Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-2661
________________________________________
CSS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
________________________________________
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)
(610) 729-3959
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
 
Title of each class 
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $.10 par value
 
CSS
 
New York Stock Exchange

________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
x
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨  Yes    x  No
As of November 11, 2019, there were 8,880,297 shares of common stock outstanding which excludes shares which may still be issued upon exercise of stock options or upon vesting of restricted stock unit grants.
 


Table of Contents

CSS INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
 
 
PAGE NO.
 
 
 


2

Table of Contents



CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
95,974

 
$
112,901

 
$
153,511

 
$
177,028

Cost of sales
71,255

 
88,220

 
116,686

 
140,700

Gross profit
24,719

 
24,681

 
36,825

 
36,328

Selling, general and administrative expenses
20,439

 
28,348

 
43,486

 
57,277

Restructuring expenses
741

 
2,127

 
2,795

 
2,127

Impairment of goodwill

 

 

 
1,390

Operating income (loss)
3,539

 
(5,794
)
 
(9,456
)
 
(24,466
)
Interest expense (income), net
721

 
434

 
1,649

 
696

Other expense (income), net
(989
)
 
(166
)
 
(1,076
)
 
(283
)
Income (loss) before income taxes
3,807

 
(6,062
)
 
(10,029
)
 
(24,879
)
Income tax expense (benefit)
325

 
(1,152
)
 
737

 
(1,493
)
Net income (loss)
$
3,482

 
$
(4,910
)
 
$
(10,766
)
 
$
(23,386
)
 
 
 
 
 
 
 
 
Net income (loss) per common share:
 
 
 
 
 
 
 
Basic
$
0.39

 
$
(0.54
)
 
$
(1.22
)
 
$
(2.57
)
Diluted
$
0.39

 
$
(0.54
)
 
$
(1.22
)
 
$
(2.57
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
8,875

 
9,057

 
8,857

 
9,088

Diluted
8,892

 
9,057

 
8,857

 
9,088

 
 
 
 
 
 
 
 
Net income (loss)
$
3,482

 
$
(4,910
)
 
$
(10,766
)
 
$
(23,386
)
Other comprehensive income (loss), net:
 
 
 
 
 
 
 
Currency translation adjustments:
(304
)
 
(246
)
 
(519
)
 
(966
)
Total currency translation gain (loss)
(304
)
 
(246
)
 
(519
)
 
(966
)
Interest rate swap agreement:
 
 
 
 
 
 
 
Fair value adjustment, net of tax $124 for the three months, and $183 for the six months ended September 30, 2018

 
211

 

 
476

Total effects of interest rate swap agreement

 
211

 

 
476

Other comprehensive income (loss), net:
(304
)
 
(35
)
 
(519
)
 
(490
)
Comprehensive income (loss)
$
3,178

 
$
(4,945
)
 
$
(11,285
)
 
$
(23,876
)
See accompanying notes to consolidated financial statements.

3

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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
 
September 30,
2019
 
March 31,
2019
 
September 30,
2018
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
5,155

 
$
17,100

 
$
15,112

Accounts receivable, net of allowances of $231, $2,198 and $1,757
81,658

 
53,835

 
101,762

Inventories
105,009

 
96,231

 
116,350

Asset held for sale
131

 
131

 
2,391

Prepaid expenses and other current assets
10,351

 
12,568

 
13,660

Total current assets
202,304

 
179,865

 
249,275

Property, plant and equipment, net
50,482

 
50,920

 
49,657

Operating lease right-of-use assets
46,948

 

 

Deferred income taxes

 

 
12,486

Intangible assets, net
35,821

 
40,285

 
56,494

Other assets
14,949

 
14,525

 
10,487

Total assets
$
350,504

 
$
285,595

 
$
378,399

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Short-term borrowings
$
50,381

 
$
26,139

 
$
21,185

Current portion of long-term debt
39

 
316

 
231

Accounts payable
36,652

 
27,916

 
37,696

Accrued payroll and other compensation
6,485

 
6,962

 
11,164

Accrued customer programs
11,870

 
12,101

 
16,171

Accrued income taxes
349

 

 

Accrued other expenses
13,190

 
14,468

 
16,050

Current portion of operating lease liabilities
7,304

 

 

Total current liabilities
126,270

 
87,902

 
102,497

Long-term debt, net of current portion
7

 
13

 
40,111

Deferred income taxes
618

 
619

 
1,218

Operating lease liabilities
38,878

 

 

Other long-term obligations
5,863

 
7,130

 
10,964

Total liabilities
171,636

 
95,664

 
154,790

Commitments and contingencies (Note 8)


 


 


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 September 30, 2019, March 31, 2019 and September 30, 2018
1,470

 
1,470

 
1,470

Additional paid-in capital
61,185

 
60,921

 
59,934

Retained earnings
265,147

 
277,613

 
311,387

Accumulated other comprehensive income (loss), net of tax
(54
)
 
465

 
673

Common stock in treasury, 5,824,025 shares at September 30, 2019, 5,865,846 shares at March 31, 2019 and 5,813,926 shares at September 30, 2018, at cost
(148,880
)
 
(150,538
)
 
(149,855
)
Total stockholders' equity
178,868

 
189,931

 
223,609

Total liabilities and stockholders' equity
$
350,504

 
$
285,595

 
$
378,399

See accompanying notes to consolidated financial statements.

4

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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Six Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(10,766
)
 
$
(23,386
)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
 
 
 
Depreciation and amortization
6,481

 
6,721

Amortization of operating lease right-of-use assets
4,603

 

Amortization of inventory step-up
284

 
8,889

Amortization of financing transaction costs
252

 
20

Accretion of asset retirement obligation
64

 
62

Accretion of contingent earn-out consideration
26

 

Change in valuation of contingent earn-out consideration
(1,392
)
 

Write-off of deferred financing transaction costs
344

 

Impairment of property, plant and equipment

 
1,570

Impairment of goodwill

 
1,390

Provision for accounts receivable allowances
1,318

 
1,867

Deferred tax (benefit) provision
(10
)
 
(2,414
)
Share-based compensation expense
264

 
1,057

Loss (gain) on sale or disposal of assets

 
4

Changes in assets and liabilities, net of effects of purchase of a business:
 
 
 
Accounts receivable
(29,280
)
 
(40,323
)
Inventories
(9,263
)
 
(22,661
)
Prepaid expenses and other assets
2,376

 
(2,283
)
Accounts payable
10,303

 
17,022

Lease liabilities
(4,064
)
 

Accrued expenses and long-term obligations
106

 
6,644

Net cash used for operating activities
(28,354
)
 
(45,821
)
Cash flows from investing activities:
 
 
 
Final payment of purchase price for a business previously acquired

 
(2,500
)
Purchase of a business

 
(2,500
)
Purchase of property, plant and equipment
(5,985
)
 
(5,891
)
Purchase of company owned life insurance policy

 
(750
)
Proceeds from sale of fixed assets
140

 

Net cash used for investing activities
(5,845
)
 
(11,641
)
Cash flows from financing activities:
 
 
 
Borrowings on credit facility
104,292

 
21,185

Payments on credit facility
(80,050
)
 

Payments on long-term debt
(283
)
 
(114
)
Dividends paid

 
(3,633
)
Purchase of treasury stock

 
(3,393
)
Payment of financing transaction costs
(1,699
)
 
(33
)
Tax effect on stock awards
(42
)
 

Net cash provided by financing activities
22,218

 
14,012

Effect of exchange rate changes on cash
36

 
2

Net decrease in cash and cash equivalents
(11,945
)
 
(43,448
)
Cash and cash equivalents at beginning of period
17,100

 
58,560

Cash and cash equivalents at end of period
$
5,155

 
$
15,112

See accompanying notes to consolidated financial statements.

5

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CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
Other
 
Common Stock
 
 
 
Common Stock
 
Paid-in
 
Retained
 
Comprehensive
 
in Treasury
 
 
 
Shares
 
Amount
 
Capital
 
Earnings
 
Income (Loss)
 
Shares
 
Amount
 
Total
Balance, March 31, 2019
14,703,084

 
$
1,470

 
$
60,921

 
$
277,613

 
$
465

 
(5,865,846
)
 
$
(150,538
)
 
$
189,931

Share-based compensation expense

 

 
73

 

 

 

 

 
73

Issuance of common stock under equity plan

 

 

 
(782
)
 

 
15,611

 
740

 
(42
)
Other comprehensive income (loss)

 

 

 

 
(215
)
 

 

 
(215
)
Net income (loss)

 

 

 
(14,248
)
 

 

 

 
(14,248
)
Balance, June 30, 2019
14,703,084

 
1,470

 
60,994

 
262,583

 
250

 
(5,850,235
)
 
(149,798
)
 
175,499

Share-based compensation expense

 

 
191

 

 

 

 

 
191

Issuance of common stock under equity plan

 

 

 
(918
)
 

 
26,210

 
918

 

Other comprehensive income (loss)

 

 

 

 
(304
)
 

 

 
(304
)
Net income (loss)

 

 

 
3,482

 

 

 

 
3,482

Balance, September 30, 2019
14,703,084

 
$
1,470

 
$
61,185

 
$
265,147

 
$
(54
)
 
(5,824,025
)
 
$
(148,880
)
 
$
178,868

 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
Other
 
Common Stock
 
 
 
Common Stock
 
Paid-in
 
Retained
 
Comprehensive
 
in Treasury
 
 
 
Shares
 
Amount
 
Capital
 
Earnings
 
Income (Loss)
 
Shares
 
Amount
 
Total
Balance, March 31, 2018
14,703,084

 
$
1,470

 
$
58,877

 
$
339,088

 
$
1,163

 
(5,583,338
)
 
$
(146,903
)
 
$
253,695

Share-based compensation expense

 

 
471

 

 

 

 

 
471

Cash dividends ($.20 per common share)

 

 

 
(1,827
)
 

 

 

 
(1,827
)
Other comprehensive income (loss)

 

 

 

 
(455
)
 

 

 
(455
)
Net income (loss)

 

 

 
(18,476
)
 

 

 

 
(18,476
)
Balance, June 30, 2018
14,703,084

 
1,470

 
59,348

 
318,785

 
708

 
(5,583,338
)
 
(146,903
)
 
233,408

Share-based compensation expense

 

 
586

 

 

 

 

 
586

Purchase of treasury shares

 

 

 

 

 
(249,908
)
 
(3,628
)
 
(3,628
)
Issuance of common stock under equity plan

 

 

 
(676
)
 

 
19,320

 
676

 

Cash dividends ($.20 per common share)

 

 

 
(1,812
)
 

 

 

 
(1,812
)
Other comprehensive income (loss)

 

 

 

 
(35
)
 

 

 
(35
)
Net income (loss)

 

 

 
(4,910
)
 

 

 

 
(4,910
)
Balance, September 30, 2018
14,703,084

 
$
1,470

 
$
59,934

 
$
311,387

 
$
673

 
(5,813,926
)
 
$
(149,855
)
 
$
223,609


See accompanying notes to consolidated financial statements.


6

Table of Contents

CSS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
The Company’s fiscal year ends on March 31. References to a particular fiscal year refer to the fiscal year ending in March of that year. For example, “fiscal 2020” refers to the fiscal year ending March 31, 2020.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
Nature of Business
CSS is a creative consumer products company, focused on the craft, gift and seasonal categories. For these design-driven categories, the Company engages in the creative development, manufacture, procurement, distribution and sale of our products with an omni-channel approach focused primarily on mass market retailers.
Craft The craft category includes sewing patterns, ribbons and trims, buttons, knitting needles, needle arts and kids' crafts. These products are sold to mass market, specialty, and online retailers, and are generally ordered on a replenishment basis throughout the year.
Gift The gift category includes products designed to celebrate certain life events or special occasions, such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Products include ribbons and bows, floral accessories, infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, and other items that commemorate life's celebrations. Products in this category are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year.
Seasonal The seasonal category includes holiday gift packaging items such as ribbon, bows, greeting cards, bags, 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. These products are sold to mass market retailers, and production forecasts for these products are generally known well in advance of shipment.
CSS’ product breadth provides its retail customers the opportunity to use a single vendor for much of their craft, gift and seasonal product requirements. A substantial portion of CSS’ products are manufactured and packaged in the United States and warehoused and distributed from facilities in the United States, the United Kingdom and Australia, with the remainder sourced from foreign suppliers, primarily in Asia. The Company also has a manufacturing facility in India that produces certain craft products, including trims, braids and tassels, and also has a distribution facility in India. The Company’s products are sold to its customers by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers’ representatives. CSS maintains purchasing offices in Hong Kong and China to administer Asian sourcing opportunities.




7

Table of Contents

Foreign Currency Translation and Transactions
The Company's foreign subsidiaries generally use the local currency as the functional currency. The Company translates all assets and liabilities at period end exchange rates and all income and expense accounts at average rates during the period. Translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses on foreign currency transactions (denominated in currencies other than the local currency) are not material and are included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to revenue recognition, the valuation of inventory and accounts receivable, the assessment of the recoverability of other intangible and long-lived assets and resolution of litigation and other proceedings. Actual results could differ from these estimates.
Inventories
The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or net realizable value. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or net realizable value. Inventories consisted of the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Raw material
$
13,898

 
$
14,246

 
$
14,212

Work-in-process
18,258

 
16,816

 
15,616

Finished goods
72,853

 
65,169

 
86,522

 
$
105,009

 
$
96,231

 
$
116,350

In connection with the acquisitions of substantially all of the net assets and business of The McCall Pattern Company on December 13, 2016, Simplicity Creative Group ("Simplicity") on November 3, 2017 and Fitlosophy, Inc. ("Fitlosophy") on June 1, 2018, the Company recorded a step-up to fair value of the inventory acquired of $21,773,000, $10,214,000, and $312,000, respectively, at the date of each such acquisition. This was a result of the acquired inventory being marked up to an estimated net selling price in purchase accounting and is recognized through cost of sales as the inventory is sold. The amount of step-up to fair value of the acquired inventory remaining as of September 30, 2019, March 31, 2019 and September 30, 2018 was $0, $284,000 and $2,076,000, respectively.
Asset Held for Sale
Asset held for sale of $131,000 as of September 30, 2019 and March 31, 2019 represents a distribution facility in Danville, Pennsylvania, which the Company sold on October 29, 2019 for $750,000. On the closing date, the Company received cash proceeds of $708,000 after closing costs. The Company also incurred additional legal costs of approximately $24,000 to sell the facility. Asset held for sale of $2,391,000 as of September 30, 2018, which represented a distribution facility in Havant, England, was sold in the fourth quarter of fiscal 2019.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and include the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Land
$
5,738

 
$
5,738

 
$
6,372

Buildings, leasehold interests and improvements
40,125

 
40,893

 
42,345

Machinery, equipment and other
119,157

 
113,946

 
108,595

 
165,020

 
160,577

 
157,312

Less - Accumulated depreciation and amortization
(114,538
)
 
(109,657
)
 
(107,655
)
Net property, plant and equipment
$
50,482

 
$
50,920

 
$
49,657


8

Table of Contents

Depreciation expense was $2,469,000 and $2,124,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $4,883,000 and $4,154,000 for the six months ended September 30, 2019 and 2018, respectively.
Leases
Effective April 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842") using the modified retrospective transition approach. See Note 5 for more information.
The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are not material to the Company’s consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of future payments. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, adjusted for any prepaid or accrued rent payments, lease incentives and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections for all asset classes: (1) the Company will not separate lease and non-lease components by class of underlying asset, (2) the Company will apply the short-term lease exemption by class of underlying asset, and, (3) the Company will apply the portfolio approach to the development of its discount rates for the leases to be recorded in accordance with ASC 842. The Company has chosen not to elect the hindsight practical expedient for its transition to ASC 842. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.
Long-Lived Assets including Other Intangible Assets and Property, Plant and Equipment
The Company performs an annual impairment test of the carrying amount of indefinite-lived intangible assets in the fourth quarter of its fiscal year. Additionally, the Company would perform its impairment testing at an interim date if events or circumstances indicate that intangibles might be impaired.
Other indefinite lived intangible assets consist of tradenames which are required to be tested annually for impairment. An entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, an entity must identify and evaluate changes in economic, industry and entity-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If the result of the qualitative analysis indicates it is more likely than not that an indefinite-lived intangible asset is impaired, a more detailed fair value calculation will need to be performed which is used to identify potential impairments and to measure the amount of impairment losses to be recognized, if any. The fair value of the Company’s tradenames is calculated using a “relief from royalty payments” methodology. This approach involves first estimating reasonable royalty rates for each trademark and then applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine the fair value. The royalty rate is estimated using both a market and income approach. The market approach relies on the existence of identifiable transactions in the marketplace involving the licensing of tradenames similar to those owned by the Company. The income approach uses a projected pretax profitability rate relevant to the licensed income stream. The Company believes the use of multiple valuation techniques results in a more accurate indicator of the fair value of each tradename. This fair value is then compared with the carrying value of each tradename to determine if impairment exists.
Long-lived assets (including property, plant and equipment), except for indefinite lived intangible assets, are reviewed for impairment when events or circumstances indicate the carrying value of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value.

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There were no triggering events identified during the six months ended September 30, 2019 that required interim impairment testing for long-lived assets. The Company recorded an impairment of property, plant and equipment of $1,570,000 in the second quarter of fiscal 2019 related to a restructuring plan to combine its operations in the United Kingdom. See Note 3 for further discussion of this restructuring and Note 6 for further information on other intangible assets.
Revenue Recognition
Revenue from the sale of the Company's products is recognized when control of the promised goods is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to receive from its customers in exchange for those goods. The Company's revenue is recognized using the five-step model identified in ASC 606, "Revenue from Contracts with Customers." These steps are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the performance obligations are satisfied.
The Company's contracts with customers generally include one performance obligation under the revenue recognition standard. For most product sales, the performance obligation is the delivery of a specified product, and is satisfied at the point in time when control of the product has transferred to the customer, which takes place when title and risk of loss transfer in accordance with the applicable shipping terms, typically either at shipping point or at delivery to a specified destination. The Company has certain limited products, primarily sewing patterns, that are sold on consignment at mass market retailers. The Company recognizes revenue on these products as they are sold to end consumers as recorded at point-of-sale terminals, which is the point in time when control of the product is transferred to the customer.
Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which the Company expects to be entitled to receive in exchange for transferring the goods. When applicable, the transaction price includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variable consideration consists of revenues that are subject to reductions to the transaction price for customer programs, which may include special pricing arrangements for specific customers, volume incentives and other promotions. The Company has significant historical experience with customer programs and estimates the expected consideration considering historical trends. The related reserves are included in accrued customer programs in the consolidated balance sheets. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. In limited cases, the Company may provide the right to return product to certain customers. The Company also records estimated reductions to revenue, based primarily on known claims, for customer returns and chargebacks that may arise as a result of shipping errors, product damaged in transit or for other reasons that become known subsequent to recognizing the revenue. These provisions are recorded in the period that the related sale is recognized and are reflected as a reduction from gross sales. The related reserves are included in accrued customer programs in the September 30, 2019 consolidated balance sheet and in accounts receivable, net of allowances in the March 31, 2019 and September 30, 2018 consolidated balance sheets. If the amount of actual customer returns and chargebacks were to increase or decrease from the estimated amount, revisions to the estimated reserve would be recorded.
The Company treats shipping and handling activities that occur until the customer has obtained control of a good as an activity to fulfill the promise to transfer the product. Costs related to shipping of product are recorded as incurred and classified in cost of sales in the consolidated statements of operations and comprehensive income (loss).
Payment terms with customers vary by customer, but generally range from 30 to 90 days. Certain seasonal revenues have extended payment terms in accordance with general industry practice. Since the term between invoicing and expected payment is less than one year, the Company does not adjust the transaction price for the effects of a financing component.
Sales commissions are earned and recognized as expense as the related revenue is recognized at a point in time. These costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate governmental agencies.
The Company operates as a single reporting segment, engaged in the creative development, manufacture, procurement, distribution, and sale of craft, gift and seasonal products, primarily to mass market retailers in the United States.
The following represents our net sales disaggregated by product category (in thousands):

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Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Craft
$
35,001

