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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the year ended December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------------- to -------------------
Commission File number 1-2661
CSS INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-1920657
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1845 Walnut Street, Philadelphia, PA 19103
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (215) 569-9900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
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Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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.
Yes X No
--- ---
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
(Page 1 of Cover Page)
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is approximately $212,502,000. Such aggregate market value was
computed by reference to the closing price of the Common Stock of the
Registrant on the New York Stock Exchange on March 3, 1998 ($34 13/16 per
share). Such calculation excludes the shares of Common Stock beneficially owned
at such date by certain directors and officers of the Registrant, by the Farber
Foundation and by the Farber Family Foundation, as described under the section
entitled "CSS SECURITY OWNERSHIP" in the Proxy Statement to be filed by the
Registrant for its 1998 Annual Meeting of Stockholders. In making such
calculation, Registrant does not determine the affiliate or non-affiliate
status of any holders of the shares of Common Stock for any other purpose.
At March 3, 1998, there were outstanding 10,985,624 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for its 1998 Annual Meeting of
Stockholders are incorporated by reference in Part III (under Items 10, 11, 12
and 13).
(Page 2 of Cover Page)
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Part I
Item 1. Business
General
CSS Industries, Inc. ("CSS" or the "Company") is a consumer products
company primarily engaged in the manufacture and sale to mass market retailers
of seasonal, social expression products, including gift wrap, gift bags, boxed
greeting cards, gift tags, tissue paper, paper and vinyl decorations,
calendars, classroom exchange Valentines, decorative ribbons and bows,
Halloween masks, costumes, make-ups and novelties and Easter egg dyes and
novelties. CSS provides its retail customers the opportunity to use a single
vendor for much of their seasonal product requirements. CSS' product breadth,
product innovation, creative design, manufacturing and packaging flexibility,
product quality and customer service are key to sustaining the Company's market
leadership position. A substantial portion of CSS' products are manufactured,
packaged and warehoused in twelve domestic facilities, with the remainder
purchased primarily from Asian manufacturers. The Company's products are sold
to its retail customers by national and regional account managers and product
specialists and by a network of independent manufacturers' representatives. The
Company is comprised of The Paper Magic Group, Inc. ("Paper Magic"), acquired
by the Company in August 1988, Berwick Industries, Inc. ("Berwick"), acquired
in May 1993, and Cleo Inc ("Cleo"), acquired in November 1995.
On December 23, 1997, CSS sold Rapidforms, Inc. and its subsidiaries. As a
result of the sale, CSS no longer operates in the Direct Mail Business Products
industry.
The Company has experienced growth through a combination of acquisitions
and the expansion of existing operations. The Company's goal is to continue to
expand by developing new or complementary products, by entering new markets, by
acquiring companies that are complementary with its existing operating business
and by acquiring other businesses with leading market positions.
Paper Magic
Principal Products Paper Magic designs, manufactures and distributes a
broad range of seasonal and decorative products to the consumer primarily
through the mass market distribution channel. Paper Magic products include
Christmas boxed greeting cards, gift tags, classroom exchange Valentine cards,
seasonal decorations for both inside and outside the home, Dudley's(R) brand of
Easter egg dyes and related Easter seasonal products, a full line of Halloween
merchandise including make-up, costumes, masks, novelties, and the Illusive
Concepts'(TM) brand of highly crafted masks and collectibles. In addition,
Paper Magic also designs and markets everyday decorative products and teachers
aids to the education market through school supply distributors and direct to
retail teachers' stores. On January 17, 1997, Paper Magic acquired all of the
outstanding stock of Color-Clings, Inc. ("Color-Clings") for $7,875,000 and
assumed and repaid $10,665,000 of debt. Color-Clings is a designer and marketer
of seasonal and everyday vinyl home decorations sold primarily to mass market
retailers in the United States and Canada.
Paper Magic's products are primarily produced and warehoused in five
facilities in central and northeastern Pennsylvania. Manufacturing processes
include a wide range of finishing, assembly and packaging operations. Paper
Magic Halloween make-up and Easter egg dye products are manufactured to
specific proprietary formulae by contract manufacturers who meet regulatory
requirements for the formularization and packaging of such products. Other
products are imported from Asian manufacturers.
Sales and Marketing Paper Magic products are sold in the United States and
Canada by national and regional account sales managers and product specialists
and by a network of CSS independent manufacturers' representatives. Products
are displayed and presented in showrooms maintained by these representatives in
major cities in the United States and Canada. Relationships are developed with
key retail customers by Paper Magic sales management personnel and the
independent manufacturers' representatives. Customers are generally mass
merchandise retailers, warehouse clubs, drug and food chains, independent card
shops and retail teacher stores. Paper Magic's revenues are seasonal with
approximately 50% of sales related to the Christmas season and the remaining
sales relating to the Halloween, Easter and Valentines day seasons and everyday
product sales. Seasonal products are generally designed and sold beginning well
over a year before the event and manufactured during an eight to ten month
production cycle. With such long lead time requirements, timely
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communication with outsourcing factories, retail customers and independent
manufacturers' representatives is critical to the timely production of seasonal
inventory. Because the products themselves are seasonal, sales terms do not
generally require payment until after the holiday in accordance with industry
practices. In general, Paper Magic products are not sold under guaranteed or
return privilege terms.
Each of the seasonal product groups is sold in an annual cycle. CSS
maintains permanent showrooms in New York City and Memphis, Tennessee where
major retail buyers will typically visit for a presentation and review of the
new lines.
Competition Paper Magic competes with several companies. In Christmas
boxed cards and gift trims, Paper Magic competes with the Plus Mark(R) line of
American Greetings Corporation and the Kristen(R) line of Burgoyne, Inc., among
others. Paper Magic's Dudley's(R) brand Easter egg dye products compete with
the PAAS(R) brand of Schering-Plough HealthCare Products, among others.
