The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with foreign currency forward contracts. Such transactions are designated as fair value hedging instruments. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. As of September 30, 2003, the notional amount of open foreign currency forward contracts was $22,606,000 and the related loss was $394,000.

The Company enters into interest rate swap agreements to manage its exposure to interest rate movements by effectively converting a portion of its anticipated working capital debt from variable to fixed rates. The average notional amounts of interest rate swap contracts subject to fixed rates outstanding as of September 30, 2003 for the remainder of fiscal year 2004 was $12,071,000. These agreements involve the Company receiving variable rate payments in exchange for fixed rate payments without the effect of leverage and without the exchange of the underlying face amount. Fixed interest rate payments are at a weighted average rate of 5.09% for fiscal year 2004. Variable rate payments are based on one month U.S. dollar LIBOR. Interest rate differentials paid under these agreements are recognized as adjustments to interest expense and amounted to $189,000 and $299,000 for the quarters ended September 30, 2003 and 2002 and $200,000 and $315,000 for the six months ended September 30, 2003 and 2002.

The Company designates all of its interest rate swap agreements as cash flow hedges and records the fair value of its interest rate swap agreements in its consolidated balance sheet. Changes in the fair value of these agreements are recorded in other comprehensive income (loss) and reclassified into earnings as the underlying hedged item affects earnings. Unrealized after tax net gains of $121,000 and $31,000 were recorded in other comprehensive income (loss) during the second quarter of fiscal 2004 and fiscal 2003, respectively. Unrealized after tax net gains of $120,000 and unrealized after tax net losses of $212,000 were recorded in other comprehensive income (loss) during the six months ended September 30, 2003 and 2002, respectively. The fair value of interest rate swap agreements is included in other current liabilities and totaled $245,000 and $437,000 as of September 30, 2003 and March 31, 2003, respectively.

Crystal Creative Products, Inc.

On October 18, 2002, a subsidiary of the Company acquired all of the capital stock of Crystal Creative Products, Inc. (“Crystal”) for approximately $22,891,000, including transaction costs, and assumed and repaid $18,828,000 of outstanding debt (primarily seasonal working capital debt). Crystal, headquartered in Middletown, Ohio, is a leading designer, manufacturer and distributor of consumer convenience gift wrap products. Its product lines include gift tissue, gift bags, and related packaging products for the consumer market, as well as specialty tissues for in-store packaging of retailers and for industrial applications. A portion of the purchase price is being held in escrow for certain post closing adjustments and indemnification obligations. The acquisition was accounted for as a purchase and the excess of cost over the fair market value of the net tangible assets acquired of $11,215,000 was recorded as intangible assets. Of the $11,215,000 of acquired intangible assets, $4,290,000 was assigned to trade names that are not subject to amortization, $6,625,000 was assigned to goodwill and $300,000 was assigned to a covenant not to compete which has a useful life of five years.

In July 2003, the Company finalized a restructuring plan related to the Crystal acquisition, under which the Company will restructure its business to integrate the acquired entity with its current businesses. In connection with this plan, the Company sold assets related to a non-core portion of the Crystal business for approximately $3,525,000 in July 2003, and will close Crystal’s primary manufacturing facility in Maysville, Kentucky and a separate administration building in Middletown, Ohio. In the quarter ended September 30, 2003, the Company recorded a restructuring reserve of approximately $1,672,000 as part of purchase accounting, including severance related to approximately 150 employees. Payments of approximately $156,000, mainly for costs associated with the closing of the Maysville facility, were made in the second quarter of fiscal 2004. As a result of this restructuring and other adjustments, goodwill increased by approximately $1,273,000. Severance payments will be paid through the first quarter of fiscal year 2005 and payments related to contractual obligations and facility exit costs will be paid through the end of fiscal year 2006. As of September 30, 2003, the remaining liability of $1,516,000 was classified as a current liability in the accompanying consolidated balance sheet.