 
$
42,472

 
70,660

 
77,760

Gift
23,630

 
30,614

 
43,459

 
54,654

Seasonal
37,343

 
39,815

 
39,392

 
44,614

   Total
$
95,974

 
$
112,901

 
$
153,511

 
$
177,028

Net Income (Loss) Per Common Share
Due to the Company's net losses for the six months ended September 30, 2019 and the three- and six months ended September 30, 2018, potentially dilutive securities of 587,000 shares, 525,000 shares and 525,000 shares, respectively, consisting of outstanding stock options and unearned time-based restricted stock units, were excluded from the diluted net loss per common share calculation due to their antidilutive effect. The Company excluded 275,000 shares, consisting of outstanding stock options, from the diluted net income per common share calculation for the three months ended September 30, 2019 due to their antidilutive effect. Market-based and performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted-average shares until the market or performance conditions are met even when the Company is profitable for the respective period.
Components of Accumulated Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Accumulated effect of currency translation adjustment:
 
  
 
 
 
 
 
Balance at beginning of period
$
(203
)
  
$
268

 
$
12

 
$
988

Currency translation adjustment during period
(304
)
 
(246
)
 
(519
)
 
(966
)
Balance at end of period
$
(507
)
  
$
22

 
$
(507
)
 
$
22

 
 
  
 
 
 
 
 
Accumulated effect of pension and postretirement benefits:
 
  
 
 
 
 
 
Balance at beginning and end of period
$
453


$
259

 
$
453

 
$
259

 
 
  
 
 
 
 
 
Accumulated effect interest rate swap agreement:
 
  
 
 
 
 
 
Balance at beginning of period
$

  
$
181

 
$

 
$
(84
)
Fair value adjustment

  
211

 

 
476

Balance at end of period
$

  
$
392

 
$

 
$
392

(2)
ACQUISITIONS
On June 1, 2018, a subsidiary of the Company completed the acquisition of substantially all of the business and net assets of Fitlosophy for $2,500,000 in cash. In addition to the $2,500,000 paid at closing, the Company may pay up to an additional $10,500,000 of contingent earn-out consideration, in cash, if net sales of certain products meet or exceed five different thresholds during the period from the acquisition date through March 31, 2023. If earned, the contingent consideration payments will be paid, generally within 20 days after the end of each rolling twelve-month measurement period (quarterly through March 31, 2023). No such payments of contingent consideration have been earned or paid as of September 30, 2019. At the date of acquisition, the estimated fair value of the contingent earn-out consideration was $1,600,000. The estimated fair value of the contingent earn-out consideration was determined using a Monte Carlo simulation discounted to a present value. See further discussion of subsequent adjustments to the fair value of the contingent earn-out consideration in Note 9 to the consolidated financial statements.
The following table summarizes the purchase price at the date of acquisition (in thousands):
Cash
$
2,500

Contingent earn-out consideration
1,600

Purchase price
$
4,100


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Fitlosophy is devoted to creating, marketing, and distributing innovative products that inspire people to develop healthy habits by focusing on effective goal-setting through journaling. Products include a complete line of fitness and wellness planning products all sold under the fitlosophyTM, live life fitTM and fitbookTM brands. The acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. This goodwill was subsequently deemed impaired as a result of the continued discrepancy between the Company's stockholders' equity balance and its market capitalization, and therefore, was expensed during the first quarter of fiscal 2019.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
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

Pro forma results of operations for this acquisition have not been presented as the financial impact to our consolidated results of operations is not material.
(3)
RESTRUCTURING PLANS
Business Restructuring
In the first quarter of fiscal 2019, the Company announced a restructuring plan to combine its operations in the United Kingdom and Australia, respectively. This restructuring was undertaken in order to improve profitability and efficiency through the elimination of (i) redundant back office functions; (ii) certain staffing positions and (iii) excess distribution and warehouse capacity, and was substantially completed in the second quarter of fiscal 2019. Commencing in the second quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments as part of this restructuring plan. Also, in connection with this restructuring plan, the Company recorded an impairment of property, plant and equipment at one of the affected facilities in the United Kingdom of $1,398,000 in the second quarter of fiscal 2019, which was included in restructuring expenses. As of September 30, 2019 and September 30, 2018, the remaining liability of $9,000 and $503,000, respectively, was classified in accrued other expenses in the accompanying consolidated balance sheets.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Restructuring reserve as of March 31, 2019
$
1

 
$
24

 
$
14

 
$
39

Charges (reversals) to expense
(1
)
 
(24
)
 
3

 
(22
)
Cash paid

 

 
(6
)
 
(6
)
Restructuring reserve as of June 30, 2019

 

 
11

 
11

Cash paid

 

 
(2
)
 
(2
)
Restructuring reserve as of September 30, 2019
$

 
$

 
$
9

 
$
9

Selected information relating to the aforementioned restructuring follows (in thousands):

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Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Initial reserve
$
297

 
$
127

 
$
133

 
$
557

Cash paid

 
(13
)
 
(41
)
 
(54
)
Restructuring reserve as of September 30, 2018
$
297

 
$
114

 
$
92

 
$
503

Strategic Business Initiative
In the third quarter of fiscal 2019, the Company announced that it engaged an international consulting firm to perform a comprehensive review of its operating structure with the goal of improving the alignment of processes across the business, as the Company continues to integrate recent acquisitions and evaluate its portfolio. Commencing in the third quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $223,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Restructuring reserve as of March 31, 2019
$
634

Cash paid
(212
)
Restructuring reserve as of June 30, 2019
422

Cash paid
(196
)
Charges (reversals) to expense
(3
)
Restructuring reserve as of September 30, 2019
$
223

Performance Improvement Initiative
In the first quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company’s cost base to improve business performance, profitability and cash flow generation. Commencing in the first quarter of fiscal 2020, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $820,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Initial reserve
$
2,076

Cash paid
(490
)
Restructuring reserve as of June 30, 2019
1,586

Cash paid
(461
)
Charges (reversals) to expense
(305
)
Restructuring reserve as of September 30, 2019
$
820

Resource Alignment Initiative
In the second quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company's cost base by improving the alignment of resources with the current operating structure. Commencing in the second quarter of fiscal 2020, the Company recorded an initial restructuring reserve and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $1,029,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):

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Employee Termination Costs
Initial reserve
$
1,049

Cash paid
(20
)
Restructuring reserve as of September 30, 2019
$
1,029

(4)
SHARE-BASED COMPENSATION
Under the terms of the Company’s 2013 Equity Compensation Plan (“2013 Plan”), the Company may grant incentive stock options, non-qualified stock options, stock units, restricted stock grants, stock appreciation rights, stock bonus awards and dividend equivalents to officers and other employees and non-employee directors. Under the 2013 Plan, a committee of the Company's Board of Directors (the "Board") approves grants to officers and other employees, and the Board approves grants to non-employee directors. Grants under the 2013 Plan may be made through July 29, 2023. The term of each grant is at the discretion of the Company, but in no event greater than ten years from the date of grant, and at the date of grant the Company has discretion to determine the date or dates on which granted options become exercisable. Service-based stock options outstanding as of September 30, 2019 become exercisable at the rate of 25% per year commencing one year after the date of grant. Market-based stock options outstanding as of September 30, 2019 become exercisable only if certain market conditions and service requirements are satisfied, and the dates on which they become exercisable will depend on the period in which such market conditions and service requirements are met, if at all, except that vesting and exercisability are accelerated upon a change of control. Outstanding service-based restricted stock units ("RSUs") granted to employees vest at either: (i) the rate of 50% of the shares underlying the grant on each of the third and fourth anniversaries of the grant date or (ii) the rate of 25% of the shares underlying the grant on each of the first four anniversaries of the grant date. Service-based RSUs granted to directors and outstanding as of September 30, 2019 will vest on July 31, 2020. Market-based and performance-based RSUs outstanding as of September 30, 2019 will vest only if certain market or performance conditions and service requirements have been met, and the dates on which they vest will depend on the period in which such market or performance conditions and service requirements are met, if at all, except that vesting and redemption are accelerated upon a change of control. The Company recognizes grants, cancellations, and forfeitures as they occur. As of September 30, 2019, there were 574,355 shares available for grant under the 2013 Plan.
The fair value of each stock option granted under the above plan is estimated on the date of grant using a Black-Scholes option pricing model. There were no stock options granted during the first six months of fiscal 2020 and fiscal 2019. As of September 30, 2019, there were 275,000 outstanding stock options.
The fair value of each performance-based and service-based RSU granted to employees is estimated on the grant date based on the closing price of the Company's common stock reduced by the present value of the expected dividend stream during the vesting period using the risk-free interest rate when applicable. The fair value of each service-based RSU granted to directors, for which dividend equivalents are paid upon vesting of the underlying awards when applicable, is estimated on the day of grant based on the closing price of the Company's common stock. During the six months ended September 30, 2019 and 2018, the Company granted 285,985 and 189,013 RSUs, respectively, with a weighted average fair value per share of $5.67 and $14.65, respectively. As of September 30, 2019, there were 396,901 outstanding performance-based and service-based RSUs.
As of September 30, 2019, there was $353,000 of total unrecognized compensation cost related to non-vested stock option awards granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of 1.4 years. As of September 30, 2019, there was $2,222,000 of total unrecognized compensation cost related to non-vested service-based, market-based and performance-based RSUs granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of 1.8 years.
Compensation cost related to stock options and RSUs recognized in operating results (included in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss)) was $191,000 and $586,000 in the three months ended September 30, 2019 and 2018, respectively, and $264,000 and $1,057,000 in the six months ended September 30, 2019 and September 30, 2018, respectively.
(5)
LEASES
The Company adopted ASC 842 as of April 1, 2019, using the modified retrospective transition approach wherein the Company applied the new lease standard at the adoption date. Accordingly, all periods prior to April 1, 2019 were presented in accordance with the previous ASC Topic 840 - Leases ("ASC 840"), and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in the recording of operating lease ROU

14

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assets of $51,486,000, operating lease liabilities of $50,180,000, a reduction of favorable lease assets of $2,866,000 and a reduction of net deferred rent liabilities of $1,560,000 as of April 1, 2019. Finance leases are not material to the Company and are not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the consolidated balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s consolidated statement of operations and comprehensive income (loss) or consolidated statement of cash flows.
The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain equipment and vehicles. Leases with an initial term of 12 months or less, which are immaterial to the Company, are not recorded in the consolidated balance sheet. For all asset classes, the Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not recorded in the consolidated balance sheet.
ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on the adoption date for existing leases and on the commencement date for new leases based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of lease payments. The Company applies the portfolio approach based on the rate of interest that it would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term to the development of its discount rates.
The components of lease costs are as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Lease costs:
 
 
 
Operating lease costs
$
2,865

 
$
5,753

Variable operating lease costs
77

 
154

Total
$
2,942

 
$
5,907

Supplemental cash flow information is as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows for operating leases
$
2,061

 
$
4,064

Total
$
2,061

 
$
4,064

 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Right-of-use assets obtained in exchange for lease obligations:
 
 
 
Operating leases
$

 
$
51,597

Total
$

 
$
51,597


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The aggregate future lease payments for operating leases as of September 30, 2019 is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
9,298

Fiscal 2021
8,542

Fiscal 2022
7,859

Fiscal 2023
6,600

Fiscal 2024
5,973

Thereafter
18,514

Total lease payments
56,786

Less: Interest
(10,604
)
Present value of lease liabilities
$
46,182

The future minimum lease payments associated with all non-cancelable lease obligations under ASC 840 as of March 31, 2019 is as follows (in thousands):
Fiscal 2020
$
10,520

Fiscal 2021
9,360

Fiscal 2022
8,446

Fiscal 2023
7,364

Fiscal 2024
6,200

Thereafter
21,818

Total lease payments
$
63,708

Weighted-average lease terms and discount rates are as follows:
 
September 30, 2019
Weighted-average remaining lease term (years) of operating leases
7.0

Weighted-average discount rate of operating leases
5.8
%
(6)
GOODWILL, OTHER INTANGIBLE ASSETS AND LONG-LIVED ASSETS
During the first quarter of fiscal 2019, the Fitlosophy acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. During the first quarter of fiscal 2019, the Company determined that a triggering event occurred due to the fact that the Company’s total stockholders’ equity was in excess of the Company's market capitalization. Given this circumstance, the Company bypassed the option to assess qualitative factors to determine the existence of impairment and proceeded directly to the quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $1,390,000. As of September 30, 2019, March 31, 2019 and September 30, 2018, the Company had no goodwill.
The change in the carrying amount of goodwill during the six months ended September 30, 2018 is as follows (in thousands):
Balance as of March 31, 2018
$

Acquisition of Fitlosophy
1,390

Impairment charge
(1,390
)
Balance as of September 30, 2018
$



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Table of Contents

The gross carrying amount and accumulated amortization of other intangible assets is as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Tradenames and trademarks
$
15,054

 
$

 
$
15,054

 
$

 
$
24,353

 
$

Customer relationships
44,037

 
25,288

 
44,037

 
23,942

 
48,657

 
21,968

Favorable lease contracts

 

 
3,882

 
1,016

 
3,882

 
657

Trademarks
2,435

 
790

 
2,435

 
645

 
2,435

 
499

Patents
1,466

 
1,124

 
1,466

 
1,059

 
1,164

 
999

Covenants not to compete
530

 
499

 
530

 
457

 
530

 
404

 
$
63,522

 
$
27,701

 
$
67,404

 
$
27,119

 
$
81,021

 
$
24,527

Amortization expense related to intangible assets was $797,000 and $1,300,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $1,598,000 and $2,567,000 for the six months ended September 30, 2019 and 2018. Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2020 and each of the succeeding four years is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
1,586

Fiscal 2021
2,997

Fiscal 2022
2,900

Fiscal 2023
2,604

Fiscal 2024
2,518

(7)
SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS
On March 7, 2019, the Company entered into a $125,000,000 asset based senior secured credit facility with three banks (the “ABL Credit Facility”). The Company used the proceeds from borrowings under the ABL Credit Facility to repay in full the Company’s prior credit facility with two banks (the “Prior Credit Facility”), under which the maximum credit available to the Company at any one time (the “Committed Amount”) was $50,000,000 at the time the Prior Credit Facility was repaid and terminated on March 7, 2019. The ABL Credit Facility has a maturity date of March 7, 2024, unless earlier terminated.
On May 23, 2019, the Company entered into a Second Amendment (the “Amendment”) to the ABL Credit Facility. The Amendment reduced the maximum amount available under the revolving credit facility from $125,000,000 to $100,000,000. Availability under the Amendment is equal to the lesser of $100,000,000 or a Borrowing Base (as defined in the Amendment), in each case minus (i) revolving loans outstanding and (ii) $15,000,000 until the Agent’s receipt of a compliance certificate demonstrating compliance with the amended financial covenants. The Amendment requires the Company to not permit the Fixed Charge Coverage Ratio (as defined in the Amendment), as of the end of any calendar month (commencing with the twelve-month period ending March 31, 2020), to be less than 1.00 to 1.00. In addition, commencing with the month ending April 30, 2019 and continuing until the month ending March 31, 2020, the Company is required to have, at the end of each calendar month during such period, EBITDA for the corresponding period (which such period shall be based on a cumulative monthly build-up commencing with the month ending April 30, 2019) then ending of not less than the corresponding amount set forth in the Amendment. The Amendment also limits Capital Expenditures (as defined in the Amendment) for fiscal 2020 to $8,000,000 or less. The $15,000,000 availability block mentioned above was reduced to $10,000,000 for the period beginning August 20, 2019 to September 10, 2019, $11,000,000 for the period beginning September 10, 2019 to September 24, 2019, and $12,500,000 for the period beginning September 24, 2019 to October 4, 2019.
Permitted Acquisitions (as defined in the ABL Credit Facility) are no longer permitted under the Amendment, and certain Restricted Payments (as defined in the ABL Credit Facility), including dividends previously allowed based upon meeting certain leverage ratio and average Availability (as defined in the ABL Credit Facility) criteria, are no longer allowed.
At the Company’s election, loans made under the ABL Credit Facility will bear interest at either: (i) a base rate (“Base Rate”) plus an applicable rate or (ii) an “Adjusted LIBO Rate” (as defined in the ABL Credit Facility) plus an applicable rate, subject to adjustment if an event of default under the ABL Credit Facility has occurred and is continuing. The Base

17

Table of Contents

Rate means the highest of (a) the Agent’s “prime rate,” (b) the federal funds effective rate plus 0.50% and (c) the Adjusted LIBO Rate for an interest period of one month plus 1%. During the period prior to March 31, 2020, Adjusted LIBO Rate loans made under the ABL Credit Facility will bear interest at the Adjusted LIBO Rate plus an applicable rate of 2.50%, and Base Rate loans made under the ABL Credit Facility will bear interest at the Base Rate plus an applicable rate of 1.50%. After March 31, 2020, the applicable rate will be adjusted based on the Company’s Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) as further set forth in the ABL Credit Facility. Additionally, the Company is subject to a commitment fee equal to 0.25% per annum on the average daily unused portion of the revolving commitment, payable monthly to the Agent for the ratable benefit of the lenders.
The ABL Credit Facility is secured by a first priority perfected security interest in substantially all of the assets of the Company, including certain real estate, subject to certain exceptions and exclusions as set forth in the ABL Credit Facility and other loan documents, including the Pledge and Security Agreement (the “Pledge Agreement”) entered into by the Company and the Agent contemporaneously with their execution of the ABL Credit Facility.
The ABL Credit Facility contains certain affirmative and negative covenants that are binding on the Company, including, but not limited to, restrictions (subject to specified exceptions and qualifications) on the ability of the Company to incur indebtedness, to create liens, to merge or consolidate, to make dispositions, to make restricted payments such as dividends, distributions or equity repurchases, to make investments or undertake acquisitions, to prepay other indebtedness, to enter into certain transactions with affiliates, to enter into sale and leaseback transactions, or to enter into any restrictive agreements. In addition, the ABL Credit Facility requires the Company to abide by certain financial covenants calculated for the Company and its subsidiaries as noted above.
The ABL Credit Facility contains customary events of default (which are in some cases subject to certain exceptions, thresholds, notice requirements and grace periods), including, but not limited to, non-payment of principal or interest or other amounts, misrepresentations, failure to perform or observe covenants, cross-defaults with certain other material indebtedness, certain change in control events, voluntary or involuntary bankruptcy proceedings, certain judgments or decrees, failure of the ABL Credit Facility or other loan documents to be in full force and effect, certain ERISA events and judgments. The ABL Credit Facility also contains certain prepayment provisions, representations, warranties and conditions. As of September 30, 2019, the Company was in compliance with all debt covenants under the ABL Credit Facility.
Under the ABL Credit Facility, all collections on account of collateralized accounts receivable are required to be deposited into lock boxes that are subject to the control of the administrative agent (“Agent”) for the ABL Credit Facility (“Agent-Controlled Lock Boxes”). All funds deposited into Agent-Controlled Lock Boxes are swept daily and are required to be applied by the Agent as repayments of amounts owed by the Company under the ABL Credit Facility. Accordingly, the Company has classified its outstanding loan balance under the ABL Credit Facility as a current liability. The outstanding balance under the ABL Credit Facility as of September 30, 2019 and March 31, 2019 was $50,381,000 and $26,139,000, respectively. As of September 30, 2018, there was $61,185,000 outstanding under the Company's Prior Credit Facility classified as a long term liability.
The Company leases certain equipment under finance leases which are classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
12

 
$
145

 
$
73

Long-term debt, net of current portion
7

 
13

 
84

 
$
19

 
$
158

 
$
157

The Company also finances certain equipment which is classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
27

 
$
173

 
$
158

Long-term debt, net of current portion

 

