149
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Notes
payable
|
$
|
42,400
|
$
|
-
|
|||
Current
portion of long-term debt
|
10,195
|
10,169
|
|||||
Accrued
customer programs
|
16,516
|
10,791
|
|||||
Accrued
restructuring expenses
|
1,232
|
4
|
|||||
Other
current liabilities
|
61,498
|
41,366
|
|||||
Total
current liabilities
|
131,841
|
62,330
|
|||||
LONG-TERM
DEBT, NET OF CURRENT PORTION
|
20,441
|
30,518
|
|||||
LONG-TERM
OBLIGATIONS
|
3,300
|
3,533
|
|||||
DEFERRED
INCOME TAXES
|
5,080
|
5,258
|
|||||
STOCKHOLDERS’
EQUITY
|
264,205
|
232,510
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
424,867
|
$
|
334,149
|
Nine
Months Ended
|
|||||||
December 31,
|
|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
29,486
|
$
|
29,508
|
|||
Adjustments
to reconcile net income to net cash used for operating
activities:
|
|||||||
Depreciation
and amortization
|
10,564
|
10,460
|
|||||
Provision
for doubtful accounts
|
202
|
479
|
|||||
Asset
impairments
|
422
|
-
|
|||||
Deferred
tax provision (benefit)
|
1
|
(224
|
)
|
||||
(Gain)
loss on sale of assets
|
(16
|
)
|
61
|
||||
Share-based
compensation expense
|
2,131
|
172
|
|||||
Changes
in assets and liabilities:
|
|||||||
Increase
in accounts receivable
|
(188,564
|
)
|
(163,400
|
)
|
|||
Decrease
in inventory
|
37,315
|
16,936
|
|||||
Decrease
in other assets
|
5,855
|
361
|
|||||
Increase
in other liabilities
|
20,070
|
14,876
|
|||||
Increase
in accrued taxes
|
6,802
|
15,934
|
|||||
Total
adjustments
|
(105,218
|
)
|
(104,345
|
)
|
|||
Net
cash used for operating activities
|
(75,732
|
)
|
(74,837
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of property, plant and equipment
|
(4,036
|
)
|
(6,930
|
)
|
|||
Proceeds
from sale of assets
|
16
|
335
|
|||||
Net
cash used for investing activities
|
(4,020
|
)
|
(6,595
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Borrowings
on long-term obligations
|
-
|
729
|
|||||
Payments
on long-term obligations
|
(10,080
|
)
|
(10,373
|
)
|
|||
Borrowings
on notes payable
|
168,560
|
227,795
|
|||||
Repayments
on notes payable
|
(126,160
|
)
|
(169,895
|
)
|
|||
Dividends
paid
|
(3,801
|
)
|
(3,783
|
)
|
|||
Purchase
of treasury stock
|
(303
|
)
|
(6,101
|
)
|
|||
Proceeds
from exercise of stock options
|
2,987
|
4,103
|
|||||
Tax
benefit realized for stock options exercised
|
1,193
|
-
|
|||||
Net
cash provided by financing activities
|
32,396
|
42,475
|
|||||
Effect
of exchange rate changes on cash
|
3
|
-
|
|||||
Net
decrease in cash and cash equivalents
|
(47,353
|
)
|
(38,957
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
57,656
|
57,333
|
|||||
Cash
and cash equivalents at end of period
|
$
|
10,303
|
$
|
18,376
|
(1)
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES:
|
December
31,
|
March
31,
|
||||||
2006
|
2006
|
||||||
Raw
material
|
$
|
15,932
|
$
|
22,881
|
|||
Work-in-process
|
16,141
|
35,741
|
|||||
Finished
goods
|
34,382
|
45,148
|
|||||
$
|
66,455
|
$
|
103,770
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
December 31,
|
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
23,290
|
$
|
23,924
|
$
|
29,486
|
$
|
29,508
|
|||||
Denominator:
|
|||||||||||||
Weighted
average shares outstanding for basic income per common
share
|
10,641
|
10,538
|
10,565
|
10,483
|
|||||||||
Effect
of dilutive stock options
|
290
|
441
|
298
|
484
|
|||||||||
Adjusted
weighted average shares outstanding for diluted income per common
share
|
10,931
|
10,979
|
10,863
|
10,967
|
|||||||||
Basic
net income per common share
|
$
|
2.19
|
$
|
2.27
|
$
|
2.79
|
$
|
2.81
|
|||||
Diluted
net income per common share
|
$
|
2.13
|
$
|
2.18
|
$
|
2.71
|
$
|
2.69
|
(2)
|
SHARE-BASED
COMPENSATION:
|
Three
Months Ended
|
Nine
Months Ended
|
||||||
December
31, 2005
|
December
31, 2005
|
||||||
(in
thousands, except per share data)
|
|||||||
Net
income, as reported
|
$
|
23,924
|
$
|
29,508
|
|||
Add:
Total stock-based employee compensation expense included in the
determination of net income as reported, net of tax
