On 17 Jan 19, shares of CSS Industries, Inc.’s (NYSE: CSS) oscillated between $9.50 and $9.99 before concluding trading period lower/higher -3.36% or -0.33 at $9.50. The stock recorded total trading quantity of 27,850 shares as compared to its ninety days average volume of 32,554 shares.
CSS Industries, Inc. (CSS) recently reported results for the quarter ended September 30, 2018, representing the second quarter of fiscal 2019.
Net sales in the second quarter of fiscal 2019 were $112.9M, contrast to $101.4M in the second quarter of fiscal 2018, driven by the November 2017 acquisition of the Simplicity Creative Group business (“Simplicity”), which contributed net sales of $21.8M in the current year quarter. Not Including Simplicity, net sales in the second quarter of fiscal 2019 were $91.1M. The decline in base business sales is primarily driven by the later timing of Christmas ribbon and bow shipments, which will shift to our third quarter of fiscal 2019.
Gross profit was $24.7M in the quarter, contrast to $26.7M in the previous year quarter and gross margin was 21.9 percent contrast to 26.3 percent in the previous year quarter. Adjusted gross profit was $30.9M for the quarter contrast to $30.5M in the previous year quarter. Adjusted gross margin was 27.3 percent in the quarter contrast to 30.1 percent in the previous year quarter. The decline in adjusted gross margin percent for the quarter was driven by the later timing of Christmas ribbon and bow sales shifting to our third quarter in fiscal 2019, as well as lower margins within our craft and gift businesses related to the mix of sales as contrast to the previous year, partially offset by the acquisition of Simplicity.
Balance Sheet and Cash Flow
The Company ended the quarter with $15.1M of cash and cash equivalents contrast to $27.2M at the end of the previous year quarter. The lower balance was primarily Because of the Company’s use of cash to fund the Simplicity acquisition. Inventory raised to $116.4M from $106.9M at the end of the previous year quarter, Because of the addition of Simplicity, partially offset by lower base business inventory. The decline in base business inventory is primarily related to the fair value step-up amortization related to McCall inventories. Not Including the effect of the lower stepped-up inventory, the base business inventory levels are essentially flat. Accounts receivable raised to $101.8M from $95.0M, mainly Because of the Simplicity acquisition. Accounts payable raised to $37.7M contrast to $26.1M in the previous year quarter, driven by the Simplicity acquisition. The Company ended the quarter with $61.5M in total debt of which $40.1M relates to borrowings associated with the acquisition of Simplicity, $0.2M related to McCall capital leases and $21.2M relates to borrowings associated with funding our seasonal working capital build.
Cash used for operating activities was $45.8M for the six months contrast to $34.2M in the previous year. Cash from operating activities included $3.6M of after-tax cash acquisition and integration-related costs contrast to $0.7M in the previous year. Cash used for investing activities included the acquisition of Fitlosophy for $2.5M and the final payment related to the Simplicity acquisition for $2.5M. Capital expenditures were $5.9M, contrast to $2.0M in the previous year. The raised investment is related to integration activities related to our recent acquisitions.
“We are reaffirming our net sales and adjusted EBITDA guidance for fiscal 2019 and remain focused on achieving those objectives,” stated Mr. Munyan. “Our business continues to perform in line with plan, though we are experiencing higher costs associated with our poly ribbon antidumping case and with integration activities. Despite predictable additional one-time costs, our poly ribbon antidumping case has proven successful in putting additional sales volume and jobs back in our U.S. plants. We are actively managing our business through the impacts of tariffs on products coming from China and our plans about this are actively being implemented. Consistent with previous comments, we do not expect tariffs to have a material impact on our year. We continue to be active in exploring potential acquisitions as we reshape our portfolio, while also working to drive efficiencies within our business.”
The Company expects to generate net sales of $398M to $412M in its fiscal year ending March 31, 2019, resulting in year over year growth of 10 percent to 14 percent. The driver of the growth will be the full year impact of the Simplicity acquisition, partially offset by a decline in the Company’s base business.
CSS EPS growth ratio for the past five years was -34.50% while Sales growth for the past five years was -0.10%. Return on equity (ROE) was noted as -22.30% while return on investment (ROI) was -12.00%.