 
27

 
$
27

 
$
173

 
$
185




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(8)
COMMITMENTS AND CONTINGENCIES
CSS and its subsidiaries are involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the consolidated financial position of the Company or its results of operations or cash flows.
(9)
FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The Company historically used certain derivative financial instruments as part of its risk management strategy to reduce interest rate and foreign currency risk. The Company recognized all derivatives on the consolidated balance sheets at fair value based on quotes obtained from financial institutions. As of March 31, 2019, the interest rate swap agreement was discontinued and the fair value of the interest rate swap agreement as of March 31, 2019 of $580,000 was reclassified into earnings with a realized loss included in other expense (income), net in the consolidated statement of operations and comprehensive income (loss). There was no interest rate swap agreement as of September 30, 2019. There were no foreign currency contracts outstanding as of September 30, 2019 and March 31, 2019.
The Company maintains a nonqualified Deferred Compensation Plan (the "Deferred Comp Plan") for qualified employees. The Deferred Comp Plan provides eligible key employees with the opportunity to elect to defer up to 50% of their eligible compensation under the Deferred Comp Plan. The Company may make matching or discretionary contributions, at the discretion of the Board. All compensation deferred under the Deferred Comp Plan is held by the Company. The Company maintains separate accounts for each participant to reflect deferred contribution amounts and the related gains or losses on such deferred amounts. A participant’s account is notionally invested in one or more investment funds and the value of the account is determined with respect to such investment allocations. The related liability is recorded as deferred compensation and included in other long-term obligations in the consolidated balance sheets as of September 30, 2019 and March 31, 2019.
The Company maintains life insurance policies in connection with the Deferred Comp Plan discussed above. The Company also maintains two life insurance policies in connection with separate deferred compensation arrangements with two former executives. The cash surrender value of the policies is recorded in other long-term assets in the consolidated balance sheets and is based on quotes obtained from insurance companies as of September 30, 2019 and March 31, 2019.
In connection with the acquisition of Fitlosophy in fiscal 2019, the Company may pay up to an additional $10,500,000 of contingent earn-out consideration, in cash, if net sales of certain products meet or exceed five different thresholds during the period from the acquisition date through March 31, 2023. The estimated fair value of the contingent earn-out consideration is determined using a Monte Carlo simulation discounted to a present value which is accreted over the earn-out period. The contingent consideration liability is included in accrued other expenses in the consolidated balance sheets as of March 31, 2019. As of September 30, 2019, the estimated fair value of the contingent earn-out consideration was reduced to zero as the projected sales for the certain products that qualify for the earn-out are not above the required thresholds.
Selected information relating to the aforementioned contingent consideration follows (in thousands):
 
Contingent Earn-out Consideration
Estimated fair value as of June 1, 2018
$
1,600

Accretion
64

Remeasurement adjustment
(298
)
Contingent Earn-out Consideration as of March 31, 2019
1,366

Accretion
16

Contingent Earn-out Consideration as of June 30, 2019
1,382

Accretion
10

Remeasurement adjustment
(1,392
)
Contingent Earn-out Consideration as of September 30, 2019
$

To increase consistency and comparability in fair value measurements, the FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques into a three-level fair value hierarchy. The fair value hierarchy gives the

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highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The Company’s recurring assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.
Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Examples of Level 2 inputs include quoted prices for identical or similar assets or liabilities in non-active markets and pricing models whose inputs are observable for substantially the full term of the asset or liability.
Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis in its consolidated balance sheets as of September 30, 2019 and March 31, 2019 (in thousands):
 
September 30, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,828

 
$

 
$
2,828

 
$

Total assets
$
2,828

 
$

 
$
2,828

 
$

Liabilities:
 
 
 
 
 
 
 
Deferred compensation plan
$
1,339

 
$
1,339

 
$

 
$

Total liabilities
$
1,339

 
$
1,339

 
$

 
$

 
March 31, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,765

 
$

 
$
2,765

 
$

Total assets
$
2,765

 
$

 
$
2,765

 
$

Liabilities:
 
 
 
 
 
 
 
Contingent earn-out consideration
$
1,366

 
$

 
$

 
$
1,366

Interest rate swap agreement
580

 

 
580

 

Deferred compensation plan
1,156

 
1,156

 

 

Total liabilities
$
3,102

 
$
1,156

 
$
580

 
$
1,366

Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected at carrying value in the consolidated balance sheets and such amounts are a reasonable estimate of their fair values due to the short-term nature of these instruments. The outstanding balance of the Company’s short-term borrowings and long-term debt approximated its fair value based on the current rates available to the Company for debt of the same maturity and represents Level 2 financial instruments.
Nonrecurring Fair Value Measurements
The Company’s nonfinancial assets which are measured at fair value on a nonrecurring basis include property, plant and equipment, intangible assets and certain other assets. These assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. In making the assessment of impairment, recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be

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generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value.
As discussed in Note 2, a subsidiary of the Company acquired substantially all of the business and net assets of Fitlosophy on June 1, 2018 and determined that the aggregate fair value of acquired intangible assets, consisting of tradenames, was $2,032,000. The Company estimated the fair value of the aforementioned acquired intangible assets using discounted cash flow techniques which included an estimate of future cash flows discounted to present value with an appropriate risk-adjusted discount rate (Level 3). The Company determined that the aggregate fair value of the acquired inventory in the Fitlosophy acquisition was $452,000, which was estimated as the selling price less costs of disposal (Level 2). The Company estimated the fair value of the Fitlosophy contingent earn-out consideration of $1,600,000 using a Monte Carlo simulation discounted to a present value (Level 3).
Indefinite-lived intangibles are subject to impairment testing on an annual basis, or sooner if events or circumstances indicate a condition of impairment may exist. Impairment testing is conducted through valuation methods that are based on assumptions for matters such as interest and discount rates, growth projections and other future business conditions (Level 3). These valuation methods require a significant degree of management judgment concerning the use of internal and external data. In the event these methods indicate that fair value is less than the carrying value, the asset is recorded at fair value as determined by the valuation models. In the first quarter of fiscal 2019, the Company recorded an impairment charge of $1,390,000 due to impairment of goodwill associated with the acquisition of Fitlosophy. See Note 2 and 6 for further discussion.
(10)
INCOME TAXES
Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Management assesses all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize existing deferred tax assets. A significant piece of objective negative evidence evaluated in fiscal 2019 was the cumulative U.S. pretax loss incurred over the then most recent three-year period. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future taxable income. On the basis of that evaluation, as of December 31, 2018, a full valuation allowance was recorded to fully offset the U.S. net deferred tax assets, as they more likely than not will not be realized. Management updated this assessment as of September 30, 2019, and concluded that the full valuation allowance for U.S. net deferred tax assets is still required.
The Company recognizes the impact of an uncertain tax position if it is more likely than not that such position will be sustained on audit, based solely on the technical merits of the position.
The income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. Management estimates the annual effective tax rate quarterly based on the forecasted pretax income (loss) results of its U.S. and non-U.S. jurisdictions. Items unrelated to current fiscal year ordinary income (loss) are recognized entirely in the period identified as a discrete item of tax.  These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, and adjustments to previously recorded reserves for uncertain tax positions.
(11)
TREASURY STOCK TRANSACTIONS
Under a stock repurchase program that had been previously authorized by the Company's Board of Directors, the Company repurchased 249,908 shares of the Company's common stock for $3,628,000 during the six months ended September 30, 2018. As payment for stock repurchases occurs upon settlement two business days after the applicable trading transaction, $235,000 of this amount was paid by the Company subsequent to September 30, 2018. There were no repurchases of the Company's common stock by the Company during the six months ended September 30, 2019. As of September 30, 2019, the Company had no shares remaining available for repurchase under the Board's authorized repurchase program.



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(12)
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefits Plans" ("ASU 2018-14"), which is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit pension or other postretirement plans. ASU 2018-14 is required to be applied on a retrospective basis to all periods presented and is effective for the Company in its fiscal year ending March 31, 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," ("ASU 2018-15"). ASU 2018-15 aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the updated guidance requires an entity to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in order to determine whether those costs should be expensed as incurred or capitalized. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
(13)
SUBSEQUENT EVENTS
Stockholder Rights Plan
On November 11, 2019, the Company’s Board of Directors (“Board”) adopted a short-term stockholder rights plan (the “Rights Plan”) and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, with a record date of November 22, 2019. The Rights Plan will expire, without any further action by the Board, on the earlier of November 11, 2020 or the business day immediately following the Company’s next annual meeting of stockholders, absent an extension being approved by the Company’s stockholders.
Each Right initially entitles the holder to purchase from the Company one one-thousandth of a share of a newly-designated series of preferred stock, Series D Junior Participating Class 2 Preferred Stock, par value $0.01 per share, of the Company (each, a “Series D Preferred Share”), at an exercise price of $22.00 per one one-thousandth of a Series D Preferred Share, subject to adjustment. Under the Rights Plan, the Rights generally would become exercisable only if a person or group acquires beneficial ownership of 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of CSS’ common stock in a transaction not approved by the Board. In that situation, each holder of a Right (other than the acquiring person or group, whose Rights will become void and will not be exercisable) will have the right to purchase, upon payment of the exercise price of $22.00 per share, subject to adjustment, and in accordance with the terms of the Rights Plan, a number of shares of CSS common stock having a market value of twice such price. In addition, if CSS is acquired in a merger or other business combination after an acquiring person acquires 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of CSS’ common stock, each holder of the Right would thereafter have the right to purchase, upon payment of the exercise price and in accordance with the terms of the

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Rights Plan, a number of shares of common stock of the acquiring person having a market value of twice such price. The acquiring person or group would not be entitled to exercise these Rights. In the Rights Plan, the definition of “beneficial ownership” includes derivative securities.
Stockholders who beneficially owned 10% or more of CSS’ outstanding common stock prior to the CSS’ first public announcement of the adoption of the Rights Plan on November 11, 2019, will not trigger any penalties under the Rights Plan so long as they do not acquire beneficial ownership of any additional shares of common stock at a time when they still beneficially own 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of such common stock, subject to certain exceptions as described in the Rights Plan.
Limited Consent and Waiver under ABL Credit Facility
On November 13, 2019, the Company and the lenders under the ABL Credit Facility (see Note 7) entered into a Limited Consent and Waiver (the “Limited Consent”) which reduced the minimum cumulative EBITDA (as defined in the ABL Credit Facility) levels required to be attained by the Company as of the end of each calendar month for the months of October 2019 through March 2020. The Limited Consent also increased the availability block from $15,000,000 to $20,000,000 from November 13, 2019 until November 30, 2019, and it provides for further increases thereof in increments of $1,000,000 beginning on December 1, 2019 and every two weeks thereafter until the availability block reaches $25,000,000 on February 1, 2020 and remains at that level thereafter unless and until the Company demonstrates compliance as of March 31, 2020 with each of the financial covenants contained in the ABL Credit Facility. Under the Limited Consent, the lenders waived any events of default that may have resulted from the Company’s adoption of the Rights Plan on November 11, 2019. In connection with the Limited Consent, there is a consent fee of $500,000.

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CSS INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STRATEGIC OVERVIEW
The Company’s near-term strategy is to return to profitability by focusing on its previously announced restructuring and cost savings initiatives. After completion of such initiatives, the Company will continue to focus on profitable sales growth through five strategic pillars. These strategic pillars include:
*Defend the base business - Design, product innovation, category leadership
*
Expand to adjacent categories with a focus on brands - Focus on fragmented markets, brands, omni-channel
*Build an omni-channel business model - Dedicated resources, leverage technology
*
Improve ROIC by maximizing margins while minimizing capital investment - Streamline and focus on economic value add and working capital
*Build a collaborative, One CSS culture - Communication, accountability, diversity
Approximately 70% of the Company’s net sales are attributable to products within our craft and gift categories, with the remainder attributable to products in the seasonal category. The craft product category reflects products used for craft activities and includes ribbons, trims, buttons, sewing patterns, knitting needles, needle arts and kids' crafts. Craft products are sold to mass market, specialty, and online retailers and are generally ordered on a replenishment basis throughout the year. The gift product category is defined as products primarily designed to celebrate certain life events or special occasions such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Gift products are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year. The seasonal product category is defined as products designed, produced and sold to mass market and online retailers for holidays and seasonal events, including Christmas, Valentine’s Day, Easter and back-to-school. Production forecasts for these products are known well in advance of shipment.
The Company has relatively high market share in many products across its categories. Most of these markets have declined in recent years. The Company continues to confront significant price pressure as its competitors source certain products from overseas and its customers increase direct sourcing from overseas factories. Increasing customer concentration has augmented customers' bargaining power, which has also contributed to price pressure. In recent fiscal years, the Company has experienced lower sales in certain Christmas product lines, craft ribbon product lines, gift stationery product lines, its infant product line, and in its non-retail packaging and floral product lines due to factors such as continued price pressure, inventory destocking, as well as a decline in brick and mortar retail traffic.
The Company has taken several measures to respond to sales volume, cost and price pressures. The Company believes it continues to have strong core product offerings which have allowed it to operate effectively in this competitive market. In addition, the Company is pursuing new product initiatives related to craft, gift and seasonal products, including new licensed and non-licensed product offerings, as well as increased investment in omni-channel offerings.
CSS continually invests in product and packaging design and product knowledge to assure that it can continue to provide unique added value to its customers. In addition, CSS maintains purchasing offices in Hong Kong and China to be able to provide foreign-sourced products at competitive prices. CSS continually evaluates the efficiency and productivity of its production and distribution facilities and of its back office operations to maintain its competitiveness.
The Company will continue to build on existing relationships with craft, gift and seasonal customers by expanding and diversifying its product lines and thereby growing its presence in the largest retailers in North America. The Company will also continue to execute the existing cost containment plans as well as continue to consider addition improvement plans to stimulate profitability.
RESULTS OF OPERATIONS
The seasonal nature of CSS’ business has historically resulted in lower sales levels and operating losses in the first and fourth quarters and comparatively higher sales levels and operating profits in the second and third quarters of the Company’s fiscal year, thereby causing significant fluctuations in the quarterly results of operations of the Company.

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The following table presents the key results of our operations for the three- and six months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
95,974

 
$
112,901

 
$
153,511

 
$
177,028

Gross Profit
24,719

 
24,681

 
36,825

 
36,328

Selling, general and administrative expenses
20,439

 
28,348

 
43,486

 
57,277

Restructuring expenses
741

 
2,127

 
2,795

 
2,127

Impairment of goodwill

 

 

 
1,390

Interest expense (income), net
721

 
434

 
1,649

 
696

Other expense (income), net
(989
)
 
(166
)
 
(1,076
)
 
(283
)
Income tax expense (benefit)
325

 
(1,152
)
 
737

 
(1,493
)
Net income (loss)
$
3,482

 
$
(4,910
)
 
$
(10,766
)
 
$
(23,386
)
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Net sales for the three months ended September 30, 2019 decreased to $95,974,000 from $112,901,000 for the three months ended September 30, 2018. This decrease was driven by decreases in craft, gift and seasonal net sales of $7,471,000, $6,984,000 and $2,472,000, respectively. The decrease in craft sales was primarily due to lower replenishment orders of ribbons, buttons, needle arts and kids' crafts. The decrease in gift sales was primarily due to lower replenishment orders of social stationery products, packaging and wholesale products and everyday trim-a-package products. The decrease in seasonal sales was primarily due to lower sales of Christmas cards and bags, and the previously announced exit of the Company’s sports-licensed back-to-school product line, partially offset by higher sales of Christmas ribbons and bows.
Gross profit for the three months ended September 30, 2019 increased to $24,719,000 from $24,681,000 for the three months ended September 30, 2018. The increase in gross profit was primarily driven by $3,845,000 of lower inventory step-up amortization, $997,000 of lower operational variances, $633,000 of lower licensing costs, $326,000 of lower discard costs, and a non-recurring write-down of inventory and royalty guarantees of $2,053,000 in the prior year related to the restructuring of the Company's specialty gift product line, which was substantially offset by the impact of lower sales volume and mix of sales of $7,725,000.
Selling, general and administrative ("SG&A") expenses of $20,439,000 for the three months ended September 30, 2019 decreased from $28,348,000 for the three months ended September 30, 2018 primarily due to lower personnel related costs of $4,908,000, a benefit related to the remeasurement of the Fitlosophy contingent earn-out consideration of $1,382,000, and lower consulting costs of $1,316,000. See further discussion of the remeasurement in Note 9 to the consolidated financial statements.
Restructuring expenses of $741,000 were recorded for the three months ended September 30, 2019 primarily associated with the Company's resource alignment initiative. Restructuring expenses of $2,127,000 for the three months ended September 30, 2018 associated with the consolidation of the Company's operations in the United Kingdom and Australia. See further discussion of these restructuring initiatives in Note 3 to the consolidated financial statements.
Interest expense, net, of $721,000 for the three months ended September 30, 2019 increased from $434,000 for the three months ended September 30, 2018 primarily due to the Company's increased borrowings, and the related borrowing rate, under the Company's ABL Credit Facility.
Other income, net, of $989,000 for the three months ended September 30, 2019 increased from $166,000 for the three months ended September 30, 2018 primarily due to the sale of certain Internet Protocol (IP) addresses which the Company determined were not needed its for ongoing business operations.
Income tax expense (benefit), as a percentage of income (loss) before income taxes, was 9% and 19% for the three months ended September 30, 2019 and 2018, respectively. The change was primarily attributable to the impact of a valuation allowance that fully offset the Company’s U.S. net deferred tax assets as of September 30, 2019, but not as of September 30, 2018.
The net income for the three months ended September 30, 2019 was $3,482,000, or $0.39 per diluted share compared to net loss of $4,910,000, or $0.54 per diluted share for the three months ended September 30, 2018.

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Six Months Ended September 30, 2019 Compared to Six Months Ended September 30, 2018
Net sales for the six months ended September 30, 2019 decreased to $153,511,000 from $177,028,000 for the six months ended September 30, 2018. This decrease was driven by decreases in gift, craft and seasonal net sales of $11,195,000, $7,100,000 and $5,222,000, respectively. The decrease in gift sales was primarily due to lower replenishment orders of social stationery products, packaging and wholesale products, infant and everyday trim-a-package products. The decrease in craft sales was primarily due to lower replenishment orders of ribbons, buttons, needle arts and kids' crafts. The decrease in seasonal sales was primarily due to lower sales of Christmas cards and bags, and the previously announced exit of the Company’s sports-licensed back-to-school product line, partially offset by higher sales of Christmas ribbons and bows.
Gross profit for the six months ended September 30, 2019 increased to $36,825,000 from $36,328,000 for the six months ended September 30, 2018. The increase in gross profit was primarily driven by $8,605,000 of lower inventory step-up amortization, $1,202,000 of lower licensing costs, $1,008,000 of lower operational variances, and a non-recurring write-down of inventory and royalty guarantees of $2,053,000 in the prior year related to the restructuring of the Company's specialty gift product line, which was substantially offset by the impact of lower sales volume and mix of sales of $12,041,000.
SG&A expenses of $43,486,000 for the six months ended September 30, 2019 decreased from $57,277,000 for the six months ended September 30, 2018 primarily due to lower personnel related costs of $8,776,000, lower consulting costs of $2,762,000, and a benefit related to the remeasurement of the Fitlosophy contingent earn-out consideration of $1,366,000 for the six months ended September 30, 2019. See further discussion of the remeasurement in Note 9 to the consolidated financial statements.
Restructuring expenses of $2,795,000 were recorded for the six months ended September 30, 2019 associated with the Company's performance improvement initiative, strategic business initiative and resource alignment initiative. Restructuring expenses of $2,127,000 for the six months ended September 30, 2018 associated with the consolidation of the Company's operations in the United Kingdom and Australia. See further discussion of these restructuring initiatives in Note 3 to the consolidated financial statements.
An impairment of goodwill of $1,390,000 was recorded for the six months ended September 30, 2018 associated with the acquisition of Fitlosophy on June 1, 2018. See further discussion in Notes 2 and 6 to the consolidated financial statements. There was no such impairment recorded for the six months ended September 30, 2019.
Interest expense, net, of $1,649,000 for the six months ended September 30, 2019 increased from $696,000 for the six months ended September 30, 2018 primarily due to the Company's increased borrowings, and the related borrowing rate, under the Company's ABL Credit Facility, and the write-off of deferred financing transaction costs of $344,000.
Other income, net, of $1,076,000 for the six months ended September 30, 2019 increased from $283,000 for the six months ended September 30, 2018 primarily due to the sale of certain Internet Protocol (IP) addresses which the Company determined were not needed for its ongoing business operations.
Income tax expense (benefit), as a percentage of income (loss) before income taxes, was (7)% and 6% for the six months ended September 30, 2019 and 2018, respectively. The change was primarily attributable to the impact of a valuation allowance that fully offset the Company’s U.S. net deferred tax assets as of September 30, 2019, but not as of September 30, 2018.
The net loss for the six months ended September 30, 2019 was $10,766,000, or $1.22 per diluted share compared to net loss of $23,386,000, or $2.57 per diluted share for the six months ended September 30, 2018.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2019, the Company had working capital of $76,034,000 and stockholders’ equity of $178,868,000. Operating activities used net cash of $28,354,000 during the six months ended September 30, 2019 compared to $45,821,000 in the six months ended September 30, 2018. Net cash used for operating activities during the six months ended September 30, 2019 reflected our working capital requirements which resulted in an increase in accounts receivable of $29,280,000 primarily reflecting seasonal billings of current fiscal year Christmas shipments, net of current fiscal year collections; an increase in inventory of $9,263,000 and an increase of accounts payable of $10,303,000 due to the normal seasonal inventory build necessary for the fiscal 2020 shipping season. Included in net loss for the six months ended September 30, 2019 were non-cash charges such as depreciation and amortization of $6,481,000, amortization of operating lease right-of-use assets of $4,603,000, amortization of inventory step-up of $284,000, amortization of financing transaction costs of $252,000, write-off of financing transaction costs of $344,000, provision for accounts receivable allowances of $1,318,000, and share-based compensation of $264,000. Net cash used for operating activities during the six months ended September 30, 2018 reflected our working capital requirements which resulted in an increase in accounts receivable of $40,323,000 primarily reflecting seasonal billings of current fiscal year Christmas shipments, net of current fiscal year collections; an increase in inventories of $22,661,000 and accounts payable of $17,022,000 due to the normal seasonal inventory build necessary for the fiscal 2019 shipping season; an increase in accrued expenses and long-term obligations of $6,644,000 and an increase in prepaid expenses and other assets of $2,263,000. Included in net loss for the six months ended September 30, 2018 were non-cash charges for amortization of

