Company reaffirms outlook for fiscal 2019 net
sales and adjusted EBITDA; revises net income guidance due to
goodwill impairment and inventory write-down costs
First Quarter Summary
- Net sales of $64.1 million increased 33
percent over the prior fiscal year quarter, reflecting the
contribution from the Simplicity acquisition
- Net loss of $18.5 million included $7.3
million of acquisition and integration-related costs and $1.4
million impairment of goodwill
- Adjusted EBITDA was ($6.7) million
compared to ($3.3) million in the prior year quarter
- Cash used for operations was $15.4
million, compared to $15.3 million in the prior year quarter
CSS Industries, Inc. (NYSE: CSS), a leading consumer products
company serving the seasonal, gift and craft markets, today
announced results for the quarter ended June 30, 2018, representing
the first quarter of fiscal 2019.
Net sales in the first quarter of fiscal 2019 were $64.1 million
compared to $48.3 million in the first quarter of fiscal 2018,
driven by the November 2017 acquisition of the Simplicity Creative
Group business (“Simplicity”), which contributed net sales of $19.5
million in the current year quarter. Excluding Simplicity, net
sales in the first quarter of fiscal 2019 were $44.6 million.
Gross profit was $11.6 million in the quarter compared to $11.8
million in the prior year quarter and gross margin was 18.2 percent
compared to 24.4 percent in the prior year quarter. Adjusted gross
profit was $17.1 million for the quarter compared to $15.0 million
in the prior year quarter. Adjusted gross margin was 26.7 percent
in the quarter compared to 31.0 percent in the prior year quarter.
The decline in adjusted gross margin percent was due to the mix
impact of volume declines due to the loss of high-margin programs
in the craft and gift categories, as well as manufacturing
variances carried in from the prior year as a result of lower
production volume and focused inventory reductions, partially
offset by the acquisition of Simplicity.
Selling, general & administrative (“SG&A”) expenses were
$28.9 million in the quarter compared to $20.7 million in the prior
year quarter. The increase was attributable to the addition of
Simplicity expenses and $1.4 million of incremental integration and
other costs.
The Company recorded a pre-tax charge of $1.4 million for the
impairment of goodwill in the first quarter of fiscal 2019. The
impairment charge relates to the June 1, 2018 acquisition by a
Company affiliate of the assets and business of Fitlosophy, Inc., a
provider of innovative products that inspire people to develop
healthy habits by focusing on effective goal-setting through
journaling. Because of the continued discrepancy between the
Company’s stockholders’ equity balance and its market
capitalization, goodwill from the foregoing acquisition was deemed
impaired and expensed accordingly.
Operating loss for the quarter was $18.7 million compared to
$8.9 million in the prior year quarter. Adjusted operating loss was
$10.0 million compared to $5.4 million in the prior year quarter.
Net loss was $18.5 million in the quarter compared to $7.1 million
in the prior year quarter. Adjusted net loss was $11.9 million
compared to $4.8 million in the prior year quarter. The diluted net
loss per share was $2.03 compared to $0.78 in the prior year
quarter, and the adjusted diluted net loss per share was $1.31
compared to $0.53 in the prior year quarter. Adjusted EBITDA was
($6.7) million for the current quarter compared to ($3.3) million
in the prior fiscal quarter.
Strategic Initiatives
Update
The Company’s overall strategy is to grow profitable sales and
improve return on invested capital (ROIC) through five strategic
pillars: defend the base business, identify adjacent product
categories with a focus on brands, build an omni-channel business
model, improve ROIC and build a collaborative One CSS culture.
First quarter highlights related to these objectives included:
- The Company has successfully exited, as
planned, the transition services agreement associated with the
Simplicity acquisition.