Competitors offering Halloween products include Disguise, Inc., Fun World, Inc.
and Rubie's. Certain of these competitors are larger and have greater resources
than the Company. Historically, Paper Magic has not competed directly, except
to a limited extent, with Hallmark Cards, Inc. and other product offerings of
American Greetings Corporation. Recently, certain of these companies have
expanded their promotional offerings to the mass market retail distribution
channel.
Paper Magic believes its products are positioned adequately for continued
growth in their primary markets. Since competition is based primarily on price,
timely delivery, creative design and increasingly, the ability to serve major
retail customers with single, combined product shipments for each holiday
event, Paper Magic's product driven focus combined with consistent service
levels allows it to compete effectively in its core markets.
Berwick
Principal Products Berwick designs, manufactures and distributes an array
of decorative ribbons, bows and related products to various markets under the
following registered trademarks: Berwick(R), Flora Satin(R), Grand Prix(R),
Brilliance(R), The Perfect Bow(R), Splendorette(R), Ribbon Magic(R), and
Veltex(R). Approximately 88% of its products are manufactured by Berwick using
extruded polypropylene resins. These products, together with fabric ribbon and
accessories, which are either manufactured or purchased for resale, are sold to
a diverse base of customers in the United States and in forty-seven countries
around the world.
Berwick manufactures and warehouses its products in five facilities
located in northeast Pennsylvania. The manufacturing process is vertically
integrated. Most ribbon and bow products are made from polypropylene resin, a
petroleum-based product, which is mixed with color pigment, melted and pressed
through an extruder. Large rolls of extruded film go through various
combinations of processes such as slitting, crimping, embossing, printing,
laminating and hot-stamping before being made into bows or packaged on ribbon
spools or reels as required by various markets and customers. Iridescent,
holographic and metallic ribbon products are also made from polypropylene
produced ribbon that is coated or laminated with a special film to produce an
iridescent or metallic sheen.
Berwick imports several products for resale and also ships certain
unfinished material, primarily large rolls of ribbon, to subcontractors for
conversion into finished bows used, for example, to decorate Christmas trees
and wreaths. Such items are more labor intensive than items produced at
Berwick's manufacturing facilities and are manufactured to Berwick's
specifications by subcontractors based in The People's Republic of China.
Sales and Marketing Berwick sells its products to customers primarily
through three distribution channels. Seasonal and everyday products are sold to
mass merchandise retailers, warehouse clubs, drug store chains, supermarket
chains and variety stores. These customers are served by national account sales
managers and product specialists and a network of CSS independent
manufacturers' representatives. Products are also sold through independent
sales representatives to wholesale distributors who serve the floral, craft and
retail packaging trades. And, lastly, the company sells custom products to
private label customers, to other social expression companies, and to
converters of the company's bulk ribbon products. Custom products are sold and
marketed by both independent manufacturers' representatives and by Berwick
sales managers. Berwick's sales are highly seasonal with approximately 74%
shipped for the Christmas selling season.
Competition Berwick competes primarily with a variety of large and small
domestic companies, including the Plus Mark(R) line of American Greetings
Corp., Hollywood Ribbon, Inc., CPS Corporation, Equality Specialties, Inc.,
Delaware Ribbon Manufacturers, Inc., C. M. Offray and Son, Inc. and Variety
Accessories. Certain of these competitors are larger and have greater financial
resources than the Company.
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Berwick believes that its products are established in its various markets
and are positioned for continued growth. Berwick's new product development,
product quality, breadth of product line, cost effective manufacturing
techniques, extensive sales network and product pricing allow it to compete
effectively in its various markets.
Cleo
Principal Products Cleo designs, manufactures and distributes a broad
range of social expression products to mass market retailers, including
Christmas and all-occasion gift wrap and gift wrap alternative products, such
as gift bags and tissue, as well as calendars, boxed greeting cards and
classroom exchange Valentines sold under the Cleo(R) brand name.
Manufacturing of gift wrap, including web printing, finishing, rewinding
and packaging are performed in one facility in Memphis, Tennessee. Finished
goods are warehoused and shipped from both the production facility and a
separate facility in Memphis. Although designed to the specifications of Cleo,
gift bags, tissue and calendars, are all purchased from outside vendors.
Cleo(R) brand boxed greeting cards and classroom exchange Valentine cards are
manufactured and packaged in Paper Magic facilities in central and northeastern
Pennsylvania.
Sales and Marketing Cleo products are sold in the United States (including
Puerto Rico), Canada and Mexico by an in-house dedicated sales organization and
by a network of CSS independent manufacturers' representatives. Customers
represent various classes of trade, including mass merchandise retailers, drug
and food chains and warehouse clubs. In addition to the above markets, through
sales and licensing agreements, Cleo also sells products to customers in Hong
Kong/China and Australia.
Sales efforts are conducted through a combination of travel to retailers'
offices, use of regional showrooms maintained by manufacturers'
representatives, and an annual trade show in New York, where customers visit
the Company's permanent showroom. Furthermore, because Cleo enjoys a strong
working relationship with its key customers, many of them travel to Memphis
annually to conduct their business on-site in CSS showrooms.
Cleo's revenues are highly seasonal with approximately 90% being Christmas
related. Industry practices require production based on commitments or bookings
early in the selling cycle with actual purchase orders received within a short
period of time prior to shipment. Because the products are seasonal, sales
terms do not require payment until after the Christmas season in accordance
with industry practices.
Due to the ever increasing competitive retail environment, Cleo plays a
crucial role in helping the retailer to develop programs to meet product
performance objectives while appealing to consumers' tastes. These objectives
are met through the development and manufacture of custom configured and
designed products. Cleo's years of experience in program development and
product quality are key competitive advantages in helping the retailers meet
their objectives.
Competition In its core product line of Christmas gift wrap, Cleo competes
primarily with Plus Mark(R), a division of American Greetings Corporation, and
CPS Corporation. Historically, Cleo has not competed directly, except to a
limited extent, with Hallmark Cards, Inc. and other product offerings of
American Greetings Corporation. Recently, certain of these companies have
expanded their promotional offerings to the mass market retail outlets in which
Cleo sells its products.