26

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inventory step-up of $8,889,000, depreciation and amortization of $6,721,000, provision for accounts receivable allowances of $1,867,000, impairment of property, plant and equipment of $1,570,000 related to a restructuring plan to combine the Company's operations in the United Kingdom, impairment of goodwill of $1,390,000 associated with the acquisition of Fitlosophy, deferred tax benefit of $2,414,000 and share-based compensation of $1,057,000.
Our investing activities used net cash of $5,845,000 in the six months ended September 30, 2019, consisting of capital expenditures of $5,985,000 primarily related to information technology and other integration projects. In the six months ended September 30, 2018, investing activities used net cash of $11,641,000 consisting of capital expenditures of $5,891,000 primarily related to information technology and other integration projects, the purchase of Fitlosophy of $2,500,000, the final payment of purchase price of $2,500,000 related to the Simplicity business previously acquired, and the purchase of a company-owned life insurance policy of $750,000.
Our financing activities provided net cash of $22,218,000 in the six months ended September 30, 2019, consisting primarily of net borrowings of $24,242,000, partially offset by payments of financing transaction costs of $1,699,000. In the six months ended September 30, 2018, financing activities provided net cash of $14,012,000 consisting primarily of short-term borrowings of $21,185,000, partially offset by payments of cash dividends of $3,633,000 and purchases of treasury stock of $3,393,000.
Historically, a significant portion of the Company’s revenues have been seasonal, primarily Christmas related, with approximately 64% of sales recognized in the second and third quarters. As payment for seasonal related products is usually not received until just before or just after the holiday selling season in accordance with general industry practice, working capital has historically increased in the second and third quarters, peaking prior to Christmas and dropping thereafter. As such, the Company relies on seasonal borrowings under its ABL Credit Facility, cash on hand and cash generated from its operations to meet its liquidity requirements throughout the year.
On March 7, 2019, the Company entered into a $125,000,000 asset based senior secured credit facility with three banks (the “ABL Credit Facility”). The Company used the proceeds from borrowings under the ABL Credit Facility to repay in full the Company’s prior credit facility with two banks (the “Prior Credit Facility”), under which the maximum credit available to the Company at any one time (the “Committed Amount”) was $50,000,000 at the time the Prior Credit Facility was repaid and terminated on March 7, 2019. On May 23, 2019, the Company entered into a Second Amendment (the “Amendment”) to the ABL Credit Facility. The Amendment reduced the maximum amount available under the revolving credit facility from $125,000,000 to $100,000,000. Availability under the Amendment is equal to the lesser of $100,000,000 or a Borrowing Base (as defined in the Amendment), in each case minus (i) revolving loans outstanding and (ii) $15,000,000 until the Agent’s receipt of a compliance certificate demonstrating compliance with the amended financial covenants. The $15,000,000 availability block mentioned above was reduced to $10,000,000 for the period beginning August 20, 2019 to September 10, 2019, $11,000,000 for the period beginning September 10, 2019 to September 24, 2019, and $12,500,000 for the period beginning September 24, 2019 to October 4, 2019. On November 13, 2019, the Company and the lenders under the ABL Credit Facility entered into a Limited Consent and Waiver (the “Limited Consent”) which reduced the minimum cumulative EBITDA (as defined in the ABL Credit Facility) levels required to be attained by the Company as of the end of each calendar month for the months of October 2019 through March 2020. The Limited Consent also increased the availability block from $15,000,000 to $20,000,000 from November 13, 2019 until November 30, 2019, and it provides for further increases thereof in increments of $1,000,000 beginning on December 1, 2019 and every two weeks thereafter until the availability block reaches $25,000,000 on February 1, 2020 and remains at that level thereafter unless and until the Company demonstrates compliance as of March 31, 2020 with each of the financial covenants contained in the ABL Credit Facility. Under the Limited Consent, the lenders waived any events of default that may have resulted from the Company’s adoption of the Rights Plan on November 11, 2019. For information concerning the ABL Credit Facility, see Note 7 to the consolidated financial statements. As of September 30, 2019, there was $50,381,000 outstanding under the Company’s ABL Credit Facility.
Based on its current operating plan, the Company believes its sources of available capital are adequate to meet its ongoing cash needs for at least the next 12 months.
As of September 30, 2019, the Company’s letter of credit commitments are as follows (in thousands):
 
Less than 1
Year

1-3
Years

4-5
Years

After 5
Years

Total
Letters of credit
$
2,582








$
2,582

The Company has a reimbursement obligation with respect to stand-by letters of credit that guarantee the funding of workers compensation claims and a lease security deposit. The Company has no financial guarantees with any third parties or related parties other than with respect to certain obligations of its subsidiaries.

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As of September 30, 2019, the Company is committed to pay guaranteed minimum royalties attributable to sales of certain licensed products. Reference is made to contractual obligations included in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2019. There have been no significant changes to such contractual obligations.
In the ordinary course of business, the Company enters into arrangements with vendors to purchase merchandise in advance of expected delivery. These purchase orders do not contain any significant termination payments or other penalties if cancelled.
LABOR RELATIONS
With the exception of the bargaining unit at the ribbon manufacturing facility in Hagerstown, Maryland, which totaled 95 employees as of September 30, 2019, CSS employees are not represented by labor unions. The collective bargaining agreement with the labor union representing the Hagerstown-based production and maintenance employees remains in effect until December 31, 2020. Historically, the Company has been successful in renegotiating expiring agreements without any disruption of operating activities.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The significant accounting policies of the Company are described in the notes to the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in many areas. Following are some of the areas requiring significant judgments and estimates: revenue; the assessment of the recoverability of other intangible and long-lived assets; the valuation of inventory and accounts receivable and resolution of litigation and other proceedings. With the exception of leases (see Note 5 to the consolidated financial statements), there have been no material changes to the critical accounting policies affecting the application of those accounting policies as noted in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019.
ACCOUNTING PRONOUNCEMENTS
See Note 12 to the consolidated financial statements for information concerning recent accounting pronouncements and the impact of those standards.
FORWARD-LOOKING STATEMENTS
Any statements contained in this report that do not describe historical facts, including estimates and other statements regarding matters that are to occur in the future, as well as statements regarding future operations, are neither promises nor guarantees and may constitute “forward-looking statements” as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. Any such forward-looking statements contained herein are based on current assumptions, estimates and expectations, but are subject to a number of known and unknown risks and significant business, economic and competitive uncertainties that may cause actual results to differ materially from expectations. Numerous factors could cause actual future results to differ materially from current expectations expressed or implied by such forward-looking statements, including the risks and other risk factors detailed in various publicly available documents filed by CSS from time to time with the Securities and Exchange Commission (SEC), which are available at www.sec.gov, including but not limited to, such information appearing under the caption “Risk Factors” in CSS’ Annual Report on Form 10-K filed with the SEC on May 31, 2019. Any forward-looking statements should be considered in light of those risk factors. CSS cautions readers not to rely on any such forward-looking statements, which speak only as of the date they are made. CSS disclaims any intent or obligation to publicly update or revise any such forward-looking statements to reflect any change in Company expectations or future events, conditions or circumstances on which any such forward-looking statements may be based, or that may affect the likelihood that actual results may differ from those set forth in such forward-looking statements.

28

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES
 
(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 principal executive officer and principal 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 principal executive officer and principal 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 principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
 
(a)
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 second quarter of fiscal 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

29

Table of Contents

CSS INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits
Exhibit 3.1
Exhibit 4.1
*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.

*Filed with this Quarterly Report on Form 10-Q.

30

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
CSS Industries, Inc.
 
(Registrant)
 
 
 
Date: November 14, 2019
By:
 
/s/ Christopher J. Munyan
 
 
 
Christopher J. Munyan
 
 
 
President and Chief Executive Officer
 
 
 
(principal executive officer and principal financial officer)
 
 
 


31
Exhibit


Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher J. Munyan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CSS Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 14, 2019
 
/s/ Christopher J. Munyan
Christopher J. Munyan,
President and Chief Executive Officer
(principal executive officer)


Exhibit


Exhibit 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher J. Munyan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CSS Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 14, 2019
 
/s/ Christopher J. Munyan
Christopher J. Munyan,
President and Chief Executive Officer
(principal financial officer)


Exhibit


Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CSS Industries, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Munyan, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Christopher J. Munyan
Christopher J. Munyan
President and Chief Executive Officer
(principal executive officer)
November 14, 2019


Exhibit


Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CSS Industries, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Munyan, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Christopher J. Munyan
Christopher J. Munyan
President and Chief Executive Officer
(principal financial officer)
November 14, 2019


v3.19.3
Summary of Significant Accounting Policies - Segment Reporting (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Segment Reporting Information [Line Items]        
Net sales $ 95,974 $ 112,901 $ 153,511 $ 177,028
Craft        
Segment Reporting Information [Line Items]        
Net sales 35,001 42,472 70,660 77,760
Gift        
Segment Reporting Information [Line Items]        
Net sales 23,630 30,614 43,459 54,654
Seasonal        
Segment Reporting Information [Line Items]        
Net sales $ 37,343 $ 39,815 $ 39,392 $ 44,614
v3.19.3
Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($)
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Jun. 30, 2018
Jun. 01, 2018
Mar. 31, 2018
Business Acquisition [Line Items]            
Goodwill $ 0 $ 0 $ 0     $ 0
Fitlosophy, Inc.            
Business Acquisition [Line Items]            
Accounts receivable         $ 389,000  
Inventory         452,000  
Other assets         5,000  
Total current assets         846,000  
Intangible assets         2,032,000  
Goodwill       $ 1,390,000 1,390,000  
Total assets acquired         4,268,000  
Current liabilities         (168,000)  
Net assets acquired         $ 4,100,000  
v3.19.3
Income Taxes
6 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Management assesses all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize existing deferred tax assets. A significant piece of objective negative evidence evaluated in fiscal 2019 was the cumulative U.S. pretax loss incurred over the then most recent three-year period. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future taxable income. On the basis of that evaluation, as of December 31, 2018, a full valuation allowance was recorded to fully offset the U.S. net deferred tax assets, as they more likely than not will not be realized. Management updated this assessment as of September 30, 2019, and concluded that the full valuation allowance for U.S. net deferred tax assets is still required.
The Company recognizes the impact of an uncertain tax position if it is more likely than not that such position will be sustained on audit, based solely on the technical merits of the position.
The income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. Management estimates the annual effective tax rate quarterly based on the forecasted pretax income (loss) results of its U.S. and non-U.S. jurisdictions. Items unrelated to current fiscal year ordinary income (loss) are recognized entirely in the period identified as a discrete item of tax.  These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, and adjustments to previously recorded reserves for uncertain tax positions.
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets
6 Months Ended
Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill, Other Intangible Assets And Long-Lived Assets
GOODWILL, OTHER INTANGIBLE ASSETS AND LONG-LIVED ASSETS
During the first quarter of fiscal 2019, the Fitlosophy acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. During the first quarter of fiscal 2019, the Company determined that a triggering event occurred due to the fact that the Company’s total stockholders’ equity was in excess of the Company's market capitalization. Given this circumstance, the Company bypassed the option to assess qualitative factors to determine the existence of impairment and proceeded directly to the quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $1,390,000. As of September 30, 2019, March 31, 2019 and September 30, 2018, the Company had no goodwill.
The change in the carrying amount of goodwill during the six months ended September 30, 2018 is as follows (in thousands):
Balance as of March 31, 2018
$

Acquisition of Fitlosophy
1,390

Impairment charge
(1,390
)
Balance as of September 30, 2018
$



The gross carrying amount and accumulated amortization of other intangible assets is as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Tradenames and trademarks
$
15,054

 
$

 
$
15,054

 
$

 
$
24,353

 
$

Customer relationships
44,037

 
25,288

 
44,037

 
23,942

 
48,657

 
21,968

Favorable lease contracts

 

 
3,882

 
1,016

 
3,882

 
657

Trademarks
2,435

 
790

 
2,435

 
645

 
2,435

 
499

Patents
1,466

 
1,124

 
1,466

 
1,059

 
1,164

 
999

Covenants not to compete
530

 
499

 
530

 
457

 
530

 
404

 
$
63,522

 
$
27,701

 
$
67,404

 
$
27,119

 
$
81,021

 
$
24,527


Amortization expense related to intangible assets was $797,000 and $1,300,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $1,598,000 and $2,567,000 for the six months ended September 30, 2019 and 2018. Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2020 and each of the succeeding four years is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
1,586

Fiscal 2021
2,997

Fiscal 2022
2,900

Fiscal 2023
2,604

Fiscal 2024
2,518

v3.19.3
Acquisitions
6 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Acquisitions
ACQUISITIONS
On June 1, 2018, a subsidiary of the Company completed the acquisition of substantially all of the business and net assets of Fitlosophy for $2,500,000 in cash. In addition to the $2,500,000 paid at closing, the Company may pay up to an additional $10,500,000 of contingent earn-out consideration, in cash, if net sales of certain products meet or exceed five different thresholds during the period from the acquisition date through March 31, 2023. If earned, the contingent consideration payments will be paid, generally within 20 days after the end of each rolling twelve-month measurement period (quarterly through March 31, 2023). No such payments of contingent consideration have been earned or paid as of September 30, 2019. At the date of acquisition, the estimated fair value of the contingent earn-out consideration was $1,600,000. The estimated fair value of the contingent earn-out consideration was determined using a Monte Carlo simulation discounted to a present value. See further discussion of subsequent adjustments to the fair value of the contingent earn-out consideration in Note 9 to the consolidated financial statements.
The following table summarizes the purchase price at the date of acquisition (in thousands):
Cash
$
2,500

Contingent earn-out consideration
1,600

Purchase price
$
4,100


Fitlosophy is devoted to creating, marketing, and distributing innovative products that inspire people to develop healthy habits by focusing on effective goal-setting through journaling. Products include a complete line of fitness and wellness planning products all sold under the fitlosophyTM, live life fitTM and fitbookTM brands. The acquisition was accounted for using the acquisition method and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $1,390,000 was recorded as goodwill. This goodwill was subsequently deemed impaired as a result of the continued discrepancy between the Company's stockholders' equity balance and its market capitalization, and therefore, was expensed during the first quarter of fiscal 2019.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
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


Pro forma results of operations for this acquisition have not been presented as the financial impact to our consolidated results of operations is not material.
v3.19.3
Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Recurring Fair Value Measurements - USD ($)
Sep. 30, 2019
Mar. 31, 2019
Assets:    
Total assets $ 2,828,000 $ 2,765,000
Liabilities:    
Total liabilities 1,339,000 3,102,000
Contingent earn-out consideration    
Liabilities:    
Total liabilities   1,366,000
Deferred compensation plan    
Liabilities:    
Total liabilities 1,339,000 1,156,000
Interest rate swap agreement    
Liabilities:    
Total liabilities 0 580,000
Cash surrender value of life insurance policies    
Assets:    
Total assets 2,828,000 2,765,000
Quoted Prices In Active Markets for Identical Assets (Level 1)    
Assets:    
Total assets 0 0
Liabilities:    
Total liabilities 1,339,000 1,156,000
Quoted Prices In Active Markets for Identical Assets (Level 1) | Contingent earn-out consideration    
Liabilities:    
Total liabilities   0
Quoted Prices In Active Markets for Identical Assets (Level 1) | Deferred compensation plan    
Liabilities:    
Total liabilities 1,339,000 1,156,000
Quoted Prices In Active Markets for Identical Assets (Level 1) | Interest rate swap agreement    
Liabilities:    
Total liabilities   0
Quoted Prices In Active Markets for Identical Assets (Level 1) | Cash surrender value of life insurance policies    
Assets:    
Total assets 0 0
Significant Other Observable Inputs (Level 2)    
Assets:    
Total assets 2,828,000 2,765,000
Liabilities:    
Total liabilities 0 580,000
Significant Other Observable Inputs (Level 2) | Contingent earn-out consideration    
Liabilities:    
Total liabilities   0
Significant Other Observable Inputs (Level 2) | Deferred compensation plan    
Liabilities:    
Total liabilities 0 0
Significant Other Observable Inputs (Level 2) | Interest rate swap agreement    
Liabilities:    
Total liabilities   580,000
Significant Other Observable Inputs (Level 2) | Cash surrender value of life insurance policies    
Assets:    
Total assets 2,828,000 2,765,000
Significant Unobservable Inputs (Level 3)    
Assets:    
Total assets 0 0
Liabilities:    
Total liabilities 0 1,366,000
Significant Unobservable Inputs (Level 3) | Contingent earn-out consideration    
Liabilities:    
Total liabilities   1,366,000
Significant Unobservable Inputs (Level 3) | Deferred compensation plan    
Liabilities:    
Total liabilities 0 0
Significant Unobservable Inputs (Level 3) | Interest rate swap agreement    
Liabilities:    
Total liabilities   0
Significant Unobservable Inputs (Level 3) | Cash surrender value of life insurance policies    
Assets:    
Total assets $ 0 $ 0
v3.19.3
Summary of Significant Accounting Policies
6 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
The Company’s fiscal year ends on March 31. References to a particular fiscal year refer to the fiscal year ending in March of that year. For example, “fiscal 2020” refers to the fiscal year ending March 31, 2020.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
Nature of Business
CSS is a creative consumer products company, focused on the craft, gift and seasonal categories. For these design-driven categories, the Company engages in the creative development, manufacture, procurement, distribution and sale of our products with an omni-channel approach focused primarily on mass market retailers.
Craft The craft category includes sewing patterns, ribbons and trims, buttons, knitting needles, needle arts and kids' crafts. These products are sold to mass market, specialty, and online retailers, and are generally ordered on a replenishment basis throughout the year.
Gift The gift category includes products designed to celebrate certain life events or special occasions, such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Products include ribbons and bows, floral accessories, infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, and other items that commemorate life's celebrations. Products in this category are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year.
Seasonal The seasonal category includes holiday gift packaging items such as ribbon, bows, greeting cards, bags, 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. These products are sold to mass market retailers, and production forecasts for these products are generally known well in advance of shipment.
CSS’ product breadth provides its retail customers the opportunity to use a single vendor for much of their craft, gift and seasonal product requirements. A substantial portion of CSS’ products are manufactured and packaged in the United States and warehoused and distributed from facilities in the United States, the United Kingdom and Australia, with the remainder sourced from foreign suppliers, primarily in Asia. The Company also has a manufacturing facility in India that produces certain craft products, including trims, braids and tassels, and also has a distribution facility in India. The Company’s products are sold to its customers by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers’ representatives. CSS maintains purchasing offices in Hong Kong and China to administer Asian sourcing opportunities.