effects
|
-
|
111
|
|||||
Deduct:
Total stock-based employee compensation expense determined under
fair-value based method for all awards, net of related tax
effects
|
(588
|
)
|
(1,825
|
)
|
|||
Pro
forma net income
|
$
|
23,336
|
$
|
27,794
|
|||
Net
income per share:
|
|||||||
Basic
- as reported
|
$
|
2.27
|
$
|
2.81
|
|||
Basic
- pro forma
|
$
|
2.21
|
$
|
2.65
|
|||
Diluted
- as reported
|
$
|
2.18
|
$
|
2.69
|
|||
Diluted
- pro forma
|
$
|
2.13
|
$
|
2.53
|
For
the Three Months
|
For
the Nine Months
|
||||||||||||
Ended
December 31,
|
Ended
December 31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Expected
dividend yield at time of grant
|
1.52
|
%
|
1.39
|
%
|
1.60
|
%
|
1.43
|
%
|
|||||
Expected
stock price volatility
|
31
|
%
|
36
|
%
|
25
|
%
|
35
|
%
|
|||||
Risk-free
interest rate
|
4.52
|
%
|
4.43
|
%
|
4.91
|
%
|
4.06
|
%
|
|||||
Expected
life of option
|
4.7
years
|
6.3
years
|
4.7
years
|
4.9
years
|
Number
of
Shares
|
Option
Price
per Share
|
Weighted
Average
Price
|
Weighted
Average Life
Remaining
|
Aggregate
Intrinsic Value
(in thousands)
|
||||||||||||
Options
outstanding at April 1, 2006
|
1,737,606
|
$
|
12.71
- 36.60
|
$
|
24.35
|
|||||||||||
Granted
|
394,100
|
27.60
- 33.24
|
30.01
|
|||||||||||||
Exercised
|
(291,846
|
)
|
12.71
- 34.12
|
17.23
|
||||||||||||
Canceled
|
(146,138
|
)
|
16.70
- 35.00
|
32.32
|
||||||||||||
Options
outstanding at December 31, 2006
|
1,693,722
|
$
|
12.71
- 36.60
|
$
|
26.22
|
4.0
years
|
$
|
15,538
|
||||||||
Options
exercisable at December 31, 2006
|
916,468
|
$
|
12.71
- 36.60
|
$
|
21.97
|
3.7
years
|
$
|
12,294
|
(3)
|
DERIVATIVE
FINANCIAL INSTRUMENTS:
|
(4)
|
BUSINESS
RESTRUCTURING:
|
Termination
Costs
|
Other
Costs
|
Total
|
||||||||
Initial
accrual
|
$
|
1,200
|
$
|
123
|
$
|
1,323
|
||||
Cash
paid - fiscal 2007
|
(26
|
)
|
(65
|
)
|
(91
|
)
|
||||
Restructuring
reserve as of December 31, 2006
|
$
|
1,174
|
$
|
58
|
$
|
1,232
|
(5)
|
GOODWILL
AND INTANGIBLES:
|
December
31,
|
March
31,
|
||||||
2006
|
2006
|
||||||
Tradenames
|
$
|
4,290
|
$
|
4,290
|
|||
Non-compete
and other, net
|
61
|
132
|
|||||
$
|
4,351
|
$
|
4,422
|
Fiscal
2007
|
$
|
23
|
||
Fiscal
2008
|
38
|
|||
Total
|
$
|
61
|
(6)
|
COMMITMENTS
AND CONTINGENCIES:
|
(7)
|
ACCOUNTING
PRONOUNCEMENTS:
|
Less
than 1
Year
|
1-3
Years
|
4-5
Years
|
After
5
Years
|
Total
|
||||||||||||
Letters
of credit
|
$
|
6,383
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
6,383
|
Nine
Months Ended December 31,
2006
|
||||||||||
Income
Before
Income
Taxes
|
Net
Income
|
Diluted
Earnings
Per
Share
|
||||||||
As
reported
|
$
|
46,700
|
$
|
29,486
|
$
|
2.71
|
||||
-
Restructuring expenses
|
1,745
|
1,102
|
.10
|
|||||||
-
Inventory write-downs due to facility closure
|
570
|
360
|
.03
|
|||||||
-
Other incremental costs related to restructuring plan
|
319
|
201
|
.02
|
|||||||
-
Expensing stock options - SFAS No. 123R
|
2,131
|
1,631
|
.15
|
|||||||
Non-GAAP
measurement
|
$
|
51,465
|
$
|
32,780
|
$
|
3.02
|
Three
Months Ended December 31, 2006
|
||||||||||
Income
Before
Income
Taxes
|
Net
Income
|
Diluted
Earnings
Per
Share
|
||||||||
As
reported
|
$
|
36,885
|
$
|
23,290
|
$
|
2.13
|
||||
-
Restructuring expenses
|
1,745
|
1,102
|
.10
|
|||||||
-
Inventory write-downs due to facility closure
|
570
|
360
|
.03
|
|||||||
-
Other incremental costs related to restructuring plan
|
319
|
201
|
.02
|
|||||||
-
Expensing stock options - SFAS No. 123R
|
719
|
550
|
.05
|
|||||||
Non-GAAP
measurement
|
$
|
40,238
|
$
|
25,503
|
$
|
2.33
|
(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 President and Chief Executive
Officer and Vice President - Finance and Chief 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 President
and Chief Executive Officer and Vice President - Finance and Chief
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 recorded, processed, summarized
and
reported within the time periods specified in the Securities and
Exchange
Commission’s rules and forms.