- In aligning with our strategic pillars,
the Company initiated a review of certain product lines to identify
underperforming products, with the goal of reducing costs and
improving working capital to enhance our long-term returns. As a
result, in July the Company committed to a plan to exit its
back-to-school sports licensing product line and also restructure
its specialty gift product line, while revising its “go to market”
strategy. This initiative will drive an approximate 75 percent
reduction in SKUs within this area, allowing the Company to further
rationalize its facilities footprint moving ahead. In conjunction
with this change, the Company expects to incur inventory write-down
costs between $1,000,000 and $1,500,000. These costs will be
recorded during our second quarter of fiscal 2019.
- The Company experienced positive
results from the implementation of its new omni-channel growth
strategy. As a result of the new strategy, sales attributable to a
major on-line retailer grew at a double-digit rate in the first
quarter.
- The Company announced its decision to
consolidate its Simplicity and McCall operations in the United
Kingdom. The consolidation is expected to be complete by the second
quarter of fiscal 2019, improving the effectiveness of the combined
brands while also delivering lower costs. The Company expects to
incur approximately $0.3 million of exit costs associated with this
consolidation, which will be recorded during our second
quarter.
“Our first quarter is always a slow quarter for us and we
expected these difficult year-over-year comparisons in part because
of known program losses with a major customer and the timing of
customer resets and replenishment orders,” said President and Chief
Executive Officer Christopher J. Munyan. “Our adjusted gross
margins, as expected, were impacted by inefficiencies from lower
production volumes in earlier periods, as well as the mix impact of
lower sales volumes. We are making good progress with our strategic
initiatives focused on improving profitability, executing on
acquisition synergies and growing our eCommerce business.”
The following is a summary of net sales by product category
(dollars in thousands):
Quarter Ended June 30, 2018 2017 Change
Seasonal $ 4,799 $ 4,642 3.4 % Gift 24,040 25,139
(4.4 )% Craft 35,288 18,543 90.3 %
Total $ 64,127 $ 48,324 32.7 %
Seasonal
The Company defines the seasonal product category as products
sold to mass-market retailers for holidays and seasonal events
including Christmas, Valentine’s Day, Easter and back-to-school.
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, and higher sales levels in the second and third
quarters.
Seasonal net sales increased 3.4 percent in the first quarter of
fiscal 2019 compared to the first quarter of fiscal 2018, driven
primarily by the timing of ribbon & bow sales.
Gift
The Company defines the gift product category as products
primarily designed to celebrate certain life events or special
occasions such as weddings, birthdays, anniversaries, graduations
or the birth of a child, as well as stickers, memory books and
stationery. These products are primarily sold into mass and
specialty retailers, floral and packaging wholesalers and
distributors. Products in this category are generally ordered on a
replenishment basis throughout the year.
Gift net sales decreased 4.4 percent in the quarter compared to
the prior fiscal year quarter, primarily due to lower sales of
social stationery, infant goods and packaging & wholesale
products, partially offset by higher sales of everyday ribbons
& bows, bags and wrap. The lower sales of social stationery
were due to timing of replenishment shipments. Lower infant sales
were due a program loss with a major retailer and the lower
packaging & wholesale products sales reflect declining demand.
The higher sales of everyday ribbons, bows, bags and wrap resulted
from share growth with a major retailer.
Craft
The craft product category reflects products used for craft
activities including ribbons, trims, buttons, sewing patterns,
knitting needles, needle arts and kids crafts. These products are
sold to mass market and specialty retailers on a replenishment
basis.
Craft net sales increased 90.3 percent in the quarter compared
to the prior fiscal year quarter, driven by the contribution of the
Simplicity acquisition. Excluding sales attributable to the
Simplicity business, net sales decreased 15.1 percent in the
quarter, primarily due to continued inventory destocking at a major
retailer as well as a shift in the timing of a button program
reset.
Income Tax Items
The Company’s effective tax rate for the quarter was 1.8 percent
compared to 18.5 percent for the prior fiscal year quarter. In the
current fiscal year quarter, the Company’s recognition of a tax
benefit was limited to the amount it expects to recognize for the
full fiscal year. That limitation, combined with a lower U.S.
federal corporate tax rate following U.S. tax reform, were the
primary drivers of the decrease in the effective tax rate.