Foreign Currency Translation and Transactions
The Company's foreign subsidiaries generally use the local currency as the functional currency. The Company translates all assets and liabilities at period end exchange rates and all income and expense accounts at average rates during the period. Translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses on foreign currency transactions (denominated in currencies other than the local currency) are not material and are included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to revenue recognition, the valuation of inventory and accounts receivable, the assessment of the recoverability of other intangible and long-lived assets and resolution of litigation and other proceedings. Actual results could differ from these estimates.
Inventories
The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or net realizable value. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or net realizable value. Inventories consisted of the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Raw material
$
13,898

 
$
14,246

 
$
14,212

Work-in-process
18,258

 
16,816

 
15,616

Finished goods
72,853

 
65,169

 
86,522

 
$
105,009

 
$
96,231

 
$
116,350


In connection with the acquisitions of substantially all of the net assets and business of The McCall Pattern Company on December 13, 2016, Simplicity Creative Group ("Simplicity") on November 3, 2017 and Fitlosophy, Inc. ("Fitlosophy") on June 1, 2018, the Company recorded a step-up to fair value of the inventory acquired of $21,773,000, $10,214,000, and $312,000, respectively, at the date of each such acquisition. This was a result of the acquired inventory being marked up to an estimated net selling price in purchase accounting and is recognized through cost of sales as the inventory is sold. The amount of step-up to fair value of the acquired inventory remaining as of September 30, 2019, March 31, 2019 and September 30, 2018 was $0, $284,000 and $2,076,000, respectively.
Asset Held for Sale
Asset held for sale of $131,000 as of September 30, 2019 and March 31, 2019 represents a distribution facility in Danville, Pennsylvania, which the Company sold on October 29, 2019 for $750,000. On the closing date, the Company received cash proceeds of $708,000 after closing costs. The Company also incurred additional legal costs of approximately $24,000 to sell the facility. Asset held for sale of $2,391,000 as of September 30, 2018, which represented a distribution facility in Havant, England, was sold in the fourth quarter of fiscal 2019.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and include the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Land
$
5,738

 
$
5,738

 
$
6,372

Buildings, leasehold interests and improvements
40,125

 
40,893

 
42,345

Machinery, equipment and other
119,157

 
113,946

 
108,595

 
165,020

 
160,577

 
157,312

Less - Accumulated depreciation and amortization
(114,538
)
 
(109,657
)
 
(107,655
)
Net property, plant and equipment
$
50,482

 
$
50,920

 
$
49,657


Depreciation expense was $2,469,000 and $2,124,000 for the quarters ended September 30, 2019 and 2018, respectively, and was $4,883,000 and $4,154,000 for the six months ended September 30, 2019 and 2018, respectively.
Leases
Effective April 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842") using the modified retrospective transition approach. See Note 5 for more information.
The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are not material to the Company’s consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of future payments. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, adjusted for any prepaid or accrued rent payments, lease incentives and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections for all asset classes: (1) the Company will not separate lease and non-lease components by class of underlying asset, (2) the Company will apply the short-term lease exemption by class of underlying asset, and, (3) the Company will apply the portfolio approach to the development of its discount rates for the leases to be recorded in accordance with ASC 842. The Company has chosen not to elect the hindsight practical expedient for its transition to ASC 842. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.
Long-Lived Assets including Other Intangible Assets and Property, Plant and Equipment
The Company performs an annual impairment test of the carrying amount of indefinite-lived intangible assets in the fourth quarter of its fiscal year. Additionally, the Company would perform its impairment testing at an interim date if events or circumstances indicate that intangibles might be impaired.
Other indefinite lived intangible assets consist of tradenames which are required to be tested annually for impairment. An entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, an entity must identify and evaluate changes in economic, industry and entity-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If the result of the qualitative analysis indicates it is more likely than not that an indefinite-lived intangible asset is impaired, a more detailed fair value calculation will need to be performed which is used to identify potential impairments and to measure the amount of impairment losses to be recognized, if any. The fair value of the Company’s tradenames is calculated using a “relief from royalty payments” methodology. This approach involves first estimating reasonable royalty rates for each trademark and then applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine the fair value. The royalty rate is estimated using both a market and income approach. The market approach relies on the existence of identifiable transactions in the marketplace involving the licensing of tradenames similar to those owned by the Company. The income approach uses a projected pretax profitability rate relevant to the licensed income stream. The Company believes the use of multiple valuation techniques results in a more accurate indicator of the fair value of each tradename. This fair value is then compared with the carrying value of each tradename to determine if impairment exists.
Long-lived assets (including property, plant and equipment), except for indefinite lived intangible assets, are reviewed for impairment when events or circumstances indicate the carrying value of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value.
There were no triggering events identified during the six months ended September 30, 2019 that required interim impairment testing for long-lived assets. The Company recorded an impairment of property, plant and equipment of $1,570,000 in the second quarter of fiscal 2019 related to a restructuring plan to combine its operations in the United Kingdom. See Note 3 for further discussion of this restructuring and Note 6 for further information on other intangible assets.
Revenue Recognition
Revenue from the sale of the Company's products is recognized when control of the promised goods is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to receive from its customers in exchange for those goods. The Company's revenue is recognized using the five-step model identified in ASC 606, "Revenue from Contracts with Customers." These steps are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the performance obligations are satisfied.
The Company's contracts with customers generally include one performance obligation under the revenue recognition standard. For most product sales, the performance obligation is the delivery of a specified product, and is satisfied at the point in time when control of the product has transferred to the customer, which takes place when title and risk of loss transfer in accordance with the applicable shipping terms, typically either at shipping point or at delivery to a specified destination. The Company has certain limited products, primarily sewing patterns, that are sold on consignment at mass market retailers. The Company recognizes revenue on these products as they are sold to end consumers as recorded at point-of-sale terminals, which is the point in time when control of the product is transferred to the customer.
Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which the Company expects to be entitled to receive in exchange for transferring the goods. When applicable, the transaction price includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variable consideration consists of revenues that are subject to reductions to the transaction price for customer programs, which may include special pricing arrangements for specific customers, volume incentives and other promotions. The Company has significant historical experience with customer programs and estimates the expected consideration considering historical trends. The related reserves are included in accrued customer programs in the consolidated balance sheets. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. In limited cases, the Company may provide the right to return product to certain customers. The Company also records estimated reductions to revenue, based primarily on known claims, for customer returns and chargebacks that may arise as a result of shipping errors, product damaged in transit or for other reasons that become known subsequent to recognizing the revenue. These provisions are recorded in the period that the related sale is recognized and are reflected as a reduction from gross sales. The related reserves are included in accrued customer programs in the September 30, 2019 consolidated balance sheet and in accounts receivable, net of allowances in the March 31, 2019 and September 30, 2018 consolidated balance sheets. If the amount of actual customer returns and chargebacks were to increase or decrease from the estimated amount, revisions to the estimated reserve would be recorded.
The Company treats shipping and handling activities that occur until the customer has obtained control of a good as an activity to fulfill the promise to transfer the product. Costs related to shipping of product are recorded as incurred and classified in cost of sales in the consolidated statements of operations and comprehensive income (loss).
Payment terms with customers vary by customer, but generally range from 30 to 90 days. Certain seasonal revenues have extended payment terms in accordance with general industry practice. Since the term between invoicing and expected payment is less than one year, the Company does not adjust the transaction price for the effects of a financing component.
Sales commissions are earned and recognized as expense as the related revenue is recognized at a point in time. These costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate governmental agencies.
The Company operates as a single reporting segment, engaged in the creative development, manufacture, procurement, distribution, and sale of craft, gift and seasonal products, primarily to mass market retailers in the United States.
The following represents our net sales disaggregated by product category (in thousands):
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Craft
$
35,001

 
$
42,472

 
70,660

 
77,760

Gift
23,630

 
30,614

 
43,459

 
54,654

Seasonal
37,343

 
39,815

 
39,392

 
44,614

   Total
$
95,974

 
$
112,901

 
$
153,511

 
$
177,028


Net Income (Loss) Per Common Share
Due to the Company's net losses for the six months ended September 30, 2019 and the three- and six months ended September 30, 2018, potentially dilutive securities of 587,000 shares, 525,000 shares and 525,000 shares, respectively, consisting of outstanding stock options and unearned time-based restricted stock units, were excluded from the diluted net loss per common share calculation due to their antidilutive effect. The Company excluded 275,000 shares, consisting of outstanding stock options, from the diluted net income per common share calculation for the three months ended September 30, 2019 due to their antidilutive effect. Market-based and performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted-average shares until the market or performance conditions are met even when the Company is profitable for the respective period.
Components of Accumulated Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Accumulated effect of currency translation adjustment:
 
  
 
 
 
 
 
Balance at beginning of period
$
(203
)
  
$
268

 
$
12

 
$
988

Currency translation adjustment during period
(304
)
 
(246
)
 
(519
)
 
(966
)
Balance at end of period
$
(507
)
  
$
22

 
$
(507
)
 
$
22

 
 
  
 
 
 
 
 
Accumulated effect of pension and postretirement benefits:
 
  
 
 
 
 
 
Balance at beginning and end of period
$
453


$
259

 
$
453

 
$
259

 
 
  
 
 
 
 
 
Accumulated effect interest rate swap agreement:
 
  
 
 
 
 
 
Balance at beginning of period
$

  
$
181

 
$

 
$
(84
)
Fair value adjustment

  
211

 

 
476

Balance at end of period
$

  
$
392

 
$

 
$
392

v3.19.3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Statement of Financial Position [Abstract]      
Allowances for accounts receivable $ 231 $ 2,198 $ 1,757
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares authorized 1,000,000 1,000,000 1,000,000
Preferred stock, shares issued 0 0 0
Common stock, par value (in dollars per share) $ 0.10 $ 0.10 $ 0.10
Common stock, shares authorized 25,000,000 25,000,000 25,000,000
Common stock, shares issued 14,703,084 14,703,084 14,703,084
Treasury stock, shares 5,824,025 5,865,846 5,813,926
v3.19.3
Leases - Maturities of Operating Lease Liabilities (Details)
$ in Thousands
Sep. 30, 2019
USD ($)
Leases [Abstract]  
Remainder of fiscal 2020 $ 9,298
Fiscal 2021 8,542
Fiscal 2022 7,859
Fiscal 2023 6,600
Fiscal 2024 5,973
Thereafter 18,514
Total lease payments 56,786
Less: Interest (10,604)
Present value of lease liabilities $ 46,182
v3.19.3
Document and Entity Information - shares
6 Months Ended
Sep. 30, 2019
Nov. 11, 2019
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2019  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Entity Registrant Name CSS INDUSTRIES INC  
Entity Central Index Key 0000020629  
Current Fiscal Year End Date --03-31  
Entity Filer Category Non-accelerated Filer  
Emerging Growth Company false  
Entity Shell Company false  
Smaller Reporting Company true  
Entity Current Reporting Status Yes  
Entity Common Stock, Shares Outstanding   8,880,297
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets - Gross Carrying Amount and Accumulated Amortization of Other Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount $ 63,522 $ 67,404 $ 81,021
Accumulated Amortization 27,701 27,119 24,527
Tradenames and trademarks      
Acquired Indefinite-lived Intangible Assets [Line Items]      
Gross carrying amount 15,054 15,054 24,353
Customer relationships      
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount 44,037 44,037 48,657
Accumulated Amortization 25,288 23,942 21,968
Favorable lease contracts      
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount 0 3,882 3,882
Accumulated Amortization 0 1,016 657
Trademarks      
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount 2,435 2,435 2,435
Accumulated Amortization 790 645 499
Patents      
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount 1,466 1,466 1,164
Accumulated Amortization 1,124 1,059 999
Covenants not to compete      
Finite-Lived Intangible Assets [Line Items]      
Gross Carrying Amount 530 530 530
Accumulated Amortization $ 499 $ 457 $ 404
v3.19.3
Leases (Tables)
6 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Lease, Cost
The components of lease costs are as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Lease costs:
 
 
 
Operating lease costs
$
2,865

 
$
5,753

Variable operating lease costs
77

 
154

Total
$
2,942

 
$
5,907

Supplemental cash flow information is as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows for operating leases
$
2,061

 
$
4,064

Total
$
2,061

 
$
4,064

 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Right-of-use assets obtained in exchange for lease obligations:
 
 
 
Operating leases
$

 
$
51,597

Total
$

 
$
51,597

Weighted-average lease terms and discount rates are as follows:
 
September 30, 2019
Weighted-average remaining lease term (years) of operating leases
7.0

Weighted-average discount rate of operating leases
5.8
%
Lessee, Operating Lease, Liability, Maturity
The aggregate future lease payments for operating leases as of September 30, 2019 is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
9,298

Fiscal 2021
8,542

Fiscal 2022
7,859

Fiscal 2023
6,600

Fiscal 2024
5,973

Thereafter
18,514

Total lease payments
56,786

Less: Interest
(10,604
)
Present value of lease liabilities
$
46,182

Schedule of Future Minimum Rental Payments for Operating Leases
The future minimum lease payments associated with all non-cancelable lease obligations under ASC 840 as of March 31, 2019 is as follows (in thousands):
Fiscal 2020
$
10,520

Fiscal 2021
9,360

Fiscal 2022
8,446

Fiscal 2023
7,364

Fiscal 2024
6,200

Thereafter
21,818

Total lease payments
$
63,708

v3.19.3
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
The Company’s fiscal year ends on March 31. References to a particular fiscal year refer to the fiscal year ending in March of that year. For example, “fiscal 2020” refers to the fiscal year ending March 31, 2020.
Principles of Consolidation
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
Nature of Business
Nature of Business
CSS is a creative consumer products company, focused on the craft, gift and seasonal categories. For these design-driven categories, the Company engages in the creative development, manufacture, procurement, distribution and sale of our products with an omni-channel approach focused primarily on mass market retailers.
Craft The craft category includes sewing patterns, ribbons and trims, buttons, knitting needles, needle arts and kids' crafts. These products are sold to mass market, specialty, and online retailers, and are generally ordered on a replenishment basis throughout the year.
Gift The gift category includes products designed to celebrate certain life events or special occasions, such as weddings, birthdays, anniversaries, graduations, or the birth of a child. Products include ribbons and bows, floral accessories, infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, and other items that commemorate life's celebrations. Products in this category are primarily sold into mass, specialty, and online retailers, floral and packaging wholesalers and distributors, and are generally ordered on a replenishment basis throughout the year.
Seasonal The seasonal category includes holiday gift packaging items such as ribbon, bows, greeting cards, bags, 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. These products are sold to mass market retailers, and production forecasts for these products are generally known well in advance of shipment.
CSS’ product breadth provides its retail customers the opportunity to use a single vendor for much of their craft, gift and seasonal product requirements. A substantial portion of CSS’ products are manufactured and packaged in the United States and warehoused and distributed from facilities in the United States, the United Kingdom and Australia, with the remainder sourced from foreign suppliers, primarily in Asia. The Company also has a manufacturing facility in India that produces certain craft products, including trims, braids and tassels, and also has a distribution facility in India. The Company’s products are sold to its customers by national and regional account sales managers, sales representatives, product specialists and by a network of independent manufacturers’ representatives. CSS maintains purchasing offices in Hong Kong and China to administer Asian sourcing opportunities.
Foreign Currency Translation and Transactions
Foreign Currency Translation and Transactions
The Company's foreign subsidiaries generally use the local currency as the functional currency. The Company translates all assets and liabilities at period end exchange rates and all income and expense accounts at average rates during the period. Translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses on foreign currency transactions (denominated in currencies other than the local currency) are not material and are included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss).
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to revenue recognition, the valuation of inventory and accounts receivable, the assessment of the recoverability of other intangible and long-lived assets and resolution of litigation and other proceedings. Actual results could differ from these estimates.
Inventories
Inventories
The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or net realizable value. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or net realizable value.
Leases
Leases
Effective April 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842") using the modified retrospective transition approach. See Note 5 for more information.
The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are not material to the Company’s consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of future payments. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, adjusted for any prepaid or accrued rent payments, lease incentives and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections for all asset classes: (1) the Company will not separate lease and non-lease components by class of underlying asset, (2) the Company will apply the short-term lease exemption by class of underlying asset, and, (3) the Company will apply the portfolio approach to the development of its discount rates for the leases to be recorded in accordance with ASC 842. The Company has chosen not to elect the hindsight practical expedient for its transition to ASC 842. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.
Long-Lived Assets including Goodwill and Other Intangible Assets
Long-Lived Assets including Other Intangible Assets and Property, Plant and Equipment
The Company performs an annual impairment test of the carrying amount of indefinite-lived intangible assets in the fourth quarter of its fiscal year. Additionally, the Company would perform its impairment testing at an interim date if events or circumstances indicate that intangibles might be impaired.
Other indefinite lived intangible assets consist of tradenames which are required to be tested annually for impairment. An entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, an entity must identify and evaluate changes in economic, industry and entity-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If the result of the qualitative analysis indicates it is more likely than not that an indefinite-lived intangible asset is impaired, a more detailed fair value calculation will need to be performed which is used to identify potential impairments and to measure the amount of impairment losses to be recognized, if any. The fair value of the Company’s tradenames is calculated using a “relief from royalty payments” methodology. This approach involves first estimating reasonable royalty rates for each trademark and then applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine the fair value. The royalty rate is estimated using both a market and income approach. The market approach relies on the existence of identifiable transactions in the marketplace involving the licensing of tradenames similar to those owned by the Company. The income approach uses a projected pretax profitability rate relevant to the licensed income stream. The Company believes the use of multiple valuation techniques results in a more accurate indicator of the fair value of each tradename. This fair value is then compared with the carrying value of each tradename to determine if impairment exists.
Long-lived assets (including property, plant and equipment), except for indefinite lived intangible assets, are reviewed for impairment when events or circumstances indicate the carrying value of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value.
Revenue Recognition
Revenue Recognition
Revenue from the sale of the Company's products is recognized when control of the promised goods is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to receive from its customers in exchange for those goods. The Company's revenue is recognized using the five-step model identified in ASC 606, "Revenue from Contracts with Customers." These steps are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the performance obligations are satisfied.
The Company's contracts with customers generally include one performance obligation under the revenue recognition standard. For most product sales, the performance obligation is the delivery of a specified product, and is satisfied at the point in time when control of the product has transferred to the customer, which takes place when title and risk of loss transfer in accordance with the applicable shipping terms, typically either at shipping point or at delivery to a specified destination. The Company has certain limited products, primarily sewing patterns, that are sold on consignment at mass market retailers. The Company recognizes revenue on these products as they are sold to end consumers as recorded at point-of-sale terminals, which is the point in time when control of the product is transferred to the customer.
Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which the Company expects to be entitled to receive in exchange for transferring the goods. When applicable, the transaction price includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variable consideration consists of revenues that are subject to reductions to the transaction price for customer programs, which may include special pricing arrangements for specific customers, volume incentives and other promotions. The Company has significant historical experience with customer programs and estimates the expected consideration considering historical trends. The related reserves are included in accrued customer programs in the consolidated balance sheets. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. In limited cases, the Company may provide the right to return product to certain customers. The Company also records estimated reductions to revenue, based primarily on known claims, for customer returns and chargebacks that may arise as a result of shipping errors, product damaged in transit or for other reasons that become known subsequent to recognizing the revenue. These provisions are recorded in the period that the related sale is recognized and are reflected as a reduction from gross sales. The related reserves are included in accrued customer programs in the September 30, 2019 consolidated balance sheet and in accounts receivable, net of allowances in the March 31, 2019 and September 30, 2018 consolidated balance sheets. If the amount of actual customer returns and chargebacks were to increase or decrease from the estimated amount, revisions to the estimated reserve would be recorded.
The Company treats shipping and handling activities that occur until the customer has obtained control of a good as an activity to fulfill the promise to transfer the product. Costs related to shipping of product are recorded as incurred and classified in cost of sales in the consolidated statements of operations and comprehensive income (loss).
Payment terms with customers vary by customer, but generally range from 30 to 90 days. Certain seasonal revenues have extended payment terms in accordance with general industry practice. Since the term between invoicing and expected payment is less than one year, the Company does not adjust the transaction price for the effects of a financing component.
Sales commissions are earned and recognized as expense as the related revenue is recognized at a point in time. These costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate governmental agencies.
The Company operates as a single reporting segment, engaged in the creative development, manufacture, procurement, distribution, and sale of craft, gift and seasonal products, primarily to mass market retailers in the United States.
Recent Accounting Pronouncements
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefits Plans" ("ASU 2018-14"), which is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit pension or other postretirement plans. ASU 2018-14 is required to be applied on a retrospective basis to all periods presented and is effective for the Company in its fiscal year ending March 31, 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," ("ASU 2018-15"). ASU 2018-15 aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the updated guidance requires an entity to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in order to determine whether those costs should be expensed as incurred or capitalized. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
v3.19.3
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Current assets:      
Cash and cash equivalents $ 5,155 $ 17,100 $ 15,112
Accounts receivable, net of allowances of $231, $2,198 and $1,757 81,658 53,835 101,762
Inventories 105,009 96,231 116,350
Asset held for sale 131 131 2,391
Prepaid expenses and other current assets 10,351 12,568 13,660
Total current assets 202,304 179,865 249,275
Property, plant and equipment, net 50,482 50,920 49,657
Operating lease right-of-use assets 46,948 0 0
Deferred income taxes 0 0 12,486
Intangible assets, net 35,821 40,285 56,494
Other assets 14,949 14,525 10,487
Total assets 350,504 285,595 378,399
Current liabilities:      
Short-term borrowings 50,381 26,139 21,185
Current portion of long-term debt 39 316 231
Accounts payable 36,652 27,916 37,696
Accrued payroll and other compensation 6,485 6,962 11,164
Accrued customer programs 11,870 12,101 16,171
Accrued income taxes 349 0 0
Accrued other expenses 13,190 14,468 16,050
Current portion of operating lease liabilities 7,304 0 0
Total current liabilities 126,270 87,902 102,497
Long-term debt, net of current portion 7 13 40,111
Deferred income taxes 618 619 1,218
Operating lease liabilities 38,878 0 0
Other long-term obligations 5,863 7,130 10,964
Total liabilities 171,636 95,664 154,790
Commitments and contingencies (Note 8)
Stockholders' equity:      
Preferred stock, Class 2, $.01 par, 1,000,000 shares authorized, no shares issued 0 0 0
Common stock, $.10 par, 25,000,000 shares authorized, 14,703,084 shares issued at September 30, 2019, March 31, 2019 and September 30, 2018 1,470 1,470 1,470
Additional paid-in capital 61,185 60,921 59,934
Retained earnings 265,147 277,613 311,387
Accumulated other comprehensive income (loss), net of tax (54) 465 673
Common stock in treasury, 5,824,025 shares at September 30, 2019, 5,865,846 shares at March 31, 2019 and 5,813,926 shares at September 30, 2018, at cost (148,880) (150,538) (149,855)
Total stockholders' equity 178,868 189,931 223,609
Total liabilities and stockholders' equity $ 350,504 $ 285,595 $ 378,399
v3.19.3
Leases - Lease Cost (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2019
Sep. 30, 2018
Lease costs:      
Operating lease costs $ 2,865 $ 5,753  
Variable operating lease costs 77 154  
Total lease costs 2,942 5,907  
Operating cash flows for operating leases 2,061 4,064 $ 0
Right-of-use assets obtained in exchange for lease obligations $ 0 $ 51,597  
Weighted-average remaining lease term (years) of operating leases 7 years 7 years  
Weighted-average discount rate of operating leases 5.80% 5.80%  
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets - Goodwill Rollforward (Details) - USD ($)
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Goodwill [Roll Forward]        
Beginning balance     $ 0 $ 0
Acquisition of Fitlosophy       1,390,000
Impairment charge $ 0 $ 0 0 (1,390,000)
Ending balance $ 0 $ 0 $ 0 $ 0
v3.19.3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares
3 Months Ended
Sep. 30, 2018
Jun. 30, 2018
Statement of Stockholders' Equity [Abstract]    
Cash dividends (in dollars per share) $ 0.20 $ 0.20
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets (Tables)
6 Months Ended
Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill
The change in the carrying amount of goodwill during the six months ended September 30, 2018 is as follows (in thousands):
Balance as of March 31, 2018
$