|
(b)
|
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
third quarter of fiscal year 2007 that has materially affected,
or is
reasonably likely to materially affect, the Company’s internal control
over financial reporting.
|
Total
Number
of
Shares
Purchased (1)
|
Average
Price
Paid
Per Share
|
Total
Number of
Shares
Purchased as
Part
of Publicly
Announced
Program (2)
|
Maximum
Number
of Shares that May Yet Be Purchased Under the
Program (2)
|
||||||||||
October
1 through October 31, 2006
|
-
|
$
|
-
|
-
|
257,224
|
||||||||
November
1 through November 30, 2006
|
-
|
-
|
-
|
257,224
|
|||||||||
December
1 through December 31, 2006
|
9,200
|
32.90
|
9,200
|
248,024
|
|||||||||
Total
Third Quarter
|
9,200
|
$
|
32.90
|
9,200
|
248,024
|
(1)
|
All
share repurchases were effected in open-market transactions and
in
accordance with the safe harbor provisions of Rule 10b-18 of
the Exchange
Act.
|
(2)
|
The
Company’s Board of Directors authorized on February 18, 1998 the
repurchase of up to 1,000,000 shares of the Company’s common stock (the
“Repurchase Program”). Thereafter, the Company’s Board of Directors
increased the number of shares authorized to be repurchased by
the Company
pursuant to the Repurchase Program as follows: November 9, 1998
(500,000
additional shares); May 4, 1999 (500,000 additional shares);
September 28,
1999 (500,000 additional shares); September 26, 2000 (500,000
additional
shares); and February 27, 2003 (400,000 additional shares). As
a result of
the Company’s three-for-two stock split distributed on July 10, 2003, the
number of shares authorized for repurchase pursuant to the Repurchase
Program was automatically increased to 5,100,000 shares. The
aggregate
number of shares repurchased by the Company pursuant to the Repurchase
Program as of December 31, 2006 was 4,851,976 on a split-adjusted
basis.
An expiration date has not been established for the Repurchase
Program.
|
Item
6.
|
Exhibits
|
Exhibit
10.1 CSS Industries, Inc. Severance Pay Plan
for Senior Management and Summary Plan
Description.
|
Exhibit
10.2 Employment Agreement dated as of
November 21, 2006 between CSS Industries, Inc. and Robert
Collins.
|
Exhibit
31.1 Certification of the Chief Executive
Officer of CSS Industries, Inc. required by Rule 13a-14(a)
under the
Securities Exchange Act of 1934.
|
Exhibit
31.2 Certification of the Chief Financial
Officer of CSS Industries, Inc. required by Rule 13a-14(a)
under the
Securities Exchange Act of 1934.
|
Exhibit
32.1 Certification of the Chief Executive
Officer of CSS Industries, Inc. required by Rule 13a-14(b)
under the
Securities Exchange Act of 1934 and 18 U. S. C. Section
1350.
|
Exhibit
32.2 Certification of the Chief Financial
Officer of CSS Industries, Inc. required by Rule 13a-14(b)
under the
Securities Exchange Act of 1934 and 18 U. S. C. Section
1350.
|
CSS INDUSTRIES, INC. | |||
(Registrant) | |||
Date:
February 1, 2007
|
By:
|
/s/Christopher
J. Munyan
|
|
Christopher
J. Munyan
|
|||
President
and Chief Executive Officer
|
|||
(principal
executive officer)
|
|||
Date:
February 1, 2007
|
By:
|
/s/Clifford
E. Pietrafitta
|
|
Clifford
E. Pietrafitta
|
|||
Vice
President - Finance and Chief Financial Officer
|
|||
(principal
financial and accounting officer)
|