Balance Sheet and Cash
Flow
The Company ended the quarter with $33.1 million of cash and
cash equivalents compared to $49.7 million at the end of the prior
fiscal year quarter. The lower balance was primarily due to the
Company’s use of cash to fund the acquisition of Simplicity.
Inventory increased to $117.9 million from $115.3 million at the
end of the prior fiscal year quarter, reflecting the addition of
Simplicity inventory, partially offset by the Company’s efforts to
reduce inventory. Accounts receivable increased to $51.9 million
from $42.8 million at the end of the prior fiscal year quarter,
primarily due to the Simplicity acquisition. Accounts payable
increased to $25.8 million compared to $14.1 million at the end of
the prior fiscal year quarter, resulting from the Simplicity
acquisition as well as the Company’s efforts to extend vendor
payment terms. The Company ended the quarter with $40.4 million in
total debt resulting from borrowings associated with the
acquisition of Simplicity.
Cash used for operating activities was $15.4 million for the
quarter compared to $15.3 million in the prior fiscal year quarter.
Cash from operating activities included $1.7 million of after-tax
cash acquisition and integration-related cash costs compared to
$0.2 million in the prior fiscal year period. Cash used for
investing activities included the acquisition of Fitlosophy for
$2.5 million and the final payment related to the Simplicity
acquisition for $2.5 million. Capital expenditures were $3.2
million, compared to $0.9 million in the prior fiscal year quarter,
primarily due to integration-related information technology
investments. Free cash flow was a use of $18.6 million compared to
a use of $16.2 million in the prior fiscal year quarter. The
Company returned $1.8 million to shareholders through cash
dividends during the quarter, consistent with the prior fiscal year
quarter.
Outlook
“We are reaffirming our net sales and adjusted EBITDA guidance
for fiscal 2019,” said Mr. Munyan. “We continue to expect solid
growth in sales and adjusted EBITDA in fiscal 2019 and strong free
cash flow. We also continue to explore opportunities to reposition
our Company through targeted acquisitions in categories where we
can grow while working to stabilize our base business and
capitalize on synergies from recent acquisitions. Lastly, we
continue to monitor the potential for tariffs on our imported
products coming from China. At this point, we do not consider there
to be a material impact on our business this fiscal year.”
The Company expects to generate net sales of $398 million to
$412 million in its fiscal year ending March 31, 2019, resulting in
year over year growth of 10 percent to 14 percent. The driver of
growth will be the full year impact of the Simplicity acquisition,
partially offset by a decline in the Company’s base business.
For the full year, we expect an adjusted tax rate of 26 percent,
primarily comprised of the new U.S. corporate tax rate, adjusted
for the projected mix between our domestic and foreign income and
the impact of a discrete item related to equity grants. The Company
continues to evaluate the impact of the recent tax reform
legislation, and will adjust its tax rate as appropriate as
additional guidance is released in this area.
Net loss outlook is revised and expected to be in the range of
$5 million to $7.5 million compared to a net loss of $36.5 million
in fiscal 2018. The increase from our previously provided guidance
of a net loss of $2 million to $4 million is driven primarily by
costs associated with the goodwill impairment, inventory write-down
costs and higher inventory step-up costs as a result of the
Fitlosophy acquisition.
The Company reaffirms its adjusted EBITDA guidance for fiscal
2019 to be in the range of $26 million to $29 million compared to
$24.3 million in fiscal 2018. The expected growth in adjusted
EBITDA primarily reflects the full year contribution of Simplicity
and integration savings related to Simplicity, partially offset by
a decline in the Company’s base business.
The Company will hold a conference call for investors on August
2, 2018 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 9270067.
- 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.