Acquisition of Fitlosophy
1,390

Impairment charge
(1,390
)
Balance as of September 30, 2018
$

Gross Carrying Amount and Accumulated Amortization of Other Intangible Assets
The gross carrying amount and accumulated amortization of other intangible assets is as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Tradenames and trademarks
$
15,054

 
$

 
$
15,054

 
$

 
$
24,353

 
$

Customer relationships
44,037

 
25,288

 
44,037

 
23,942

 
48,657

 
21,968

Favorable lease contracts

 

 
3,882

 
1,016

 
3,882

 
657

Trademarks
2,435

 
790

 
2,435

 
645

 
2,435

 
499

Patents
1,466

 
1,124

 
1,466

 
1,059

 
1,164

 
999

Covenants not to compete
530

 
499

 
530

 
457

 
530

 
404

 
$
63,522

 
$
27,701

 
$
67,404

 
$
27,119

 
$
81,021

 
$
24,527

Schedule of Future Amortization Expense
Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2020 and each of the succeeding four years is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
1,586

Fiscal 2021
2,997

Fiscal 2022
2,900

Fiscal 2023
2,604

Fiscal 2024
2,518

v3.19.3
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Inventories
Inventories consisted of the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Raw material
$
13,898

 
$
14,246

 
$
14,212

Work-in-process
18,258

 
16,816

 
15,616

Finished goods
72,853

 
65,169

 
86,522

 
$
105,009

 
$
96,231

 
$
116,350

Property, Plant and Equipment
Property, plant and equipment are stated at cost and include the following (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Land
$
5,738

 
$
5,738

 
$
6,372

Buildings, leasehold interests and improvements
40,125

 
40,893

 
42,345

Machinery, equipment and other
119,157

 
113,946

 
108,595

 
165,020

 
160,577

 
157,312

Less - Accumulated depreciation and amortization
(114,538
)
 
(109,657
)
 
(107,655
)
Net property, plant and equipment
$
50,482

 
$
50,920

 
$
49,657

Schedule of Segment Reporting
The following represents our net sales disaggregated by product category (in thousands):
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Craft
$
35,001

 
$
42,472

 
70,660

 
77,760

Gift
23,630

 
30,614

 
43,459

 
54,654

Seasonal
37,343

 
39,815

 
39,392

 
44,614

   Total
$
95,974

 
$
112,901

 
$
153,511

 
$
177,028

Schedule of Accumulated Other Comprehensive Income (Loss)
Components of Accumulated Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Accumulated effect of currency translation adjustment:
 
  
 
 
 
 
 
Balance at beginning of period
$
(203
)
  
$
268

 
$
12

 
$
988

Currency translation adjustment during period
(304
)
 
(246
)
 
(519
)
 
(966
)
Balance at end of period
$
(507
)
  
$
22

 
$
(507
)
 
$
22

 
 
  
 
 
 
 
 
Accumulated effect of pension and postretirement benefits:
 
  
 
 
 
 
 
Balance at beginning and end of period
$
453


$
259

 
$
453

 
$
259

 
 
  
 
 
 
 
 
Accumulated effect interest rate swap agreement:
 
  
 
 
 
 
 
Balance at beginning of period
$

  
$
181

 
$

 
$
(84
)
Fair value adjustment

  
211

 

 
476

Balance at end of period
$

  
$
392

 
$

 
$
392

v3.19.3
Summary of Significant Accounting Policies - Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Property, Plant and Equipment [Line Items]      
Property, plant and equipment $ 165,020 $ 160,577 $ 157,312
Less - Accumulated depreciation and amortization (114,538) (109,657) (107,655)
Net property, plant and equipment 50,482 50,920 49,657
Land      
Property, Plant and Equipment [Line Items]      
Property, plant and equipment 5,738 5,738 6,372
Buildings, leasehold interests and improvements      
Property, Plant and Equipment [Line Items]      
Property, plant and equipment 40,125 40,893 42,345
Machinery, equipment and other      
Property, Plant and Equipment [Line Items]      
Property, plant and equipment $ 119,157 $ 113,946 $ 108,595
v3.19.3
Acquisitions - Schedule of Acquisition (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 01, 2018
Sep. 30, 2019
Sep. 30, 2018
Business Acquisition [Line Items]      
Cash   $ 0 $ 2,500
Fitlosophy, Inc.      
Business Acquisition [Line Items]      
Cash $ 2,500    
Contingent earn-out consideration 1,600    
Purchase price $ 4,100    
v3.19.3
Short-Term Borrowings And Credit Arrangements
6 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Short-Term Borrowings And Credit Arrangements
SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS
On March 7, 2019, the Company entered into a $125,000,000 asset based senior secured credit facility with three banks (the “ABL Credit Facility”). The Company used the proceeds from borrowings under the ABL Credit Facility to repay in full the Company’s prior credit facility with two banks (the “Prior Credit Facility”), under which the maximum credit available to the Company at any one time (the “Committed Amount”) was $50,000,000 at the time the Prior Credit Facility was repaid and terminated on March 7, 2019. The ABL Credit Facility has a maturity date of March 7, 2024, unless earlier terminated.
On May 23, 2019, the Company entered into a Second Amendment (the “Amendment”) to the ABL Credit Facility. The Amendment reduced the maximum amount available under the revolving credit facility from $125,000,000 to $100,000,000. Availability under the Amendment is equal to the lesser of $100,000,000 or a Borrowing Base (as defined in the Amendment), in each case minus (i) revolving loans outstanding and (ii) $15,000,000 until the Agent’s receipt of a compliance certificate demonstrating compliance with the amended financial covenants. The Amendment requires the Company to not permit the Fixed Charge Coverage Ratio (as defined in the Amendment), as of the end of any calendar month (commencing with the twelve-month period ending March 31, 2020), to be less than 1.00 to 1.00. In addition, commencing with the month ending April 30, 2019 and continuing until the month ending March 31, 2020, the Company is required to have, at the end of each calendar month during such period, EBITDA for the corresponding period (which such period shall be based on a cumulative monthly build-up commencing with the month ending April 30, 2019) then ending of not less than the corresponding amount set forth in the Amendment. The Amendment also limits Capital Expenditures (as defined in the Amendment) for fiscal 2020 to $8,000,000 or less. The $15,000,000 availability block mentioned above was reduced to $10,000,000 for the period beginning August 20, 2019 to September 10, 2019, $11,000,000 for the period beginning September 10, 2019 to September 24, 2019, and $12,500,000 for the period beginning September 24, 2019 to October 4, 2019.
Permitted Acquisitions (as defined in the ABL Credit Facility) are no longer permitted under the Amendment, and certain Restricted Payments (as defined in the ABL Credit Facility), including dividends previously allowed based upon meeting certain leverage ratio and average Availability (as defined in the ABL Credit Facility) criteria, are no longer allowed.
At the Company’s election, loans made under the ABL Credit Facility will bear interest at either: (i) a base rate (“Base Rate”) plus an applicable rate or (ii) an “Adjusted LIBO Rate” (as defined in the ABL Credit Facility) plus an applicable rate, subject to adjustment if an event of default under the ABL Credit Facility has occurred and is continuing. The Base Rate means the highest of (a) the Agent’s “prime rate,” (b) the federal funds effective rate plus 0.50% and (c) the Adjusted LIBO Rate for an interest period of one month plus 1%. During the period prior to March 31, 2020, Adjusted LIBO Rate loans made under the ABL Credit Facility will bear interest at the Adjusted LIBO Rate plus an applicable rate of 2.50%, and Base Rate loans made under the ABL Credit Facility will bear interest at the Base Rate plus an applicable rate of 1.50%. After March 31, 2020, the applicable rate will be adjusted based on the Company’s Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) as further set forth in the ABL Credit Facility. Additionally, the Company is subject to a commitment fee equal to 0.25% per annum on the average daily unused portion of the revolving commitment, payable monthly to the Agent for the ratable benefit of the lenders.
The ABL Credit Facility is secured by a first priority perfected security interest in substantially all of the assets of the Company, including certain real estate, subject to certain exceptions and exclusions as set forth in the ABL Credit Facility and other loan documents, including the Pledge and Security Agreement (the “Pledge Agreement”) entered into by the Company and the Agent contemporaneously with their execution of the ABL Credit Facility.
The ABL Credit Facility contains certain affirmative and negative covenants that are binding on the Company, including, but not limited to, restrictions (subject to specified exceptions and qualifications) on the ability of the Company to incur indebtedness, to create liens, to merge or consolidate, to make dispositions, to make restricted payments such as dividends, distributions or equity repurchases, to make investments or undertake acquisitions, to prepay other indebtedness, to enter into certain transactions with affiliates, to enter into sale and leaseback transactions, or to enter into any restrictive agreements. In addition, the ABL Credit Facility requires the Company to abide by certain financial covenants calculated for the Company and its subsidiaries as noted above.
The ABL Credit Facility contains customary events of default (which are in some cases subject to certain exceptions, thresholds, notice requirements and grace periods), including, but not limited to, non-payment of principal or interest or other amounts, misrepresentations, failure to perform or observe covenants, cross-defaults with certain other material indebtedness, certain change in control events, voluntary or involuntary bankruptcy proceedings, certain judgments or decrees, failure of the ABL Credit Facility or other loan documents to be in full force and effect, certain ERISA events and judgments. The ABL Credit Facility also contains certain prepayment provisions, representations, warranties and conditions. As of September 30, 2019, the Company was in compliance with all debt covenants under the ABL Credit Facility.
Under the ABL Credit Facility, all collections on account of collateralized accounts receivable are required to be deposited into lock boxes that are subject to the control of the administrative agent (“Agent”) for the ABL Credit Facility (“Agent-Controlled Lock Boxes”). All funds deposited into Agent-Controlled Lock Boxes are swept daily and are required to be applied by the Agent as repayments of amounts owed by the Company under the ABL Credit Facility. Accordingly, the Company has classified its outstanding loan balance under the ABL Credit Facility as a current liability. The outstanding balance under the ABL Credit Facility as of September 30, 2019 and March 31, 2019 was $50,381,000 and $26,139,000, respectively. As of September 30, 2018, there was $61,185,000 outstanding under the Company's Prior Credit Facility classified as a long term liability.
The Company leases certain equipment under finance leases which are classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
12

 
$
145

 
$
73

Long-term debt, net of current portion
7

 
13

 
84

 
$
19

 
$
158

 
$
157


The Company also finances certain equipment which is classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
27

 
$
173

 
$
158

Long-term debt, net of current portion

 

 
27

 
$
27

 
$
173

 
$
185

v3.19.3
Restructuring Plans
6 Months Ended
Sep. 30, 2019
Restructuring and Related Activities [Abstract]  
Restructuring Plans
RESTRUCTURING PLANS
Business Restructuring
In the first quarter of fiscal 2019, the Company announced a restructuring plan to combine its operations in the United Kingdom and Australia, respectively. This restructuring was undertaken in order to improve profitability and efficiency through the elimination of (i) redundant back office functions; (ii) certain staffing positions and (iii) excess distribution and warehouse capacity, and was substantially completed in the second quarter of fiscal 2019. Commencing in the second quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments as part of this restructuring plan. Also, in connection with this restructuring plan, the Company recorded an impairment of property, plant and equipment at one of the affected facilities in the United Kingdom of $1,398,000 in the second quarter of fiscal 2019, which was included in restructuring expenses. As of September 30, 2019 and September 30, 2018, the remaining liability of $9,000 and $503,000, respectively, was classified in accrued other expenses in the accompanying consolidated balance sheets.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Restructuring reserve as of March 31, 2019
$
1

 
$
24

 
$
14

 
$
39

Charges (reversals) to expense
(1
)
 
(24
)
 
3

 
(22
)
Cash paid

 

 
(6
)
 
(6
)
Restructuring reserve as of June 30, 2019

 

 
11

 
11

Cash paid

 

 
(2
)
 
(2
)
Restructuring reserve as of September 30, 2019
$

 
$

 
$
9

 
$
9


Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Initial reserve
$
297

 
$
127

 
$
133

 
$
557

Cash paid

 
(13
)
 
(41
)
 
(54
)
Restructuring reserve as of September 30, 2018
$
297

 
$
114

 
$
92

 
$
503


Strategic Business Initiative
In the third quarter of fiscal 2019, the Company announced that it engaged an international consulting firm to perform a comprehensive review of its operating structure with the goal of improving the alignment of processes across the business, as the Company continues to integrate recent acquisitions and evaluate its portfolio. Commencing in the third quarter of fiscal 2019, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $223,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Restructuring reserve as of March 31, 2019
$
634

Cash paid
(212
)
Restructuring reserve as of June 30, 2019
422

Cash paid
(196
)
Charges (reversals) to expense
(3
)
Restructuring reserve as of September 30, 2019
$
223


Performance Improvement Initiative
In the first quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company’s cost base to improve business performance, profitability and cash flow generation. Commencing in the first quarter of fiscal 2020, the Company recorded an initial restructuring reserve, subsequent adjustments, and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $820,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Initial reserve
$
2,076

Cash paid
(490
)
Restructuring reserve as of June 30, 2019
1,586

Cash paid
(461
)
Charges (reversals) to expense
(305
)
Restructuring reserve as of September 30, 2019
$
820


Resource Alignment Initiative
In the second quarter of fiscal 2020, the Company announced a restructuring plan with the goal of reducing the Company's cost base by improving the alignment of resources with the current operating structure. Commencing in the second quarter of fiscal 2020, the Company recorded an initial restructuring reserve and has made cash payments in connection with this initiative. As of September 30, 2019, the remaining liability of $1,029,000 was classified in accrued other expenses in the accompanying consolidated balance sheet.
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Initial reserve
$
1,049

Cash paid
(20
)
Restructuring reserve as of September 30, 2019
$
1,029

v3.19.3
Treasury Stock Transactions
6 Months Ended
Sep. 30, 2019
Equity [Abstract]  
Treasury Stock Transactions
TREASURY STOCK TRANSACTIONS
Under a stock repurchase program that had been previously authorized by the Company's Board of Directors, the Company repurchased 249,908 shares of the Company's common stock for $3,628,000 during the six months ended September 30, 2018. As payment for stock repurchases occurs upon settlement two business days after the applicable trading transaction, $235,000 of this amount was paid by the Company subsequent to September 30, 2018. There were no repurchases of the Company's common stock by the Company during the six months ended September 30, 2019. As of September 30, 2019, the Company had no shares remaining available for repurchase under the Board's authorized repurchase program.
v3.19.3
Treasury Stock Transactions (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Equity [Abstract]        
Number of shares repurchased (in shares) 249,908 0 249,908  
Value of shares repurchased $ 3,628   $ 3,628  
Purchase of treasury stock   $ 0 $ 3,393 $ 235
Number of remaining shares authorized to be repurchased (in shares)   0   0
v3.19.3
Share-Based Compensation - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Stock options granted during the period (in shares)     0 0
Selling, General and Administrative Expenses        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Compensation cost related to stock options and RSUs recognized $ 191 $ 586 $ 264 $ 1,057
RSUs        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
RSUs granted during the period (in shares)     285,985 189,013
Weighted average fair value of restricted stock granted (in dollars per share)     $ 5.67 $ 14.65
RSUs outstanding (in shares) 396,901   396,901  
Equity incentive plan, weighted average recognition period     1 year 10 months 4 days  
Total unrecognized compensation cost related to non-vested RSUs $ 2,222   $ 2,222  
Stock Options        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Stock options outstanding (in shares) 275,000   275,000  
Total unrecognized compensation cost related to non-vested stock option awards $ 353   $ 353  
Equity incentive plan, weighted average recognition period     1 year 4 months 31 days  
2013 Equity Compensation Plan        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Term of grant     10 years  
Shares available for grant (in shares) 574,355   574,355  
2013 Equity Compensation Plan | Service-Based Options        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting rate percentage     25.00%  
Award service period     1 year  
Third Anniversary | 2013 Equity Compensation Plan | Service-Based RSUs | Director        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting rate percentage     50.00%  
Fourth Anniversary | 2013 Equity Compensation Plan | Service-Based RSUs | Director        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting rate percentage     50.00%  
Vesting beginning of each year | 2013 Equity Compensation Plan | Service-Based RSUs | Director        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting rate percentage     25.00%  
v3.19.3
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Sep. 30, 2018
Jun. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Cash flows from operating activities:              
Net income (loss) $ 3,482 $ (14,248) $ (4,910) $ (18,476) $ (10,766) $ (23,386)  
Adjustments to reconcile net income (loss) to net cash used for operating activities:              
Depreciation and amortization         6,481 6,721  
Amortization of operating lease right-of-use assets         4,603 0  
Amortization of inventory step-up         284 8,889  
Amortization of financing transaction costs         252 20  
Accretion of asset retirement obligation         64 62  
Accretion of contingent earn-out consideration         26 0  
Change in valuation of contingent earn-out consideration         (1,392) 0  
Write-off of deferred financing transaction costs         344 0  
Impairment of property, plant and equipment         0 1,570  
Impairment of goodwill 0   0   0 1,390  
Provision for accounts receivable allowances         1,318 1,867  
Deferred tax (benefit) provision         (10) (2,414)  
Share-based compensation expense         264 1,057  
Loss (gain) on sale or disposal of assets         0 4  
Changes in assets and liabilities, net of effects of purchase of a business:              
Accounts receivable         (29,280) (40,323)  
Inventories         (9,263) (22,661)  
Prepaid expenses and other assets         2,376 (2,283)  
Accounts payable         10,303 17,022  
Lease liabilities (2,061)       (4,064) 0  
Accrued expenses and long-term obligations         106 6,644  
Net cash used for operating activities         (28,354) (45,821)  
Cash flows from investing activities:              
Final payment of purchase price for a business previously acquired         0 (2,500)  
Purchase of a business         0 (2,500)  
Purchase of property, plant and equipment         (5,985) (5,891)  
Purchase of company owned life insurance policy         0 (750)  
Proceeds from sale of fixed assets         140 0  
Net cash used for investing activities         (5,845) (11,641)  
Cash flows from financing activities:              
Borrowings on credit facility         104,292 21,185  
Payments on credit facility         (80,050) 0  
Payments on long-term debt         (283) (114)  
Dividends paid         0 (3,633)  
Purchase of treasury stock         0 (3,393) $ (235)
Payment of financing transaction costs         (1,699) (33)  
Tax effect on stock awards         (42) 0  
Net cash provided by financing activities         22,218 14,012  
Effect of exchange rate changes on cash         36 2  
Net decrease in cash and cash equivalents         (11,945) (43,448)  
Cash and cash equivalents at beginning of period   $ 17,100   $ 58,560 17,100 58,560 15,112
Cash and cash equivalents at end of period $ 5,155   $ 15,112   $ 5,155 $ 15,112 $ 5,155
v3.19.3
Leases - Maturities of Operating Lease Liabilities Prior To ASC 842 (Details)
$ in Thousands
Sep. 30, 2019
USD ($)
Leases [Abstract]  
Fiscal 2020 $ 10,520
Fiscal 2021 9,360
Fiscal 2022 8,446
Fiscal 2023 7,364
Fiscal 2024 6,200
Thereafter 21,818
Total lease payments $ 63,708
v3.19.3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Net sales $ 95,974 $ 112,901 $ 153,511 $ 177,028
Cost of sales 71,255 88,220 116,686 140,700
Gross profit 24,719 24,681 36,825 36,328
Selling, general and administrative expenses 20,439 28,348 43,486 57,277
Restructuring expenses 741 2,127 2,795 2,127
Impairment of goodwill 0 0 0 1,390
Operating income (loss) 3,539 (5,794) (9,456) (24,466)
Interest expense (income), net 721 434 1,649 696
Other expense (income), net (989) (166) (1,076) (283)
Income (loss) before income taxes 3,807 (6,062) (10,029) (24,879)
Income tax expense (benefit) 325 (1,152) 737 (1,493)
Net income (loss) $ 3,482 $ (4,910) $ (10,766) $ (23,386)
Net income (loss) per common share, basic (in dollars per share) $ 0.39 $ (0.54) $ (1.22) $ (2.57)
Net income (loss) per common share, diluted (in dollars per share) $ 0.39 $ (0.54) $ (1.22) $ (2.57)
Weighted average basic shares outstanding (in shares) 8,875 9,057 8,857 9,088
Weighted average diluted shares outstanding (in shares) 8,892 9,057 8,857 9,088
Net income (loss) $ 3,482 $ (4,910) $ (10,766) $ (23,386)
Currency translation adjustments:        
Currency translation adjustments (304) (246) (519) (966)
Total currency translation gain (loss) (304) (246) (519) (966)
Interest rate swap agreement:        
Fair value adjustment, net of tax $124 for the three months, and $183 for the six months ended September 30, 2018 0 211 0 476
Total effects of interest rate swap agreement 0 211 0 476
Other comprehensive income (loss), net: (304) (35) (519) (490)
Comprehensive income (loss) $ 3,178 $ (4,945) $ (11,285) $ (23,876)
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets - Schedule of Future Amortization Expense (Details)
$ in Thousands
Sep. 30, 2019
USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]  
Remainder of fiscal 2020 $ 1,586
Fiscal 2021 2,997
Fiscal 2022 2,900
Fiscal 2023 2,604
Fiscal 2024 $ 2,518
v3.19.3
Fair Value Measurements (Tables)
6 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Schedule of Business Acquisitions by Acquisition, Contingent Consideration
Selected information relating to the aforementioned contingent consideration follows (in thousands):
 
