|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
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.)
|
450 Plymouth Road, Suite 300, Plymouth Meeting, PA
|
|
19462
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
¨
|
Accelerated filer
|
x
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
|
|
Emerging growth company
|
¨
|
|
|
PAGE NO.
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Net sales
|
$
|
64,127
|
|
|
$
|
48,324
|
|
Cost of sales
|
52,480
|
|
|
36,512
|
|
||
Gross profit
|
11,647
|
|
|
11,812
|
|
||
Selling, general and administrative expenses
|
28,929
|
|
|
20,696
|
|
||
Impairment of goodwill
|
1,390
|
|
|
—
|
|
||
Operating income (loss)
|
(18,672
|
)
|
|
(8,884
|
)
|
||
Interest expense (income), net
|
262
|
|
|
(54
|
)
|
||
Other expense (income), net
|
(117
|
)
|
|
(159
|
)
|
||
Income (loss) before income taxes
|
(18,817
|
)
|
|
(8,671
|
)
|
||
Income tax expense (benefit)
|
(341
|
)
|
|
(1,607
|
)
|
||
Net income (loss)
|
$
|
(18,476
|
)
|
|
$
|
(7,064
|
)
|
|
|
|
|
||||
Weighted average basic and diluted shares outstanding
|
9,120
|
|
|
9,089
|
|
||
|
|
|
|
||||
Basic and diluted net income (loss) per common share
|
$
|
(2.03
|
)
|
|
$
|
(0.78
|
)
|
|
|
|
|
||||
Cash dividends per share of common stock
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
|
|
|
||||
Comprehensive income (loss):
|
|
|
|
||||
Net income (loss)
|
$
|
(18,476
|
)
|
|
$
|
(7,064
|
)
|
Foreign currency translation adjustment
|
(720
|
)
|
|
308
|
|
||
Fair value of interest rate swap agreements
|
265
|
|
|
—
|
|
||
Comprehensive income (loss)
|
$
|
(18,931
|
)
|
|
$
|
(6,756
|
)
|
|
June 30,
2018 |
|
March 31,
2018 |
|
June 30,
2017 |
||||||
|
(Unaudited)
|
|
(Audited)
|
|
(Unaudited)
|
||||||
Assets
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
33,103
|
|
|
$
|
58,560
|
|
|
$
|
49,695
|
|
Accounts receivable, net of allowances of $1,640, $1,576 and $1,124
|
51,908
|
|
|
63,083
|
|
|
42,753
|
|
|||
Inventories
|
117,944
|
|
|
102,436
|
|
|
115,348
|
|
|||
Prepaid expenses and other current assets
|
12,851
|
|
|
11,962
|
|
|
14,099
|
|
|||
Total current assets
|
215,806
|
|
|
236,041
|
|
|
221,895
|
|
|||
Property, plant and equipment, net
|
53,133
|
|
|
52,126
|
|
|
35,474
|
|
|||
Deferred income taxes
|
10,560
|
|
|
10,439
|
|
|
—
|
|
|||
Goodwill
|
—
|
|
|
—
|
|
|
19,916
|
|
|||
Intangible assets, net
|
57,794
|
|
|
57,029
|
|
|
43,038
|
|
|||
Other assets
|
9,828
|
|
|
9,553
|
|
|
8,172
|
|
|||
Total assets
|
$
|
347,121
|
|
|
$
|
365,188
|
|
|
$
|
328,495
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Current portion of long-term debt
|
$
|
229
|
|
|
$
|
228
|
|
|
$
|
223
|
|
Accounts payable
|
25,751
|
|
|
20,581
|
|
|
14,076
|
|
|||
Accrued payroll and other compensation
|
9,994
|
|
|
11,496
|
|
|
7,107
|
|
|||
Accrued customer programs
|
13,937
|
|
|
12,284
|
|
|
4,934
|
|
|||
Accrued other liabilities
|
11,387
|
|
|
14,751
|
|
|
7,638
|
|
|||
Total current liabilities
|
61,298
|
|
|
59,340
|
|
|
33,978
|
|
|||
Long-term debt, net of current portion
|
40,170
|
|
|
40,228
|
|
|
399
|
|
|||
Deferred income taxes
|
1,500
|
|
|
1,639
|
|
|
4,413
|
|
|||
Other long-term obligations
|
10,745
|
|
|
10,286
|
|
|
3,809
|
|
|||
Total liabilities
|
113,713
|
|
|
111,493
|
|
|
42,599
|
|
|||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|||
Stockholders’ equity:
|
|
|
|
|
|
||||||
Preferred stock, Class 2, $.01 par, 1,000,000 shares authorized, no shares issued