In the seasonal category, we focus on gift packaging items such as
ribbon, bows, greeting cards, wrapping paper, bags, boxes, tags and
gift card holders, in addition to specific holiday-themed
decorations, accessories, and activities, such as Easter egg dyes
and novelties and Valentine’s Day classroom exchange cards. For the
gift category, our core products include items designed to
celebrate certain life events or special occasions, such as
weddings, birthdays, anniversaries, graduations, or the birth of a
child, as well as stickers, memory books and stationery. Our core
products within the craft category include ribbons, trims, buttons,
sewing patterns, knitting needles, needle arts and kids crafts. In
keeping with our corporate mission, all of our products are
designed to help make life memorable.
Forward-looking
Statements
This press release includes “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995, including, among others, statements related to reducing costs
and improving working capital and enhancing returns by exiting a
product line, restructuring the specialty gift product line and
revising the Company’s “go to market” strategy; expected SKU
reductions, facilities footprint rationalization and the timing and
amount of future costs for an inventory write-down; expected future
lower costs and improved brand effectiveness from the consolidation
of certain United Kingdom operations and the expected timing and
amount of exit costs associated with such consolidation; strategic
initiatives to improve profitability, execute on acquisition
synergies and grow the Company’s eCommerce business; future strong
free cash flow; the Company’s expected adjusted tax rate for fiscal
2019; the amount of net sales, net loss and adjusted EBITDA
expected to be generated by the Company in fiscal 2019; and the
expected future impact on the Company of potential new tariffs on
products from China. 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, inherent uncertainties associated
with assumptions used to forecast fiscal 2019 net sales, net
income, adjusted EBITDA, free cash flow and adjusted tax rate;
execution risks that may impact the Company’s ability to achieve
the levels of net sales, net income, adjusted EBITDA and free cash
flow currently forecasted for fiscal 2019, including the risk that
the Company’s planned integration and cost reduction activities may
not be successfully implemented in fiscal 2019; risks associated
with the Simplicity acquisition, including the risk that the
Company may not realize the strategic benefits that are currently
expected and the risk that expected synergies will not be realized
in the amounts currently expected, or at all, and that any such
synergies may not be realized within the timeframe currently
expected; risks associated with the plan to exit a product line and
restructure the specialty gift product line; risks associated with
consolidating certain operations in the United Kingdom; risks
associated with the base business, including the risk that
currently forecasted base business sales may not be achieved; risks
associated with restructuring and integration activities, including
the risk that expected synergies, cost savings and improved working
capital may not be achieved; general market and economic
conditions; increased competition (including competition from
foreign products which may be imported at less than fair value and
from foreign products which may benefit from foreign governmental
subsidies); information technology risks, such as cyber attacks and
data breaches; increased operating costs, including labor-related
and energy costs and costs relating to the imposition or
retrospective application of duties on imported products; currency
risks and other risks associated with international markets; risks
associated with acquisitions, including difficulties identifying
and evaluating suitable acquisition opportunities, acquisition
integration costs and the risk that the Company may not be able to
integrate and derive the expected benefits and synergies from
acquisitions; the risk that customers may become insolvent, may
delay payments or may impose deductions or penalties on amounts
owed to the Company; costs of compliance with governmental
regulations and government investigations; liability associated
with noncompliance with governmental regulations, including
regulations pertaining to the environment, Federal and state
employment laws, and import and export controls and customs laws;
uncertainties associated with projecting the impact on the Company
of potential future tariffs on products imported from China; and
other factors described more fully in the Company’s annual report
on Form 10-K and elsewhere in the Company’s filings with the
Securities and Exchange Commission. 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 three months
ended June 30, 2018 and 2017, condensed consolidated balance sheets
as of June 30, 2018, March 31, 2018 and June 30, 2017, and
condensed consolidated statements of cash flows for the three
months ended June 30, 2018 and 2017 follow:
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share data)
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 )
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(in thousands)
June 30,2018 March 31,2018 June 30,2017
Assets
Current assets: Cash and cash equivalents $ 33,103 $ 58,560 $
49,695 Accounts receivable, net 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 Stockholders’ equity 233,408 253,695
285,896 Total liabilities and stockholders’ equity $ 347,121
$ 365,188 $ 328,495
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
Unaudited
(in thousands)
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 (7,677 ) (14,255 ) 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
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 value
step-ups
- 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 June 30, 2018 2017 Diluted income
(loss) per share $ (2.03 ) $ (0.78 ) Acquisition costs, integration
and other 0.24 0.05 Goodwill impairment 0.15 — Inventory step-up
amortization 0.55 0.35 Legal settlements — (0.01 ) Tax impact (1)
(0.23 ) (0.14 ) Adjusted diluted income (loss) per share (2) $
(1.31 ) $ (0.53 )
(1) Tax impact determined using a combined federal and state
statutory rate of 24% and 36%, respectively, for the three months
ended June 30, 2018 and June 30, 2017.