Contingent Earn-out Consideration
Estimated fair value as of June 1, 2018
$
1,600

Accretion
64

Remeasurement adjustment
(298
)
Contingent Earn-out Consideration as of March 31, 2019
1,366

Accretion
16

Contingent Earn-out Consideration as of June 30, 2019
1,382

Accretion
10

Remeasurement adjustment
(1,392
)
Contingent Earn-out Consideration as of September 30, 2019
$

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis in its consolidated balance sheets as of September 30, 2019 and March 31, 2019 (in thousands):
 
September 30, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,828

 
$

 
$
2,828

 
$

Total assets
$
2,828

 
$

 
$
2,828

 
$

Liabilities:
 
 
 
 
 
 
 
Deferred compensation plan
$
1,339

 
$
1,339

 
$

 
$

Total liabilities
$
1,339

 
$
1,339

 
$

 
$

 
March 31, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,765

 
$

 
$
2,765

 
$

Total assets
$
2,765

 
$

 
$
2,765

 
$

Liabilities:
 
 
 
 
 
 
 
Contingent earn-out consideration
$
1,366

 
$

 
$

 
$
1,366

Interest rate swap agreement
580

 

 
580

 

Deferred compensation plan
1,156

 
1,156

 

 

Total liabilities
$
3,102

 
$
1,156

 
$
580

 
$
1,366

v3.19.3
Restructuring Plans (Tables)
6 Months Ended
Sep. 30, 2019
Restructuring and Related Activities [Abstract]  
Schedule of restructuring and related costs
Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Restructuring reserve as of March 31, 2019
$
1

 
$
24

 
$
14

 
$
39

Charges (reversals) to expense
(1
)
 
(24
)
 
3

 
(22
)
Cash paid

 

 
(6
)
 
(6
)
Restructuring reserve as of June 30, 2019

 

 
11

 
11

Cash paid

 

 
(2
)
 
(2
)
Restructuring reserve as of September 30, 2019
$

 
$

 
$
9

 
$
9

Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
 
Facility Exit Costs
 
Other Costs
 
Total
Initial reserve
$
297

 
$
127

 
$
133

 
$
557

Cash paid

 
(13
)
 
(41
)
 
(54
)
Restructuring reserve as of September 30, 2018
$
297

 
$
114

 
$
92

 
$
503

Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Initial reserve
$
2,076

Cash paid
(490
)
Restructuring reserve as of June 30, 2019
1,586

Cash paid
(461
)
Charges (reversals) to expense
(305
)
Restructuring reserve as of September 30, 2019
$
820

Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Restructuring reserve as of March 31, 2019
$
634

Cash paid
(212
)
Restructuring reserve as of June 30, 2019
422

Cash paid
(196
)
Charges (reversals) to expense
(3
)
Restructuring reserve as of September 30, 2019
$
223

Selected information relating to the aforementioned restructuring follows (in thousands):
 
Employee Termination Costs
Initial reserve
$
1,049

Cash paid
(20
)
Restructuring reserve as of September 30, 2019
$
1,029

v3.19.3
Subsequent Events
6 Months Ended
Sep. 30, 2019
Subsequent Events [Abstract]  
Subsequent Events
SUBSEQUENT EVENTS
Stockholder Rights Plan
On November 11, 2019, the Company’s Board of Directors (“Board”) adopted a short-term stockholder rights plan (the “Rights Plan”) and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, with a record date of November 22, 2019. The Rights Plan will expire, without any further action by the Board, on the earlier of November 11, 2020 or the business day immediately following the Company’s next annual meeting of stockholders, absent an extension being approved by the Company’s stockholders.
Each Right initially entitles the holder to purchase from the Company one one-thousandth of a share of a newly-designated series of preferred stock, Series D Junior Participating Class 2 Preferred Stock, par value $0.01 per share, of the Company (each, a “Series D Preferred Share”), at an exercise price of $22.00 per one one-thousandth of a Series D Preferred Share, subject to adjustment. Under the Rights Plan, the Rights generally would become exercisable only if a person or group acquires beneficial ownership of 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of CSS’ common stock in a transaction not approved by the Board. In that situation, each holder of a Right (other than the acquiring person or group, whose Rights will become void and will not be exercisable) will have the right to purchase, upon payment of the exercise price of $22.00 per share, subject to adjustment, and in accordance with the terms of the Rights Plan, a number of shares of CSS common stock having a market value of twice such price. In addition, if CSS is acquired in a merger or other business combination after an acquiring person acquires 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of CSS’ common stock, each holder of the Right would thereafter have the right to purchase, upon payment of the exercise price and in accordance with the terms of the Rights Plan, a number of shares of common stock of the acquiring person having a market value of twice such price. The acquiring person or group would not be entitled to exercise these Rights. In the Rights Plan, the definition of “beneficial ownership” includes derivative securities.
Stockholders who beneficially owned 10% or more of CSS’ outstanding common stock prior to the CSS’ first public announcement of the adoption of the Rights Plan on November 11, 2019, will not trigger any penalties under the Rights Plan so long as they do not acquire beneficial ownership of any additional shares of common stock at a time when they still beneficially own 10% or more (or, solely in the case of certain current, ordinary course institutional investors as described in the Rights Plan, 20% or more) of such common stock, subject to certain exceptions as described in the Rights Plan.
Limited Consent and Waiver under ABL Credit Facility
On November 13, 2019, the Company and the lenders under the ABL Credit Facility (see Note 7) entered into a Limited Consent and Waiver (the “Limited Consent”) which reduced the minimum cumulative EBITDA (as defined in the ABL Credit Facility) levels required to be attained by the Company as of the end of each calendar month for the months of October 2019 through March 2020. The Limited Consent also increased the availability block from $15,000,000 to $20,000,000 from November 13, 2019 until November 30, 2019, and it provides for further increases thereof in increments of $1,000,000 beginning on December 1, 2019 and every two weeks thereafter until the availability block reaches $25,000,000 on February 1, 2020 and remains at that level thereafter unless and until the Company demonstrates compliance as of March 31, 2020 with each of the financial covenants contained in the ABL Credit Facility. Under the Limited Consent, the lenders waived any events of default that may have resulted from the Company’s adoption of the Rights Plan on November 11, 2019. In connection with the Limited Consent, there is a consent fee of $500,000.
v3.19.3
Fair Value Measurements
6 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The Company historically used certain derivative financial instruments as part of its risk management strategy to reduce interest rate and foreign currency risk. The Company recognized all derivatives on the consolidated balance sheets at fair value based on quotes obtained from financial institutions. As of March 31, 2019, the interest rate swap agreement was discontinued and the fair value of the interest rate swap agreement as of March 31, 2019 of $580,000 was reclassified into earnings with a realized loss included in other expense (income), net in the consolidated statement of operations and comprehensive income (loss). There was no interest rate swap agreement as of September 30, 2019. There were no foreign currency contracts outstanding as of September 30, 2019 and March 31, 2019.
The Company maintains a nonqualified Deferred Compensation Plan (the "Deferred Comp Plan") for qualified employees. The Deferred Comp Plan provides eligible key employees with the opportunity to elect to defer up to 50% of their eligible compensation under the Deferred Comp Plan. The Company may make matching or discretionary contributions, at the discretion of the Board. All compensation deferred under the Deferred Comp Plan is held by the Company. The Company maintains separate accounts for each participant to reflect deferred contribution amounts and the related gains or losses on such deferred amounts. A participant’s account is notionally invested in one or more investment funds and the value of the account is determined with respect to such investment allocations. The related liability is recorded as deferred compensation and included in other long-term obligations in the consolidated balance sheets as of September 30, 2019 and March 31, 2019.
The Company maintains life insurance policies in connection with the Deferred Comp Plan discussed above. The Company also maintains two life insurance policies in connection with separate deferred compensation arrangements with two former executives. The cash surrender value of the policies is recorded in other long-term assets in the consolidated balance sheets and is based on quotes obtained from insurance companies as of September 30, 2019 and March 31, 2019.
In connection with the acquisition of Fitlosophy in fiscal 2019, the Company may pay up to an additional $10,500,000 of contingent earn-out consideration, in cash, if net sales of certain products meet or exceed five different thresholds during the period from the acquisition date through March 31, 2023. The estimated fair value of the contingent earn-out consideration is determined using a Monte Carlo simulation discounted to a present value which is accreted over the earn-out period. The contingent consideration liability is included in accrued other expenses in the consolidated balance sheets as of March 31, 2019. As of September 30, 2019, the estimated fair value of the contingent earn-out consideration was reduced to zero as the projected sales for the certain products that qualify for the earn-out are not above the required thresholds.
Selected information relating to the aforementioned contingent consideration follows (in thousands):
 
Contingent Earn-out Consideration
Estimated fair value as of June 1, 2018
$
1,600

Accretion
64

Remeasurement adjustment
(298
)
Contingent Earn-out Consideration as of March 31, 2019
1,366

Accretion
16

Contingent Earn-out Consideration as of June 30, 2019
1,382

Accretion
10

Remeasurement adjustment
(1,392
)
Contingent Earn-out Consideration as of September 30, 2019
$


To increase consistency and comparability in fair value measurements, the FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The Company’s recurring assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.
Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Examples of Level 2 inputs include quoted prices for identical or similar assets or liabilities in non-active markets and pricing models whose inputs are observable for substantially the full term of the asset or liability.
Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis in its consolidated balance sheets as of September 30, 2019 and March 31, 2019 (in thousands):
 
September 30, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,828

 
$

 
$
2,828

 
$

Total assets
$
2,828

 
$

 
$
2,828

 
$

Liabilities:
 
 
 
 
 
 
 
Deferred compensation plan
$
1,339

 
$
1,339

 
$

 
$

Total liabilities
$
1,339

 
$
1,339

 
$

 
$

 
March 31, 2019
 
Quoted Prices In
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Assets:
 
 
 
 
 
 
 
Cash surrender value of life insurance policies
$
2,765

 
$

 
$
2,765

 
$

Total assets
$
2,765

 
$

 
$
2,765

 
$

Liabilities:
 
 
 
 
 
 
 
Contingent earn-out consideration
$
1,366

 
$

 
$

 
$
1,366

Interest rate swap agreement
580

 

 
580

 

Deferred compensation plan
1,156

 
1,156

 

 

Total liabilities
$
3,102

 
$
1,156

 
$
580

 
$
1,366


Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected at carrying value in the consolidated balance sheets and such amounts are a reasonable estimate of their fair values due to the short-term nature of these instruments. The outstanding balance of the Company’s short-term borrowings and long-term debt approximated its fair value based on the current rates available to the Company for debt of the same maturity and represents Level 2 financial instruments.
Nonrecurring Fair Value Measurements
The Company’s nonfinancial assets which are measured at fair value on a nonrecurring basis include property, plant and equipment, intangible assets and certain other assets. These assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. In making the assessment of impairment, recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows estimated by the Company to be generated by such assets. If such asset group is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are recorded at the lower of their carrying value or estimated net realizable value.
As discussed in Note 2, a subsidiary of the Company acquired substantially all of the business and net assets of Fitlosophy on June 1, 2018 and determined that the aggregate fair value of acquired intangible assets, consisting of tradenames, was $2,032,000. The Company estimated the fair value of the aforementioned acquired intangible assets using discounted cash flow techniques which included an estimate of future cash flows discounted to present value with an appropriate risk-adjusted discount rate (Level 3). The Company determined that the aggregate fair value of the acquired inventory in the Fitlosophy acquisition was $452,000, which was estimated as the selling price less costs of disposal (Level 2). The Company estimated the fair value of the Fitlosophy contingent earn-out consideration of $1,600,000 using a Monte Carlo simulation discounted to a present value (Level 3).
Indefinite-lived intangibles are subject to impairment testing on an annual basis, or sooner if events or circumstances indicate a condition of impairment may exist. Impairment testing is conducted through valuation methods that are based on assumptions for matters such as interest and discount rates, growth projections and other future business conditions (Level 3). These valuation methods require a significant degree of management judgment concerning the use of internal and external data. In the event these methods indicate that fair value is less than the carrying value, the asset is recorded at fair value as determined by the valuation models. In the first quarter of fiscal 2019, the Company recorded an impairment charge of $1,390,000 due to impairment of goodwill associated with the acquisition of Fitlosophy. See Note 2 and 6 for further discussion.
v3.19.3
Leases
6 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases
LEASES
The Company adopted ASC 842 as of April 1, 2019, using the modified retrospective transition approach wherein the Company applied the new lease standard at the adoption date. Accordingly, all periods prior to April 1, 2019 were presented in accordance with the previous ASC Topic 840 - Leases ("ASC 840"), and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in the recording of operating lease ROU assets of $51,486,000, operating lease liabilities of $50,180,000, a reduction of favorable lease assets of $2,866,000 and a reduction of net deferred rent liabilities of $1,560,000 as of April 1, 2019. Finance leases are not material to the Company and are not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the consolidated balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s consolidated statement of operations and comprehensive income (loss) or consolidated statement of cash flows.
The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain equipment and vehicles. Leases with an initial term of 12 months or less, which are immaterial to the Company, are not recorded in the consolidated balance sheet. For all asset classes, the Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not recorded in the consolidated balance sheet.
ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on the adoption date for existing leases and on the commencement date for new leases based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of lease payments. The Company applies the portfolio approach based on the rate of interest that it would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term to the development of its discount rates.
The components of lease costs are as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Lease costs:
 
 
 
Operating lease costs
$
2,865

 
$
5,753

Variable operating lease costs
77

 
154

Total
$
2,942

 
$
5,907

Supplemental cash flow information is as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows for operating leases
$
2,061

 
$
4,064

Total
$
2,061

 
$
4,064

 
Three Months Ended
 
Six Months Ended
 
September 30, 2019
 
September 30, 2019
Right-of-use assets obtained in exchange for lease obligations:
 
 
 
Operating leases
$

 
$
51,597

Total
$

 
$
51,597


The aggregate future lease payments for operating leases as of September 30, 2019 is projected to be as follows (in thousands):
Remainder of fiscal 2020
$
9,298

Fiscal 2021
8,542

Fiscal 2022
7,859

Fiscal 2023
6,600

Fiscal 2024
5,973

Thereafter
18,514

Total lease payments
56,786

Less: Interest
(10,604
)
Present value of lease liabilities
$
46,182


The future minimum lease payments associated with all non-cancelable lease obligations under ASC 840 as of March 31, 2019 is as follows (in thousands):
Fiscal 2020
$
10,520

Fiscal 2021
9,360

Fiscal 2022
8,446

Fiscal 2023
7,364

Fiscal 2024
6,200

Thereafter
21,818

Total lease payments
$
63,708


Weighted-average lease terms and discount rates are as follows:
 
September 30, 2019
Weighted-average remaining lease term (years) of operating leases
7.0