Employees
At March 3, 1998, approximately 770 persons were employed by Paper Magic,
580 persons were employed by Berwick, 680 persons were employed by Cleo (with
personnel increasing to approximately 1,700; 1,100 and 1,100, respectively, as
seasonal employees are added), and 24 persons were employed at the Company's
headquarters.
With the exception of the bargaining unit at Cleo, which included 395
employees as of March 3, 1998, the employees at Paper Magic, Berwick and
Rapidforms are not represented by labor unions. Because of the seasonal nature
of certain of its businesses, the number of Paper Magic, Berwick and Cleo
production employees fluctuate during the year.
The Company believes that relationships with all of its employees are
good.
Item 2. Properties
Paper Magic operates out of 810,000 square feet of owned warehouse space
in five buildings in northeast Pennsylvania. Paper Magic also leases 63,000
square feet of space for creative design activities and general administrative
purposes in Scranton, Pennsylvania, Concord, California, New York, New York and
Bloomington and Minneapolis, Minnesota.
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Berwick owns four buildings in northeast Pennsylvania which represent 623,000
square feet of production, warehouse and office space and leases 425,000 square
feet of additional warehouse space in two buildings located in northeast
Pennsylvania. Cleo operates principally in two facilities in Memphis,
Tennessee. The manufacturing operations, raw materials and finished goods
warehouse and offices are in a 1,003,000 square foot leased facility while
additional finished goods warehousing and distribution are in a 1,135,000
square foot owned facility, of which Cleo occupies 366,000 square feet and
leases the remaining space to another user.
The headquarters and principal executive office of the Company are located
in Philadelphia, Pennsylvania.
The Company is also the lessee of approximately 130,229 square feet of
office and retail space (which was related to former operations) which have
been subleased by the Company, as sublessor, to various sublessees.
Item 3. Legal Proceedings
Effective November 15, 1995, CSS acquired all of the outstanding shares of
Cleo from Gibson Greetings, Inc. ("Gibson") in accordance with a stock purchase
agreement dated October 3, 1995. The purchase price is subject to adjustment
based on the Closing Date Statement of Net Equity of Cleo at November 15, 1995
(the "Statement"). Based upon the Statement prepared by Cleo, CSS has requested
that Gibson consent to the release to CSS of the $12,000,000 of the purchase
price currently held in escrow for the resolution of such purchase price
adjustments and the payment of any indemnification claims. Gibson has indicated
that it disagrees with the Statement and believes that none of the $12,000,000
held in escrow should be released to CSS. The disagreement relates primarily to
the valuation of Cleo's inventory. CSS and Gibson have engaged an independent
public accounting firm to resolve the disputed items on the Statement.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable. 5
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Part II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Principal Market for Common Stock
The Common Stock of the Company is listed for trading on the New York
Stock Exchange. The following table sets forth the high and low sales prices
per share of that stock for each of the calendar quarters during 1997 and 1996.
High Low
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1997
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First Quarter .......... $30 1/8 $25 1/4
Second Quarter ......... 34 3/4 29 1/2
Third Quarter .......... 39 1/4 30 7/16
Fourth Quarter ......... 37 1/2 30 11/16
1996
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First Quarter .......... $22 1/4 $20 1/2
Second Quarter ......... 25 3/4 22 1/8
Third Quarter .......... 23 1/2 22 1/4
Fourth Quarter ......... 26 1/4 23
(b) Holders of Common Stock
At March 3, 1998, there were approximately 2,100 holders of the Company's
Common Stock.
(c) Dividends
The Company has not declared or paid any dividends on its Common Stock for
more than the past three fiscal years. The ability of the Company to pay any
cash dividends on its Common Stock is dependent on the Company's earnings and
profits and cash requirements and is further limited by the terms of the
Company's revolving line of credit. The Company does not anticipate that it
will declare or pay any cash dividends on its Common Stock for the foreseeable
future.
At March 3, 1998, there were no shares of preferred stock outstanding.
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ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
Years Ended December 31,
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1997 1996(a) 1995(a) 1994(b) 1993(b)
------------- ------------- ----------- ----------- -----------
Statement of Operations Data:
Sales ...................................... $ 357,720 $ 323,051 $202,294 $153,440 $147,603
Income from continuing operations before
income taxes ............................. 30,442 27,499 16,733 14,514 15,477
Income from continuing operations .......... 18,871 17,110 10,084 8,817 9,246
Income from discontinued operations, net of
income taxes ............................. 6,348 5,234 5,691 5,324 7,748
Gain on sale of discontinued operations, net
of income taxes .......................... 17,871 -- -- 9,661 --
Net income ................................. 43,090 22,344 15,775 23,802 16,994
Income from continuing operations per
common share --
Basic .................................... 1.74 1.59 .94 .77 .79
Diluted .................................. 1.67 1.55 .93 .76 .78
Balance Sheet Data:
Working capital ............................ 129,245 71,780 66,395 72,075 85,288
Total assets ............................... 342,362 330,122 356,388 180,744 185,018
Short-term debt ............................ 52,524 99,027 129,618 678 708
Long-term debt ............................. 2,580 3,762 16,915 5,656 6,232
Shareholders' equity ....................... $ 221,649 $ 176,752 $153,856 $142,980 $133,952
(a) Restated to reflect the historical results of Rapidforms as a discontinued
operation.
(b) Restated to reflect the historical results of Rapidforms and Ellisco as
discontinued operations.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business Acquisitions and Divestitures
On December 23, 1997, the Company sold its Direct Mail Business Products
Group, composed of Rapidforms and its subsidiaries, for approximately
$84,635,000, resulting in a net gain of $17,521,000 and net cash proceeds of
approximately $60,000,000 after income taxes and the buy out of the minority
interest. Rapidforms designs and sells business forms, business supplies,
in-house retail merchandising products, holiday greeting cards and advertising
specialties to small and medium size businesses primarily through the direct
mailing of catalogs and brochures. On January 8, 1997, Rapidforms sold its
Standard Forms, Ltd. subsidiary for $4,083,000, resulting in a gain of
$350,000. Sales from these discontinued operations were $81,654,000,
$89,028,000 and $86,138,000 in 1997, 1996 and 1995, respectively.