(2) Adjusted diluted income (loss) per share may not foot due to
rounding.
CSS Industries, Inc.
Reconciliation of Certain Non-GAAP
Measures
(Unaudited)
(in thousands)
Three Months Ended June 30, 2018 2017 Net income
(loss) $ (18,476 ) $ (7,064 ) Interest expense (income) 262 (54 )
Other expense (income) (117 ) (159 ) Income tax expense (benefit)
(341 ) (1,607 ) Depreciation and amortization 3,297 2,126
Acquisition costs, integration and other 2,211 429 Goodwill
impairment 1,390 — Inventory step-up amortization 5,043 3,185 Legal
settlements — (110 ) Adjusted EBITDA $ (6,731 ) $ (3,254 )
Gross profit $ 11,647 $ 11,812 Gross margin % 18.2 %
24.4 % Acquisition costs, integration and other 430 — Inventory
step-up amortization 5,043 3,185 Adjusted gross
profit $ 17,120 $ 14,997 Adjusted gross margin % 26.7
% 31.0 % Operating income (loss) $ (18,672 ) $ (8,884
) Operating income (loss) % (29.1 )% (18.4 )% Inventory step-up
amortization 5,043 3,185 Goodwill impairment 1,390 — Acquisition
costs, integration and other 2,211 429 Legal settlements —
(110 ) Adjusted operating income (loss) $ (10,028 ) $ (5,380 )
Adjusted operating income (loss) % (15.6 )% (11.1 )%
Net income (loss) $ (18,476 ) $ (7,064 ) Inventory step-up
amortization 5,043 3,185 Goodwill impairment 1,390 — Acquisition
costs, integration and other 2,211 429 Legal settlements — (110 )
Tax impact (1) (2,075 ) (1,262 ) Adjusted net income (loss) $
(11,907 ) $ (4,822 )
(1) Tax impact determined using a combined federal and state
statutory rate of 24% and 36%, respectively, for the three months
ended June 30, 2018 and June 30, 2017.
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 June 30, 2018 2017 Net cash used
for operating activities $ (15,404 ) $ (15,324 ) Purchase of
property, plant and equipment (3,159 ) (901 ) Free cash flow $
(18,563 ) $ (16,225 ) CSS Industries, Inc. Adjusted EBITDA Guidance
Non-GAAP Reconciliation Unaudited (in millions) FY 2019 Net
(loss) income ($7.5) - ($5.0) Income tax (benefit) expense (1.1) -
(0.6) Interest expense 1.6 Other income (0.5 ) Depreciation and
amortization 14.0 Goodwill impairment 1.4 Inventory write-down 1.2
Inventory step-up amortization 10.7 Acquisition integration and
other 6.2 Adjusted EBITDA $26.0 - $29.0
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CSS Industries, Inc.Keith PfeilInvestor
Relations610-729-3947
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