Weighted-average discount rate of operating leases
5.8
%
v3.19.3
Summary of Significant Accounting Policies - Inventories (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Inventory Disclosure [Abstract]      
Raw material $ 13,898 $ 14,246 $ 14,212
Work-in-process 18,258 16,816 15,616
Finished goods 72,853 65,169 86,522
Inventory, net $ 105,009 $ 96,231 $ 116,350
v3.19.3
Summary of Significant Accounting Policies - Components of AOCI (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
AOCI Attributable to Parent, Net of Tax [Roll Forward]        
Beginning balance $ 175,499 $ 233,408 $ 189,931 $ 253,695
OCI, gain (loss) (304) (35) (519) (490)
Ending balance 178,868 223,609 178,868 223,609
Accumulated effect of currency translation adjustment        
AOCI Attributable to Parent, Net of Tax [Roll Forward]        
Beginning balance (203) 268 12 988
OCI, gain (loss) (304) (246) (519) (966)
Ending balance (507) 22 (507) 22
Accumulated defined benefit plans adjustment attributable to parent        
AOCI Attributable to Parent, Net of Tax [Roll Forward]        
Beginning balance 453 259 453 259
Ending balance 453 259 453 259
Accumulated effect interest rate swap agreement        
AOCI Attributable to Parent, Net of Tax [Roll Forward]        
Beginning balance 0 181 0 (84)
OCI, gain (loss) 0 211 0 476
Ending balance $ 0 $ 392 $ 0 $ 392
v3.19.3
Restructuring Plans - Additional Information (Details) - USD ($)
$ in Thousands
6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Jun. 30, 2019
Mar. 31, 2019
Restructuring Cost and Reserve [Line Items]        
Impairment of property, plant and equipment $ 0 $ 1,570    
United Kingdom and Australia Restructuring Plan        
Restructuring Cost and Reserve [Line Items]        
Impairment of property, plant and equipment 1,398      
Restructuring reserve 9 $ 503 $ 11 $ 39
Strategic Business Initiative        
Restructuring Cost and Reserve [Line Items]        
Restructuring reserve 223      
Performance Improvement Initiative        
Restructuring Cost and Reserve [Line Items]        
Restructuring reserve 820      
Resource Alignment Initiative        
Restructuring Cost and Reserve [Line Items]        
Restructuring reserve $ 1,029      
v3.19.3
Fair Value Measurements - Contingent Consideration (Details) - USD ($)
3 Months Ended 6 Months Ended 10 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Sep. 30, 2019
Sep. 30, 2018
Mar. 31, 2019
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]          
Accretion     $ 26,000 $ 0  
Remeasurement adjustment     (1,392,000) $ 0  
Fitlosophy, Inc.          
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]          
Contingent Earn-out Consideration, beginning balance         $ 1,600,000
Contingent Earn-Out Consideration | Fitlosophy, Inc.          
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]          
Contingent Earn-out Consideration, beginning balance $ 1,382,000 $ 1,366,000 1,366,000   1,600,000
Accretion 10,000 16,000     64,000
Remeasurement adjustment (1,392,000)       (298,000)
Contingent Earn-out Consideration, ending balance $ 0 $ 1,382,000 $ 0   $ 1,366,000
v3.19.3
Commitments And Contingencies
6 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES
CSS and its subsidiaries are involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the consolidated financial position of the Company or its results of operations or cash flows.
v3.19.3
Share-Based Compensation
6 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation
SHARE-BASED COMPENSATION
Under the terms of the Company’s 2013 Equity Compensation Plan (“2013 Plan”), the Company may grant incentive stock options, non-qualified stock options, stock units, restricted stock grants, stock appreciation rights, stock bonus awards and dividend equivalents to officers and other employees and non-employee directors. Under the 2013 Plan, a committee of the Company's Board of Directors (the "Board") approves grants to officers and other employees, and the Board approves grants to non-employee directors. Grants under the 2013 Plan may be made through July 29, 2023. The term of each grant is at the discretion of the Company, but in no event greater than ten years from the date of grant, and at the date of grant the Company has discretion to determine the date or dates on which granted options become exercisable. Service-based stock options outstanding as of September 30, 2019 become exercisable at the rate of 25% per year commencing one year after the date of grant. Market-based stock options outstanding as of September 30, 2019 become exercisable only if certain market conditions and service requirements are satisfied, and the dates on which they become exercisable will depend on the period in which such market conditions and service requirements are met, if at all, except that vesting and exercisability are accelerated upon a change of control. Outstanding service-based restricted stock units ("RSUs") granted to employees vest at either: (i) the rate of 50% of the shares underlying the grant on each of the third and fourth anniversaries of the grant date or (ii) the rate of 25% of the shares underlying the grant on each of the first four anniversaries of the grant date. Service-based RSUs granted to directors and outstanding as of September 30, 2019 will vest on July 31, 2020. Market-based and performance-based RSUs outstanding as of September 30, 2019 will vest only if certain market or performance conditions and service requirements have been met, and the dates on which they vest will depend on the period in which such market or performance conditions and service requirements are met, if at all, except that vesting and redemption are accelerated upon a change of control. The Company recognizes grants, cancellations, and forfeitures as they occur. As of September 30, 2019, there were 574,355 shares available for grant under the 2013 Plan.
The fair value of each stock option granted under the above plan is estimated on the date of grant using a Black-Scholes option pricing model. There were no stock options granted during the first six months of fiscal 2020 and fiscal 2019. As of September 30, 2019, there were 275,000 outstanding stock options.
The fair value of each performance-based and service-based RSU granted to employees is estimated on the grant date based on the closing price of the Company's common stock reduced by the present value of the expected dividend stream during the vesting period using the risk-free interest rate when applicable. The fair value of each service-based RSU granted to directors, for which dividend equivalents are paid upon vesting of the underlying awards when applicable, is estimated on the day of grant based on the closing price of the Company's common stock. During the six months ended September 30, 2019 and 2018, the Company granted 285,985 and 189,013 RSUs, respectively, with a weighted average fair value per share of $5.67 and $14.65, respectively. As of September 30, 2019, there were 396,901 outstanding performance-based and service-based RSUs.
As of September 30, 2019, there was $353,000 of total unrecognized compensation cost related to non-vested stock option awards granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of 1.4 years. As of September 30, 2019, there was $2,222,000 of total unrecognized compensation cost related to non-vested service-based, market-based and performance-based RSUs granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of 1.8 years.
Compensation cost related to stock options and RSUs recognized in operating results (included in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss)) was $191,000 and $586,000 in the three months ended September 30, 2019 and 2018, respectively, and $264,000 and $1,057,000 in the six months ended September 30, 2019 and September 30, 2018, respectively.
v3.19.3
Restructuring Plans - Restructuring Charges (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Restructuring Cost and Reserve [Line Items]          
Charges (reversals) to expense $ 741   $ 2,127 $ 2,795 $ 2,127
United Kingdom and Australia Restructuring Plan          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 11 $ 39   39  
Charges (reversals) to expense   (22)      
Cash paid (2) (6)     (54)
Initial reserve         557
Restructuring reserve as of June 30, 2019 9 11 503 9 503
United Kingdom and Australia Restructuring Plan | Employee Termination Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 0 1   1  
Charges (reversals) to expense   (1)      
Cash paid 0 0     0
Initial reserve         297
Restructuring reserve as of June 30, 2019 0 0 297 0 297
United Kingdom and Australia Restructuring Plan | Facility Exit Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 0 24   24  
Charges (reversals) to expense   (24)      
Cash paid 0 0     (13)
Initial reserve         127
Restructuring reserve as of June 30, 2019 0 0 114 0 114
United Kingdom and Australia Restructuring Plan | Other Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 11 14   14  
Charges (reversals) to expense   3      
Cash paid (2) (6)     (41)
Initial reserve         133
Restructuring reserve as of June 30, 2019 9 11 $ 92 9 $ 92
Strategic Business Initiative          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of June 30, 2019 223     223  
Strategic Business Initiative | Employee Termination Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 422 634   634  
Charges (reversals) to expense (3)        
Cash paid (196) (212)      
Restructuring reserve as of June 30, 2019 223 422   223  
Performance Improvement Initiative          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of June 30, 2019 820     820  
Performance Improvement Initiative | Employee Termination Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019 1,586 2,076   2,076  
Charges (reversals) to expense (305)        
Cash paid (461) (490)      
Restructuring reserve as of June 30, 2019 820 1,586   820  
Resource Alignment Initiative          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of June 30, 2019 1,029     1,029  
Resource Alignment Initiative | Employee Termination Costs          
Restructuring Cost and Reserve [Line Items]          
Restructuring reserve as of March 31, 2019   $ 1,049   1,049  
Cash paid       (20)  
Restructuring reserve as of June 30, 2019 $ 1,029     $ 1,029  
v3.19.3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)
3 Months Ended 6 Months Ended
Oct. 29, 2019
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Mar. 31, 2019
Jun. 01, 2018
Nov. 03, 2017
Dec. 13, 2016
Net Investment Income [Line Items]                  
Remaining amount of inventory acquired   $ 0 $ 2,076,000 $ 0 $ 2,076,000 $ 284,000      
Asset held for sale   131,000 2,391,000 131,000 2,391,000 $ 131,000      
Proceeds from sale of fixed assets       140,000 0        
Depreciation expense   $ 2,469,000 $ 2,124,000 4,883,000 4,154,000        
Impairment of property, plant and equipment       $ 0 $ 1,570,000        
Effective antidilutive securities excluded from computation of net income per share (in shares)   275,000 525,000 587,000 525,000        
The McCall Pattern Company                  
Net Investment Income [Line Items]                  
Step up to fair value of inventory acquired                 $ 21,773,000
Simplicity Creative Group                  
Net Investment Income [Line Items]                  
Step up to fair value of inventory acquired               $ 10,214,000  
Fitlosophy, Inc.                  
Net Investment Income [Line Items]                  
Step up to fair value of inventory acquired             $ 312,000    
Minimum                  
Net Investment Income [Line Items]                  
Revenue payment terms       30 days          
Maximum                  
Net Investment Income [Line Items]                  
Revenue payment terms       90 days          
Subsequent Event                  
Net Investment Income [Line Items]                  
Consideration for sale of facility $ 750,000                
Proceeds from sale of fixed assets 708,000                
Legal fees incurred $ 24,000                
v3.19.3
Acquisitions - Additional Information (Details) - USD ($)
6 Months Ended
Jun. 01, 2018
Sep. 30, 2019
Sep. 30, 2018
Mar. 31, 2019
Jun. 30, 2018
Mar. 31, 2018
Business Acquisition [Line Items]            
Cash   $ 0 $ 2,500,000      
Goodwill   0 $ 0 $ 0   $ 0
Fitlosophy, Inc.            
Business Acquisition [Line Items]            
Cash $ 2,500,000          
Contingent consideration 10,500,000 $ 10,500,000        
Contingent earn-out consideration 1,600,000          
Goodwill $ 1,390,000       $ 1,390,000  
v3.19.3
Subsequent Events - Narrative (Details) - USD ($)
2 Months Ended
Nov. 11, 2019
Feb. 01, 2020
Nov. 30, 2019
Oct. 04, 2019
Sep. 30, 2019
Sep. 24, 2019
Sep. 10, 2019
May 23, 2019
Mar. 31, 2019
Sep. 30, 2018
Subsequent Event [Line Items]                    
Preferred stock, par value (in dollars per share)         $ 0.01       $ 0.01 $ 0.01
Subsequent Event                    
Subsequent Event [Line Items]                    
Exercise price $ 22.00                  
Threshold for exercise 10.00%                  
Threshold for exercise feature for certain current investors 20.00%                  
ABL Credit Facility                    
Subsequent Event [Line Items]                    
Borrowing capacity           $ 11,000,000 $ 10,000,000 $ 15,000,000    
ABL Credit Facility | Subsequent Event                    
Subsequent Event [Line Items]                    
Borrowing capacity       $ 12,500,000            
Consent fees $ 500,000                  
Forecast | ABL Credit Facility                    
Subsequent Event [Line Items]                    
Borrowing capacity   $ 25,000,000 $ 20,000,000              
Borrowing capacity incremental increase   $ 1,000,000                
v3.19.3
Fair Value Measurements - Additional Information (Details)
3 Months Ended 6 Months Ended
Sep. 30, 2019
USD ($)
executive
InsurancePolicy
Sep. 30, 2018
USD ($)
Jun. 30, 2018
USD ($)
Sep. 30, 2019
USD ($)
executive
InsurancePolicy
Sep. 30, 2018
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Jun. 01, 2018
USD ($)
Mar. 31, 2018
USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Foreign currency contract outstanding $ 0     $ 0     $ 0    
Goodwill 0 $ 0   0 $ 0   0   $ 0
Impairment of goodwill 0 $ 0   0 $ 1,390,000        
Recurring Fair Value Measurements                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Liability outstanding $ 1,339,000     $ 1,339,000     3,102,000    
Number of life insurance policies | InsurancePolicy 2     2          
Number of former executives | executive 2     2          
Nonqualified Deferred Compensation Plan                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Percentage of compensation eligible to be deferred 50.00%     50.00%          
Fitlosophy, Inc.                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Contingent consideration $ 10,500,000     $ 10,500,000       $ 10,500,000  
Contingent earn-out consideration               1,600,000  
Intangible assets               2,032,000  
Inventory               452,000  
Goodwill     $ 1,390,000         1,390,000  
Impairment of goodwill     $ 1,390,000            
Interest Rate Swap | Recurring Fair Value Measurements                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Liability outstanding 0     0     580,000    
Contingent Earn-Out Consideration | Fitlosophy, Inc.                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Contingent earn-out consideration $ 0     $ 0   $ 1,382,000 $ 1,366,000 $ 1,600,000  
v3.19.3
Short-Term Borrowings And Credit Arrangements - Additional Information (Details)
12 Months Ended
Mar. 07, 2019
USD ($)
bank
Mar. 31, 2020
Feb. 01, 2020
USD ($)
Nov. 30, 2019
USD ($)
Oct. 04, 2019
USD ($)
Sep. 30, 2019
USD ($)
Sep. 24, 2019
USD ($)
Sep. 10, 2019
USD ($)
May 23, 2019
USD ($)
Mar. 31, 2019
USD ($)
Mar. 06, 2019
USD ($)
bank
Sep. 30, 2018
USD ($)
Debt Instrument [Line Items]                        
Long-term debt, net of current portion           $ 7,000       $ 13,000   $ 40,111,000
Capital Lease Obligations                        
Debt Instrument [Line Items]                        
Current portion of long-term debt           12,000       145,000   73,000
Long-term debt, net of current portion           7,000       13,000   84,000
Long term debt           19,000       158,000   157,000
Financed Computer Equipment                        
Debt Instrument [Line Items]                        
Current portion of long-term debt           27,000       173,000   158,000
Long-term debt, net of current portion           0       0   27,000
Long term debt           27,000       173,000   185,000
ABL Credit Facility                        
Debt Instrument [Line Items]                        
Maximum borrowing capacity $ 125,000,000               $ 100,000,000      
Revolving credit facility agreement with number of banks | bank 3                      
Reduction in borrowing capacity             $ 11,000,000 $ 10,000,000 $ 15,000,000      
Fixed charge coverage ratio                 1.00      
Capital expenditures                 $ 8,000,000      
Unused commitment fee percentage 0.25%                      
Revolving Credit Facility                        
Debt Instrument [Line Items]                        
Borrowings outstanding           $ 50,381,000       $ 26,139,000    
Prior Credit Facility                        
Debt Instrument [Line Items]                        
Maximum borrowing capacity                     $ 50,000,000  
Revolving credit facility agreement with number of banks | bank                     2  
Borrowings outstanding                       $ 61,185,000
Federal Funds Effective Swap Rate | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Variable rate 0.50%                      
London Interbank Offered Rate (LIBOR) | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Variable rate 1.00%                      
Subsequent Event | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Reduction in borrowing capacity         $ 12,500,000              
Forecast | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Reduction in borrowing capacity     $ 25,000,000 $ 20,000,000                
Forecast | London Interbank Offered Rate (LIBOR) | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Variable rate   2.50%                    
Forecast | Base Rate | ABL Credit Facility                        
Debt Instrument [Line Items]                        
Variable rate   1.50%                    
v3.19.3
Leases - Narrative (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Apr. 01, 2019
Mar. 31, 2019
Sep. 30, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Operating lease right-of-use assets $ 46,948   $ 0 $ 0
Operating lease, liability $ 46,182      
Accounting Standards Update 2016-02        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Operating lease right-of-use assets   $ 51,486    
Operating lease, liability   50,180    
Reduction in favorable lease assets   2,866    
Net deferred rent liabilities   $ 1,560    
v3.19.3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Common Stock in Treasury
Beginning balance, shares at Mar. 31, 2018   14,703,084       (5,583,338)
Beginning balance at Mar. 31, 2018 $ 253,695 $ 1,470 $ 58,877 $ 339,088 $ 1,163 $ (146,903)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share-based compensation expense 471   471      
Other comprehensive income (loss) (455)       (455)  
Net income (loss) (18,476)     (18,476)    
Cash dividends ($.20 per common share) (1,827)     (1,827)    
Ending balance at Jun. 30, 2018 233,408 $ 1,470 59,348 318,785 708 $ (146,903)
Ending balance, shares at Jun. 30, 2018   14,703,084       (5,583,338)
Beginning balance, shares at Mar. 31, 2018   14,703,084       (5,583,338)
Beginning balance at Mar. 31, 2018 253,695 $ 1,470 58,877 339,088 1,163 $ (146,903)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income (loss) $ (23,386)          
Purchase of treasury shares, shares (249,908)          
Purchase of treasury shares $ (3,628)          
Ending balance at Sep. 30, 2018 223,609 $ 1,470 59,934 311,387 673 $ (149,855)
Ending balance, shares at Sep. 30, 2018   14,703,084       (5,813,926)
Beginning balance, shares at Jun. 30, 2018   14,703,084       (5,583,338)
Beginning balance at Jun. 30, 2018 233,408 $ 1,470 59,348 318,785 708 $ (146,903)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share-based compensation expense 586   586      
Issuance of common stock under equity plan 0     (676)   $ 676
Issuance of common stock under equity plan, shares           19,320
Other comprehensive income (loss) (35)       (35)  
Net income (loss) (4,910)     (4,910)    
Cash dividends ($.20 per common share) $ (1,812)     (1,812)    
Purchase of treasury shares, shares (249,908)          
Purchase of treasury shares $ (3,628)          
Ending balance at Sep. 30, 2018 223,609 $ 1,470 59,934 311,387 673 $ (149,855)
Ending balance, shares at Sep. 30, 2018   14,703,084       (5,813,926)
Beginning balance, shares at Mar. 31, 2019   14,703,084       (5,865,846)
Beginning balance at Mar. 31, 2019 189,931 $ 1,470 60,921 277,613 465 $ (150,538)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share-based compensation expense 73   73      
Issuance of common stock under equity plan (42)     (782)   $ 740
Issuance of common stock under equity plan, shares           15,611
Other comprehensive income (loss) (215)       (215)  
Net income (loss) (14,248)     (14,248)    
Ending balance at Jun. 30, 2019 175,499 $ 1,470 60,994 262,583 250 $ (149,798)
Ending balance, shares at Jun. 30, 2019   14,703,084       (5,850,235)
Beginning balance, shares at Mar. 31, 2019   14,703,084       (5,865,846)
Beginning balance at Mar. 31, 2019 189,931 $ 1,470 60,921 277,613 465 $ (150,538)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income (loss) $ (10,766)          
Purchase of treasury shares, shares 0          
Ending balance at Sep. 30, 2019 $ 178,868 $ 1,470 61,185 265,147 (54) $ (148,880)
Ending balance, shares at Sep. 30, 2019   14,703,084       (5,824,025)
Beginning balance, shares at Jun. 30, 2019   14,703,084       (5,850,235)
Beginning balance at Jun. 30, 2019 175,499 $ 1,470 60,994 262,583 250 $ (149,798)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share-based compensation expense 191   191      
Issuance of common stock under equity plan 0     (918)   $ 918
Issuance of common stock under equity plan, shares           26,210
Other comprehensive income (loss) (304)       (304)  
Net income (loss) 3,482     3,482    
Ending balance at Sep. 30, 2019 $ 178,868 $ 1,470 $ 61,185 $ 265,147 $ (54) $ (148,880)
Ending balance, shares at Sep. 30, 2019   14,703,084       (5,824,025)
v3.19.3
Goodwill, Other Intangible Assets And Long-Lived Assets - Additional Information (Details) - USD ($)
3 Months Ended 6 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Mar. 31, 2019
Jun. 30, 2018
Jun. 01, 2018
Mar. 31, 2018
Acquired Finite-Lived Intangible Assets [Line Items]                
Goodwill $ 0 $ 0 $ 0 $ 0 $ 0     $ 0
Amortization expense related to intangible assets $ 797,000 $ 1,300,000 $ 1,598,000 $ 2,567,000        
Fitlosophy, Inc.                
Acquired Finite-Lived Intangible Assets [Line Items]                
Goodwill           $ 1,390,000 $ 1,390,000  
v3.19.3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2018
Sep. 30, 2018
Income Statement [Abstract]    
Tax portion of fair value adjustment $ 124 $ 183
v3.19.3
Acquisitions (Tables)
6 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Schedule of Business Acquisitions
The following table summarizes the purchase price at the date of acquisition (in thousands):
Cash
$
2,500

Contingent earn-out consideration
1,600

Purchase price
$
4,100

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
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

v3.19.3
Recent Accounting Pronouncements
6 Months Ended
Sep. 30, 2019
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefits Plans" ("ASU 2018-14"), which is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit pension or other postretirement plans. ASU 2018-14 is required to be applied on a retrospective basis to all periods presented and is effective for the Company in its fiscal year ending March 31, 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," ("ASU 2018-15"). ASU 2018-15 aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the updated guidance requires an entity to determine the stage of a project that the implementation activity relates to and the nature of the associated costs in order to determine whether those costs should be expensed as incurred or capitalized. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard, but it does not expect that it will have a material impact on the Company's consolidated financial statements.
v3.19.3
Short-Term Borrowings And Credit Arrangements (Tables)
6 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Schedule of long term debt
The Company leases certain equipment under finance leases which are classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
12

 
$
145

 
$
73

Long-term debt, net of current portion
7

 
13

 
84

 
$
19

 
$
158

 
$
157


The Company also finances certain equipment which is classified in the accompanying consolidated balance sheets as follows (in thousands):
 
September 30, 2019
 
March 31, 2019
 
September 30, 2018
Current portion of long-term debt
$
27

 
$
173

 
$
158

Long-term debt, net of current portion

 

 
27

 
$
27

 
$
173

 
$
185