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CSS Industries Inc. Reports Operating Results (10-K)

June 01, 2010 | About:
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10qk

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CSS Industries Inc. (CSS) filed Annual Report for the period ended 2010-03-31.

Css Industries Inc. has a market cap of $182.63 million; its shares were traded at around $18.89 with a P/E ratio of 20.76 and P/S ratio of 0.41. The dividend yield of Css Industries Inc. stocks is 3.18%.CSS is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Sales and Marketing Most of CSS products are sold in the United States and Canada by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers representatives. CSS maintains permanent showrooms in New York City, Memphis, Dallas, Atlanta, Las Vegas and Hong Kong where buyers for major retail customers will typically visit for a presentation and review of the new lines. Products are also displayed and presented in showrooms maintained by various independent manufacturers representatives in major cities in the United States and Canada. Relationships are developed with key retail customers by CSS sales personnel and independent manufacturers representatives. Customers are generally mass market retailers, discount department stores, specialty chains, warehouse clubs, drug and food chains, dollar stores, independent card, gift and floral shops and retail teachers stores. Net sales to Wal-Mart Stores, Inc. and its affiliates and Target Corporation accounted for approximately 26% and 10% of total net sales, respectively, during fiscal 2010. No other customer accounted for 10% or more of the Companys net sales in fiscal 2010. Approximately 59% of the Companys sales are attributable to seasonal (Christmas, Halloween, Valentines Day and Easter) products, with the remainder attributable to all occasion products. Approximately 46% of CSS sales relate to the Christmas season. Seasonal products are generally designed and marketed beginning up to 18 to 20 months before the holiday event and manufactured during an eight to ten month production cycle. Due to these long lead time requirements, timely communication with third party factories, retail customers and independent manufacturers representatives is critical to the timely production of seasonal products. Because the products themselves are primarily seasonal, sales terms do not generally require payment until just before or just after the holiday, in accordance with industry practice. C.R. Gibsons social stationery products are sold by a national organization of sales representatives that specialize in the gift and card shop channel, as well as by C.R. Gibsons sales representatives. The Company also sells custom products to private label customers, to other social expression companies, and to converters of the Companys ribbon products. Custom products are sold by both independent manufacturers representatives and CSS sales managers. CSS products, with some customer specific exceptions, are not sold under guaranteed or return privilege terms. All occasion ribbon and bow products are also sold through sales representatives or independent manufacturers representatives to wholesale distributors and independent small retailers who serve the floral, craft and retail packaging trades.

Approximately 59% of our sales are attributable to seasonal (Christmas, Halloween, Valentines Day and Easter) products, with the remainder being attributable to all occasion products. Approximately 46% of our sales relate to the Christmas season. The seasonal nature of our business has historically resulted in lower sales levels and operating losses in our first and fourth quarters, and higher sales levels and operating profits in our second and third quarters. As a result, our quarterly results of operations fluctuate during our fiscal year, and a quarter to quarter comparison is not a good indication of our performance or how we will perform in the future. For example, our overall results of operations in the future may fluctuate substantially based on seasonal demand for our products. Such variations in demand could have a material adverse effect on the timing of cash flow and therefore our ability to meet our obligations with respect to our debt and other financial commitments. Seasonal fluctuations also affect our inventory levels. We must carry significant amounts of inventory, especially before the Christmas retail selling period. If we are not successful in selling the inventory during the relevant period, we may have to sell the inventory at significantly reduced prices, or we may not be able to sell the inventory at all.

A few of our customers are material to our business and operations. Our sales to Wal-Mart Stores, Inc. and its affiliates and Target Corporation accounted for approximately 26% and 10% of our sales, respectively, during our 2010 fiscal year. No other single customer accounted for 10% or more of our sales in fiscal 2010. Our ten largest customers, which include mass market retailers, warehouse clubs and national drug store chains, accounted for approximately 60% of our sales in our 2010 fiscal year. Our business depends, in part, on our ability to identify and define product and market trends, and to anticipate, understand and react to changing consumer demands in a timely manner. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales, or a significant reduction of sales, to one or more of our large customers may adversely affect our business, results of operations and financial condition. Further, in recent years there has been consolidation among our retail customer base. As the retail sector consolidates, our customers

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