On January 17, 1997, the Company acquired all of the outstanding stock of
Color-Clings, Inc. ("Color-Clings") for $7,875,000 and assumed and repaid
$10,665,000 of outstanding debt. Color-Clings is a designer and marketer of
seasonal and everyday vinyl home decorations sold primarily to mass market
retailers in the United States and Canada. Subsequent to the acquisition, a
substantial portion of the operations of Color-Clings was merged into existing
operations of the Company.
On October 29, 1996, the Company acquired the assets and business of
Ribbon Magic, Inc. ("Ribbon Magic"). In consideration for the purchase of this
business, CSS assumed and paid off $1,581,000 of outstanding debt. Ribbon Magic
manufactured and distributed a line of upscale ribbon and bow products to mass
market retailers in the United States and Canada. Subsequent to the
acquisition, the operations of Ribbon Magic were merged into existing
operations of the Company.
Seasonality
The seasonal nature of CSS' business results in low sales and operating
losses for the first two quarters and high shipment levels and operating
profits for the second half of the year, thereby causing significant
fluctuations in the quarterly results of operations of the Company.
Because of the seasonality and the general industry practice of deferred
payment terms, a material portion of the Company's trade receivables are
collected in December and January, thus enabling the Company to repay the
short-term debt borrowed to fund the inventory and accounts receivable build-up
during the year.
Results of Operations
Consolidated sales from continuing operations for 1997 increased by 11% to
$357,720,000 from $323,051,000. The increase was primarily attributable to
incremental sales provided by the January 17, 1997 acquisition of Color-Clings.
Excluding Color-Clings, sales increased 1% as increased Halloween, Valentine
and ribbon and bow sales were substantially offset by a decrease in sales of
Christmas paper products. The 60% increase in sales in 1996 primarily reflected
incremental sales of Cleo, acquired in November 1995.
As a percentage of sales, cost of sales was 71% in 1997, 72% in 1996 and
71% in 1995. Cost of sales as a percentage of sales decreased to 71% in 1997
from 72% in 1996 due primarily to increased efficiencies at Berwick, reduced
reserve requirements and lower sales of Cleo close-out merchandise, and reduced
workers compensation expense due to better loss experience in recent years.
These improvements were offset, in part, by lower selling prices of certain
Christmas products and increased labor and overhead costs at Cleo caused by
operational problems associated with the implementation of a new, fully
integrated business management system. The increase in cost of sales as a
percentage of sales in 1996 reflected competitive pricing pressures, the
acquisition of lower margin businesses in 1995, the increasing importance of
direct import sales and higher paper and resin costs.
Selling, general and administrative expenses, as a percentage of sales,
was 19% in 1997, 18% in 1996 and 20% in 1995. The increase in 1997 was
primarily due to incrementally higher selling, general and administrative
expenses of Color-Clings, incremental costs associated with the implementation
of a new, fully integrated business management system
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at Cleo, higher sales commissions and higher salaries. The decrease in 1996
compared to 1995 was due to incrementally lower selling, general and
administrative costs of Cleo.
Interest expense, net was $7,178,000 in 1997, $8,035,000 in 1996 and
$3,352,000 in 1995. The decrease in 1997 was primarily due to lower average
borrowings during the year as operating cash generated from the 1996 selling
season more than offset incremental cash expended for the acquisition of
Color-Clings. The increase in 1996 was primarily due to increased borrowings to
fund acquisitions in 1994 and 1995 and to finance additional working capital
requirements.
Rental and other income, net was $2,143,000 in 1997, $1,158,000 in 1996
and $1,970,000 in 1995. The increase in 1997 was primarily due to the sale of a
sublease interest and incremental rental income at Cleo. The decrease in 1996
resulted from the absence of sublease income related to a leasehold interest
which expired in late 1995 and lower gains from sales of marketable securities.
Income before income taxes was $30,442,000, or 9% of sales in 1997,
$27,499,000, or 9% of sales in 1996 and $16,733,000, or 8% of sales in 1995.
Income taxes as a percentage of income before income taxes was 38% in 1997
and 1996 and 40% in 1995. The decrease in 1997 and 1996 was primarily
attributable to lower state tax expense.
Income from continuing operations increased 10% in 1997 to $18,871,000,
and increased 70% in 1996 to $17,110,000. Income from continuing operations per
diluted share rose 8% in 1997 to $1.67 per share and increased 67% in 1996 to
$1.55 per share. The Company adopted SFAS No. 128, "Earnings per Share,"
effective December 15, 1997. As a result, the Company's reported earnings per
share from continuing operations for 1996 and 1995 were restated. The effect of
this accounting change on previously reported earnings per share from
continuing operations data was not material.
Net income to common shareholders of $43,090,000 in 1997 reflected
earnings from discontinued operations of $6,348,000 and a $17,871,000 gain on
the sale of Rapidforms, net of income taxes.
Inflation
The Company attempts to alleviate inflationary material and labor
pressures by increasing selling prices to help offset rising costs (subject to
competitive conditions), increasing productivity, and improving design and
manufacturing techniques. The net effect of inflation, as a percentage of
sales, in 1997 was not material.
Liquidity and Capital Resources
At December 31, 1997, the Company had working capital of $129,245,000 and
shareholders' equity of $221,649,000. The increase in accounts receivable, net
of reserves, from $149,719,000 in 1996 to $165,761,000 in 1997 reflected
increased sales of Color-Clings and later collections of Christmas receivables
compared to 1996. Inventories, net of reserves, increased from $49,139,000 to
$66,270,000 due primarily to the acquisition of Color-Clings, higher finished
goods inventory carryover, and higher raw paper inventories. Property increased
from $37,991,000 in 1996 to $44,868,000 in 1997 due to incremental investments
in information systems and manufacturing equipment. The decrease in current
liabilities reflected the paydown of debt from the proceeds of the sale of
Rapidforms.