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock, $.10 par, 25,000,000 shares authorized, 14,703,084 shares issued at June 30, 2018, March 31, 2018 and June 30, 2017
|
1,470
|
|
|
1,470
|
|
|
1,470
|
|
|||
Additional paid-in capital
|
59,348
|
|
|
58,877
|
|
|
57,221
|
|
|||
Retained earnings
|
318,785
|
|
|
339,088
|
|
|
374,750
|
|
|||
Accumulated other comprehensive income (loss), net of tax
|
708
|
|
|
1,163
|
|
|
245
|
|
|||
Common stock in treasury, 5,583,338 shares at June 30, 2018 and March 31, 2018 and 5,608,690 shares at June 30, 2017, at cost
|
(146,903
|
)
|
|
(146,903
|
)
|
|
(147,790
|
)
|
|||
Total stockholders' equity
|
233,408
|
|
|
253,695
|
|
|
285,896
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
347,121
|
|
|
$
|
365,188
|
|
|
$
|
328,495
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(18,476
|
)
|
|
$
|
(7,064
|
)
|
Adjustments to reconcile net income (loss) to net cash used for operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,297
|
|
|
2,126
|
|
||
Amortization of inventory step-up
|
5,043
|
|
|
3,185
|
|
||
Accretion of asset retirement obligation
|
31
|
|
|
—
|
|
||
Accretion of investment discount
|
—
|
|
|
(69
|
)
|
||
Impairment of goodwill
|
1,390
|
|
|
—
|
|
||
Provision for accounts receivable allowances
|
733
|
|
|
526
|
|
||
Deferred tax (benefit) provision
|
(218
|
)
|
|
(56
|
)
|
||
Share-based compensation expense
|
471
|
|
|
283
|
|
||
Loss on sale or disposal of assets
|
2
|
|
|
—
|
|
||
Changes in assets and liabilities, net of effects of purchase of a business:
|
|
|
|
||||
Accounts receivable
|
10,709
|
|
|
5,562
|
|
||
Inventories
|
(20,312
|
)
|
|
(13,156
|
)
|
||
Prepaid expenses and other assets
|
(1,445
|
)
|
|
(4,323
|
)
|
||
Accounts payable
|
4,995
|
|
|
(99
|
)
|
||
Accrued expenses and long-term obligations
|
(1,624
|
)
|
|
(2,239
|
)
|
||
Total adjustments
|
3,072
|
|
|
(8,260
|
)
|
||
Net cash used for operating activities
|
(15,404
|
)
|
|
(15,324
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Maturities of investment securities
|
—
|
|
|
20,000
|
|
||
Final payment of purchase price for a business previously acquired
|
(2,500
|
)
|
|
—
|
|
||
Purchase of a business
|
(2,500
|
)
|
|
—
|
|
||
Purchase of property, plant and equipment
|
(3,159
|
)
|
|
(901
|
)
|
||
Net cash (used for) provided by investing activities
|
(8,159
|
)
|
|
19,099
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Payments on long-term debt
|
(57
|
)
|
|
(54
|
)
|
||
Dividends paid
|
(1,824
|
)
|
|
(1,819
|
)
|
||
Proceeds from exercise of stock options, net of tax withholdings
|
—
|
|
|
37
|
|
||
Net cash used for financing activities
|
(1,881
|
)
|
|
(1,836
|
)
|
||
Effect of exchange rate changes on cash
|
(13
|
)
|
|
63
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(25,457
|
)
|
|
2,002
|
|
||
Cash and cash equivalents at beginning of period
|
58,560
|
|
|
47,693
|
|
||
Cash and cash equivalents at end of period
|
$
|
33,103
|
|
|
$
|
49,695
|
|
(1)
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
June 30, 2018
|
|
March 31, 2018
|
|
June 30, 2017
|
||||||
Raw material
|
$
|
13,207
|
|
|
$
|
11,602
|
|
|
$
|
12,129
|
|
Work-in-process
|
16,495
|
|
|
17,809
|
|
|
19,198
|
|
|||
Finished goods
|
88,242
|
|
|
73,025
|
|
|
84,021
|
|
|||
|
$
|
117,944
|
|
|
$
|
102,436
|
|
|
$
|
115,348
|
|
|
June 30, 2018
|
|
March 31, 2018
|
|
June 30, 2017
|
||||||
Land
|
$
|
7,025
|
|
|
$
|
7,100
|
|
|
$
|
5,882
|
|
Buildings, leasehold interests and improvements
|
45,348
|
|
|
45,164
|
|
|
40,798
|
|
|||
Machinery, equipment and other
|
106,292
|
|