The Company relies primarily on cash generated from its operations and
seasonal borrowings to meet its liquidity requirements. Most CSS revenues are
seasonal with approximately 75 percent of sales being Christmas and Halloween
related. As payment for sales of Christmas and Halloween related products is
usually not received until after the respective holiday in accordance with
general industry practice, short-term borrowing needs increase throughout the
second and third quarters, peaking prior to Christmas and dropping thereafter.
Seasonal borrowings are made under a $300,000,000 unsecured revolving credit
facility with fourteen banks and financial institutions. The facility is
available to fund the seasonal borrowing needs and to provide the Company with
a source of capital for general corporate purposes. At December 31, 1997, there
was $51,570,000 outstanding under this facility. For information concerning the
revolving credit facility, see Note 6 of Notes to Consolidated Financial
Statements.
On February 19, 1998, the Company announced that its Board of Directors
authorized the buy back of up to 1,000,000 shares of Common Stock at prices and
pursuant to other terms and conditions that the Company's officers deem
appropriate.
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26
Based on its current operating plan, the Company believes its sources of
available capital are adequate to meet its ongoing cash needs for the
foreseeable future.
Information Systems
The Company has initiated a series of information systems improvements in
the past two years, including the implementation of fully integrated business
management information systems at Cleo and the conversion of certain other
computer systems for compliance with the Year 2000. Costs incurred to modify
existing systems to process transactions regarding the Year 2000 have been and
will be expensed as incurred and are not expected to have a significant impact
on the Company's ongoing results of operations.
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CSS Industries, Inc.
and Subsidiaries
Item 8. Financial Statements
INDEX
Page
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Report of Independent Public Accountants ................................................. 31
Consolidated Balance Sheets -- December 31, 1997 and 1996 ................................ 32 - 33
Consolidated Statements of Operations -- for the years ended December 31, 1997,
1996 and 1995 ........................................................................... 34
Consolidated Statements of Cash Flows -- for the years ended December 31, 1997,
1996 and 1995 ........................................................................... 35
Consolidated Statements of Shareholders' Equity -- for the years ended December 31, 1997,
1996 and 1995 .......................................................................... 36 - 37
Notes to Consolidated Financial Statements ............................................... 38 - 46
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Report of Independent Public Accountants
To the Board of Directors and Shareholders
of CSS Industries, Inc.:
We have audited the accompanying consolidated balance sheets of CSS
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1997 and 1996 and the related consolidated statements of operations, cash flows
and shareholders' equity for each of the three years in the period ended
December 31, 1997. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CSS
Industries, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental schedule
listed in Item 14(a) is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
February 19, 1998
--------
31
CSS Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
--------------------------
1997 1996
ASSETS ------------ -----------
(Restated)
CURRENT ASSETS
Cash and temporary investments ............................ $ 1,365 $ 2,690
Accounts receivable, net of allowance for doubtful accounts
of $2,292 and $2,941 .................................... 165,761 149,719
Inventories ............................................... 66,270 49,139
Deferred income taxes ..................................... 726 727
Other current assets ...................................... 9,909 5,233
Net current assets of discontinued operations ............. -- 11,056
--------- ---------
Total current assets .................................... 244,031 218,564
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land ...................................................... 472 863
Buildings, leasehold interests and improvements ........... 24,454 24,358
Machinery, equipment and other ............................ 55,006 43,026
--------- ---------
79,932 68,247
Less -- Accumulated depreciation and amortization ......... (35,064) (30,256)
--------- ---------
Net property, plant and equipment ....................... 44,868 37,991
--------- ---------
OTHER ASSETS
Intangible assets, net of accumulated amortization of $6,069
and $4,768 ................................................ 38,648 24,244
Deferred income taxes ...................................... 330 1,876
Net long-term assets of discontinued operations ............ -- 32,904
Other ...................................................... 14,485 14,543
--------- ---------
Total other assets ...................................... 53,463 73,567
--------- ---------
$ 342,362 $ 330,122
========= =========
- -------
32
December 31,
--------------------------
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY ------------ -----------
(Restated)
CURRENT LIABILITIES
Notes payable ........................................................... $ 51,570 $ 98,375
Current portion of long-term debt ....................................... 954 652
Accounts payable ........................................................ 14,679 11,155
Accrued payroll and other compensation .................................. 6,447 9,068
Accrued income taxes .................................................... 20,752 5,905
Accrued expenses ........................................................ 20,384 21,629
--------- ---------
Total current liabilities ............................................. 114,786 146,784
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION ................................... 2,580 3,762
--------- ---------
OTHER LONG-TERM OBLIGATIONS .............................................. 3,347 2,824
--------- ---------
COMMITMENTS AND CONTINGENCIES ............................................ -- --
SHAREHOLDERS' EQUITY
Preferred stock, Class 2, $.01 par, authorized 1,000,000 shares ......... -- --
Common stock, $.10 par, authorized 20,000,000 shares, issued
12,366,566 shares and 12,293,090 shares ............................... 1,237 1,229
Additional paid-in capital .............................................. 28,248 28,675
Retained earning ........................................................ 214,748 171,658
Cumulative foreign currency translation adjustment ...................... -- (188)
Common stock in treasury 1,429,977 and 1,523,780 shares, at cost ........ (22,584) (24,622)
--------- ---------
Total shareholders' equity ............................................ 221,649 176,752
--------- ---------
$ 342,362 $ 330,122
========= =========
--------
33
CSS Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Years Ended December 31,
----------------------------------------
1997 1996 1995
----------- ------------ -----------
(Restated) (Restated)
SALES ............................................................ $357,720 $323,051 $202,294
-------- -------- --------
COSTS AND EXPENSES
Cost of sales ................................................... 252,687 230,997 143,049
Selling, general and administrative expenses .................... 69,556 57,678 41,130
Interest expense, net of interest income of $152, $147 and $315 7,178 8,035 3,352
Rental and other income, net .................................... (2,143) (1,158) (1,970)
-------- -------- --------
327,278 295,552 185,561
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES .................................................... 30,442 27,499 16,733
INCOME TAXES ..................................................... 11,571 10,389 6,649
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS ................................ 18,871 17,110 10,084
DISCONTINUED OPERATIONS
Income from discontinued operations, net of income taxes of
$4,673, $4,000 and $4,347 ..................................... 6,348 5,234 5,691
Gain on sale of discontinued operations, net of income taxes of
$13,635 in 1997 ............................................... 17,871 -- --
-------- -------- --------
NET INCOME ....................................................... $ 43,090 $ 22,344 $ 15,775
======== ======== ========
NET INCOME PER COMMON SHARE
Basic
Continuing operations ......................................... $ 1.74 $ 1.59 $ .94
Discontinued operations ....................................... .59 .49 .53
Gain on sale of discontinued operations ....................... 1.64 -- --
-------- -------- --------
$ 3.97 $ 2.08 $ 1.47
======== ======== ========
Diluted
Continuing operations ......................................... 1.67 $ 1.55 $ .93
Discontinued operations ....................................... .56 .48 .52
Gain on sale of discontinued operations ....................... 1.58 -- --
-------- -------- --------
$ 3.81 $ 2.03 $ 1.45
======== ======== ========
See notes to consolidated financial statements.
- -------
34
CSS Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------- -------------
(Restated) (Restated)
Cash flows from operating activities:
Net income ............................................................... $ 43,090 $ 22,344 $ 15,775
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .......................................... 7,665 4,883 4,965
Provision for doubtful accounts ........................................ 903 1,821 1,346
Deferred tax provision (benefit) ....................................... 3,248 (1,215) (2,106)
Loss (gain) on sale of assets .......................................... 95 (114) (33)
(Gain) on sale of marketable securities ................................ -- (251) (1,061)
(Gain) on sale of discontinued operations .............................. (17,871) -- --
Changes in assets and liabilities of discontinued operations ........... (9,689) (1,562) (5,834)
Changes in assets and liabilities, net of effects from purchases and
disposal of businesses:
(Increase) decrease in accounts receivable ............................ (14,902) 14,070 21,394
(Increase) decrease in inventories .................................... (9,388) 19,969 7,625
(Increase) decrease in other assets ................................... (3,464) 271 (13,162)
(Decrease) increase in accounts payable ............................... (6,045) 804 4,404
(Decrease) increase in accrued taxes .................................. (274) 1,918 3,253
(Decrease) in accrued expenses ........................................ (6,007) (6,806) (15,159)
--------- --------- ----------
Total adjustments .................................................... (55,729) 33,788 5,632
--------- --------- ----------
Net cash (used for) provided by operating activities ................. (12,639) 56,132 21,407
--------- --------- ----------
Cash flows from investing activities:
Purchases of marketable securities ....................................... -- -- (2,080)
Proceeds on sale of marketable securities ................................ -- 724 2,668
Purchases of businesses, net of cash received of $976, $50, and $63....... (17,564) (1,581) (142,240)
Purchase of property, plant and equipment ................................ (13,682) (13,449) (4,968)
Proceeds from sale of businesses ......................................... 88,718 -- --
Proceeds from sale of assets ............................................. 2,422 1,732 284
--------- --------- ----------
Net cash provided by (used for) investing activities ................. 59,894 (12,574) (146,336)
--------- --------- ----------
Cash flows from financing activities:
Payments on long-term obligations ........................................ (2,832) (15,390) (2,253)
(Repayments) borrowings on notes payable ................................. (46,805) (29,149) 127,524
Purchase of treasury stock ............................................... (644) (994) (6,133)
Proceeds from exercise of stock options .................................. 1,701 1,473 899
--------- --------- ----------
Net cash (used for) provided by financing activities ................. (48,580) (44,060) 120,037
--------- --------- ----------
Effect of exchange rate changes on cash ................................... -- 274 8
--------- --------- ----------
Net decrease in cash and temporary investments ............................ (1,325) (228) (4,884)
Cash and temporary investments at beginning of year ....................... 2,690 2,918 7,802
--------- --------- ----------
Cash and temporary investments at end of year ............................. $ 1,365 $ 2,690 $ 2,918
========= ========= ==========
See notes to consolidated financial statements.