|
104,497
|
|
|
90,713
|
|
|||
|
158,665
|
|
|
156,761
|
|
|
137,393
|
|
|||
Less - Accumulated depreciation and amortization
|
(105,532
|
)
|
|
(104,635
|
)
|
|
(101,919
|
)
|
|||
Net property, plant and equipment
|
$
|
53,133
|
|
|
$
|
52,126
|
|
|
$
|
35,474
|
|
(2)
|
ACQUISITION
|
Cash
|
$
|
2,500
|
|
Contingent earn-out consideration
|
1,600
|
|
|
Estimated purchase price
|
$
|
4,100
|
|
Accounts receivable
|
$
|
389
|
|
Inventory
|
452
|
|
|
Other assets
|
5
|
|
|
Total current assets
|
846
|
|
|
Intangible assets
|
2,032
|
|
|
Goodwill
|
1,390
|
|
|
Total assets acquired
|
4,268
|
|
|
Current liabilities
|
(168
|
)
|
|
Net assets acquired
|
$
|
4,100
|
|
(3)
|
SHARE-BASED COMPENSATION
|
(4)
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
|
|
|
Fair Value of Derivative Instruments
|
||||||
|
Balance Sheet Location
|
|
June 30, 2018
|
|
June 30, 2017
|
||||
Foreign currency forward contracts
|
Accrued other liabilities
|
|
$
|
2
|
|
|
$
|
35
|
|
Interest rate swap agreement
|
Other assets
|
|
238
|
|
|
—
|
|
(5)
|
INTANGIBLE ASSETS
|
Balance as of March 31, 2018
|
$
|
—
|
|
Acquisition of Fitlosophy
|
1,390
|
|
|
Impairment charge
|
(1,390
|
)
|
|
Balance as of June 30, 2018
|
$
|
—
|
|
|
June 30, 2018
|
|
March 31, 2018
|
|
June 30, 2017
|
||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||||||
Tradenames and trademarks
|
$
|
24,353
|
|
|
$
|
—
|
|
|
$
|
24,353
|
|
|
$
|
—
|
|
|
$
|
19,953
|
|
|
$
|
—
|
|
Customer relationships
|
48,657
|
|
|
20,976
|
|
|
48,657
|
|
|
19,976
|
|
|
39,757
|
|
|
17,273
|
|
||||||
Favorable lease contracts
|
3,882
|
|
|
478
|
|
|
3,882
|
|
|
299
|
|
|
—
|
|
|
—
|
|
||||||
Trademarks
|
2,435
|
|
|
425
|
|
|
403
|
|
|
393
|
|
|
403
|
|
|
370
|
|
||||||
Patents
|
1,164
|
|
|
971
|
|
|
1,164
|
|
|
941
|
|
|
1,164
|
|
|
855
|
|
||||||
Non-compete
|
530
|
|
|
377
|
|
|
530
|
|
|
351
|
|
|
530
|
|
|
271
|
|
||||||
|
$
|
81,021
|
|
|
$
|
23,227
|
|
|
$
|
78,989
|
|
|
$
|
21,960
|
|
|
$
|
61,807
|
|
|
$
|
18,769
|
|
Remainder of fiscal 2019
|
$
|
3,887
|
|
Fiscal 2020
|
5,041
|
|
|
Fiscal 2021
|
4,554
|
|
|
Fiscal 2022
|
4,458
|
|
|
Fiscal 2023
|
3,741
|
|
(6)
|
LONG-TERM DEBT
|
|
June 30, 2018
|
|
March 31, 2018
|
|
June 30, 2017
|
||||||
Current portion of long-term debt
|
$
|
73
|
|
|
$
|
74
|
|
|
$
|
76
|
|
Long-term debt, net of current portion
|
102
|
|
|
120
|
|
|
175
|
|
|||
|
$
|
175
|
|
|
$
|
194
|
|
|
$
|
251
|
|
|
June 30, 2018
|
|
March 31, 2018
|
|
June 30, 2017
|
||||||
Current portion of long-term debt
|
$
|
156
|
|
|
$
|
154
|
|
|
$
|
147
|
|
Long-term debt, net of current portion
|
68
|
|
|
108
|
|
|
224
|
|
|||
|
$
|
224
|
|
|
$
|
262
|
|
|
$
|
371
|
|
(7)
|
COMMITMENTS AND CONTINGENCIES
|
(8)
|
FAIR VALUE MEASUREMENTS
|
|
|
|
Fair Value Measurements at June 30, 2018 Using
|
||||||||||||
|
June 30, 2018
|
|
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
$
|
366
|
|
|
$
|
366
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
2,031
|
|
|
—
|
|
|
2,031
|
|
|
—
|
|
||||
Interest rate swap agreement
|
238
|
|
|
—
|
|
|
238
|
|
|
—
|
|
||||
Total assets
|
$
|
2,635
|
|
|
$
|
366
|
|
|
$
|
2,269
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Deferred compensation plans
|
$
|
892
|
|
|
$
|
892
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Total liabilities
|
$
|
894
|
|
|
$
|
892
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements at March 31, 2018 Using
|
||||||||||||
|
March 31, 2018
|
|
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
$
|
359
|
|
|
$
|
359