--------
35
CSS Industries, Inc. and Subsidiaries
Consolidated Statements of
Shareholders' Equity
(In thousands, except share amounts)
Preferred Stock Common Stock Additional
------------------- ----------------------- Paid-in
Shares Amount Shares Amount Capital
-------- -------- ------------ -------- -----------
BALANCE, JANUARY 1, 1995 .......................... -- $ -- 12,096,648 $1,210 $ 26,197
Issuance of common stock upon exercise of
stock options .................................. -- -- 97,200 9 890
Increase in treasury shares ...................... -- -- -- -- --
Unrealized gain on marketable securities ......... -- -- -- -- --
Foreign currency translation adjustment .......... -- -- -- -- --
Net income ....................................... -- -- -- -- --
---- ----- ---------- ------ --------
BALANCE, DECEMBER 31, 1995 ........................ -- -- 12,193,848 1,219 27,087
Issuance of common stock upon exercise of
stock options .................................. -- -- 99,242 10 1,588
Increase in treasury shares ...................... -- -- -- -- --
Unrealized gain on marketable securities ......... -- -- -- -- --
Foreign currency translation adjustment .......... -- -- -- -- --
Net income ....................................... -- -- -- -- --
---- ----- ---------- ------ --------
BALANCE, DECEMBER 31, 1996 ........................ -- -- 12,293,090 1,229 28,675
Issuance of common stock upon exercise of
stock options .................................. -- -- 73,476 8 573
Increase in treasury shares ...................... -- -- -- -- --
Redemption of outstanding options ................ -- -- -- -- (1,000)
Foreign currency translation adjustment .......... -- -- -- -- --
Net income ....................................... -- -- -- -- --
---- ----- ---------- ------ --------
BALANCE, DECEMBER 31, 1997 ........................ -- $ -- 12,366,566 $1,237 $ 28,248
==== ===== ========== ====== ========
- -------
36
Cumulative Common Stock
Unrealized Foreign in Treasury
Gain on Currency -------------------------------
Retained Marketable Translation
Earnings Securities Adjustment Shares Amount Total
- ---------- ------------ ------------- --------------- ------------- -----------
$133,539 $ -- $ (471) (1,101,875) $ (17,495) $142,980
-- -- -- 899
-- -- -- (377,957) (6,133) (6,133)
-- 327 -- -- -- 327
-- -- 8 -- -- 8
15,775 -- -- -- -- 15,775
-------- ------ ------ ---------- --------- --------
149,314 327 (463) (1,479,832) (23,628) 153,856
-- -- -- -- -- 1,598
-- -- -- (43,948) (994) (994)
-- (327) -- -- -- (327)
-- -- 275 -- -- 275
22,344 -- -- -- -- 22,344
-------- ------ ------ ---------- --------- --------
171,658 -- (188) (1,523,780) (24,622) 176,752
-- -- -- 118,642 2,682 3,263
-- -- -- (24,839) (644) (644)
-- -- -- -- -- (1,000)
-- -- 188 -- -- 188
43,090 -- -- -- -- 43,090
-------- ------ ------ ---------- --------- --------
$214,748 $ -- $ -- (1,429,977) $ (22,584) $221,649
======== ====== ====== ========== ========= ========
--------
37
CSS Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of CSS
Industries, Inc. ("Company") and all subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. Gains and
losses on foreign currency transactions are included in the consolidated
statements of income.
Restatement of Prior Years Financial Statements
On December 23, 1997, the Company sold its Direct Mail Business Products
Group, composed of Rapidforms, Inc. and its subsidiaries ("Rapidforms"). The
gain on the sale and the operating results of Rapidforms prior to the sale have
been accounted for as discontinued operations and, accordingly, have been
segregated on the statement of operations. The prior year financial statements
and footnotes have also been restated to conform to the current year
presentation.
Certain other prior-period amounts have been reclassified to conform with
current-year classification.
Nature of Business
CSS is a consumer products company primarily engaged in the manufacture
and sale to mass market retailers of seasonal, social expression products,
including gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper,
paper and vinyl decorations, calendars, classroom exchange Valentines,
decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties
and Easter egg dyes and novelties. Due to the seasonality of the Company's
business, the majority of sales occur in the third and fourth quarters and a
material portion of the Company's trade receivables are due in December and
January of each year. CSS is comprised of The Paper Magic Group, Inc., ("Paper
Magic"), acquired by the Company in August 1988, Berwick Industries, Inc.
("Berwick"), acquired in May 1993, and Cleo Inc. ("Cleo"), acquired in November
1995.
As a result of the sale of Rapidforms on December 23, 1997, CSS no longer
operates in the Direct Mail Business Products industry.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Marketable Securities
In accordance with Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), the Company values certain equity securities at market value
at the end of each accounting period. Unrealized market value gains and losses
are charged to earnings if the securities are traded for short-term profit.
Otherwise, such unrealized gains and losses are charged or credited to a
separate component of shareholders' equity.
- -------
38
Inventories
Substantially all of the Company's inventories are stated at the lower of
first-in, first-out (FIFO) cost or market. The remaining portion of the
inventory is valued at the lower of last-in, first-out cost or market. Had all
inventories been valued at the lower of FIFO cost or market, inventories would
have been greater by $1,651,000 and $1,917,000 at December 31, 1997 and 1996,
respectively. Inventories consisted of the following:
1997 1996
(in thousands) ---------- ----------
Raw material ............. $23,840 $16,371
Work-in-process .......... 9,789 7,970
Finished goods ........... 32,641 24,798
------- -------
$66,270 $49,139
======= =======
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided generally on the straight-line method and are based
on estimated useful lives or terms of leases as follows:
Buildings, leasehold interests and improvements ......... Lease term to 40 years
Machinery, equipment and other .......................... 3 to 11 years
When property is retired or otherwise disposed of, the related cost and
accumulated depreciation and amortization are eliminated from the accounts. Any
gain or loss from the disposition of property, plant and equipment is included
in other income. Maintenance and repairs are expensed as incurred while
improvements are capitalized and depreciated over their estimated useful lives.
Intangible Assets
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of its intangible
assets may warrant revision or that the remaining balance of goodwill may not
be recoverable. Intangible assets, including goodwill, are amortized over
periods not to exceed 40 years.
Income Taxes
The Company follows the liability method of accounting for deferred income
taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the tax rate expected to be in effect when taxes are actually
paid or recovered.
Revenue Recognition
The Company recognizes revenues in accordance with its shipping terms.
Returns and allowances are reserved for based on specific need or historical
experience.
Net Income Per Common Share
Basic net income per common share is based on the weighted average number
of common shares outstanding during the period -- 10,850,000 in 1997,
10,731,000 in 1996, and 10,782,000 in 1995. Average outstanding shares used in
the computation of diluted net income per share include the impact of dilutive
stock options and were 11,292,000 in 1997, 11,007,000 in 1996 and 10,891,000 in
1995.
The Company adopted SFAS No. 128, "Earnings per Share," effective December
15, 1997. As a result, the Company's reported earnings per share from
continuing operations for 1996 and 1995 were restated. The effect of this
accounting change on previously reported earnings per share from continuing
operations data was not material.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
holdings of highly liquid debt instruments with original maturity of less than
three months to be temporary investments.