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
2,007
|
|
|
—
|
|
|
2,007
|
|
|
—
|
|
||||
Total assets
|
$
|
2,366
|
|
|
$
|
359
|
|
|
$
|
2,007
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreement
|
$
|
110
|
|
|
$
|
—
|
|
|
$
|
110
|
|
|
$
|
—
|
|
Deferred compensation plans
|
776
|
|
|
776
|
|
|
—
|
|
|
—
|
|
||||
Total liabilities
|
$
|
886
|
|
|
$
|
776
|
|
|
$
|
110
|
|
|
$
|
—
|
|
(9)
|
INCOME TAXES
|
(10)
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
(11)
|
SUBSEQUENT EVENTS
|
*
|
Identify adjacent product categories with a focus on brands:
focus on fragmented markets, brands, and omni-channel approach
|
*
|
Improve ROIC by maximizing margins while minimizing capital investment:
fix underperforming product lines and focus on working capital
|
*
|
Build a collaborative, dynamic "One CSS" culture:
increase communication, accountability and talent infusion
|
|
Less than 1
Year
|
|
1-3
Years
|
|
4-5
Years
|
|
After 5
Years
|
|
Total
|
|||||||
Letters of credit
|
$
|
2,182
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
2,182
|
|
(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 Executive 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 Executive 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 (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the President and Chief Executive Officer and Executive Vice President – Finance and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
|
(b)
|
Changes in Internal Controls
. On April 1, 2018, we adopted ASU 2014-09 and its related amendments (collectively known as ASC 606), "Revenue from Contracts with Customers." Although the new standard is not expected to have an impact on our ongoing net income, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance. As a result of this assessment, we did implement some updates to the control activities surrounding our current processes related to revenue recognition. These updates included implementing new training and contract review controls specific to ASC 606, and the development of new processes for gathering data for the new disclosure requirements.
|
Exhibit 10.1
|
|
Exhibit 10.2
|
|
Exhibit 10.3
|
|
Exhibit 10.4
|
|
Exhibit 10.5
|
|
Exhibit 10.6
|
|
*Exhibit 10.7
|
|
*Exhibit 31.1
|
|
*Exhibit 31.2
|
|
*Exhibit 32.1
|
|
*Exhibit 32.2
|
|
*101.INS
|
XBRL Instance Document.
|
*101.SCH
|
XBRL Schema Document.
|
*101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
*101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
*101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
*101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
CSS INDUSTRIES, INC.
|
||
|
(Registrant)
|
||
|
|
|
|
Date: August 1, 2018
|
By:
|
|
/s/ Christopher J. Munyan
|
|
|
|
Christopher J. Munyan
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date: August 1, 2018
|
By:
|
|
/s/ John M. Roselli
|
|
|
|
John M. Roselli
|
|
|
|
Executive Vice President – Finance and Chief Financial Officer
|
|
|
|
(principal financial officer)
|
/s/ Christopher J. Munyan
|
Christopher J. Munyan,
|
President and Chief Executive Officer
|
(principal executive officer)
|
/s/ John M. Roselli
|
John M. Roselli
|
Executive Vice President – Finance and Chief Financial Officer
|
(principal financial officer)
|
/s/ Christopher J. Munyan
|
Christopher J. Munyan
|
President and Chief Executive Officer
|
(principal executive officer)
|
/s/ John M. Roselli
|
John M. Roselli
|
Executive Vice President – Finance and Chief Financial Officer
|
(principal financial officer)
|