--------
39
Supplemental Schedule of Cash Flow Information
(In thousands)
1997 1996 1995
---------- ---------- ----------
Cash paid during the year for: Interest .......... $ 7,009 $ 8,595 $ 2,286
======= ======= ========
Income taxes ................................... $12,538 $13,076 $ 7,355
======= ======= ========
Details of acquisitions:
Fair value of assets acquired .................. $35,988 $ 2,430 $191,575
Liabilities assumed ............................ 17,448 799 49,272
------- ------- --------
Cash paid ...................................... 18,540 1,631 142,303
Less cash acquired. ............................ 976 50 63
------- ------- --------
Net cash paid for acquisitions ................... $17,564 $ 1,581 $142,240
======= ======= ========
See Note 2 for supplemental disclosure of non-cash investing activities.
(2) BUSINESS ACQUISITIONS AND DIVESTITURES:
On December 23, 1997, the Company sold Rapidforms and its subsidiaries for
approximately $84,635,000, resulting in a net gain of $17,521,000 and net cash
proceeds of approximately $60,000,000 after income taxes and the buy out of the
minority interest. Rapidforms designs and sells business forms, business
supplies, in-house retail merchandising products, holiday greeting cards and
advertising specialties to small and medium size businesses primarily through
the direct mailing of catalogs and brochures. On January 8, 1997 Rapidforms
sold its Standard Forms, Ltd. subsidiary for $4,083,000, resulting in a gain of
$350,000. Sales from these discontinued operations were $81,654,000,
$89,028,000 and $86,138,000, in 1997, 1996 and 1995, respectively.
On January 17, 1997, the Company acquired all of the outstanding stock of
Color-Clings, Inc. ("Color-Clings") for $7,875,000 and assumed and repaid
$10,665,000 of outstanding debt. Color-Clings is a designer and marketer of
seasonal and everyday vinyl home decorations sold primarily to mass market
retailers in the United States and Canada. The acquisition was accounted for as
a purchase and the excess of cost over fair market value of $15,698,000 was
recorded as goodwill and is being amortized over twenty years. Subsequent to
the acquisition, a substantial portion of the operations of Color-Clings were
merged into existing operations of the Company.
On October 29, 1996, the Company acquired the assets and business of
Ribbon Magic, Inc. ("Ribbon Magic"). In consideration for the purchase of this
business, CSS assumed and paid off $1,581,000 of outstanding debt. Ribbon Magic
manufactured and distributed a line of upscale ribbon and bow products to mass
market retailers in the United States and Canada. Subsequent to the
acquisition, the operations of Ribbon Magic were merged into existing
operations of the Company.
CSS acquired all of the outstanding stock of Cleo, effective November 15,
1995, for approximately $135,000,000. The purchase price included $12,000,000
held in escrow for certain post closing adjustments and indemnification
obligations. The Company and the seller have disagreed on the disbursement of
the escrow and have engaged an independent public accounting firm to resolve
the disputed items. The $12,000,000 has been recorded by the Company as a
receivable in Other Assets. Cleo designs, manufactures and distributes a wide
range of promotional gift wrap and gift wrap accessories to mass market
retailers in the United States and Canada. The acquisition was accounted for as
a purchase and the excess of historical book value over the purchase price was
recorded as a $28,528,000 reduction to property, plant and equipment, an
accrual for restructuring expenses of $10,034,000, and a credit to goodwill of
$7,243,000. Negative goodwill is included in intangible assets in the
accompanying balance sheet and is being amortized over ten years.
- -------
40
The unaudited consolidated results of operations of the Company and Cleo
on a pro forma basis as though the transaction had been consummated at the
beginning of 1995 were as follows:
1995
(in thousands, except per share values) -----------
Sales ............................................ $342,988
Income from continuing operations ................ (57)
Income from continuing operations per common share
Basic ........................................... $ (.01)
Diluted ......................................... $ (.01)
Pro forma adjustments included in the above results reflect (1) increased
inventory obsolescence reserves required for the periods prior to November 15,
1995, (2) reduced rental expense related to a renegotiated lease and to leases
on terminated facilities, (3) reduction of administrative payroll costs and
management fees, and (4) the effect of purchase accounting adjustments on
interest, depreciation, amortization and tax expense.
On June 6, 1995, the Company acquired substantially all of the assets and
the business of Topstone Industries, Inc. ("Topstone") and Illusive Concepts,
Inc. ("Illusive Concepts"). Topstone designs, markets and distributes Halloween
masks, wigs, costumes, accessories and novelties sold to mass merchandisers,
drug chains and party stores. Illusive Concepts designs and markets highly
crafted latex masks, accessories and decorative displays sold primarily to
party and gift shops and limited edition collectibles sold through various
channels. In consideration for the purchase of these businesses, the Company
assumed and paid off $8,740,000 of outstanding debt. The acquisition was
accounted for as a purchase and the excess of cost over fair market value of
$3,598,000 was recorded as goodwill in the accompanying balance sheet and is
being amortized over forty years. Subsequent to the acquisition, a substantial
portion of the operations of these acquisitions were merged into existing
operations of the Company.
(3) STOCK OPTION PLANS:
Under the terms of the CSS Industries, Inc. 1995 Stock Option Plan for
Non-Employee Directors ("1995 Plan"), non-qualified stock options to purchase
up to 300,000 shares of common stock are available for grant to non-employee
directors at exercise prices of not less than fair market value on the date of
grant. Options to purchase 4,000 shares of the Company's common stock are to be
granted automatically to each non-employee director on the last day of November
through the year 2000. Options may be exercised at the rate of 25% per year
commencing one year after the date of grant. At December 31, 1997, options to
acquire 244,000 shares were available under the 1995 Plan.
Under the terms of the 1994 Equity Compensation Plan ("1994 Plan"), the
Human Resources Committee ("Committee") of the Board of Directors may grant
incentive stock options, non-qualified stock options, restricted stock grants,
stock appreciation rights or combinations thereof to officers and other key
employees. Grants under the 1994 Plan may be made through November 2004 and are
exercisable at the discretion of the Committee but in no event greater than ten
years from the date of grant. At December 31, 1997, options to acquire 898,000
shares were available for grant under the 1994 Plan.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation expense for
the Company's stock option plans been determined based upon the fair value at
the grant date for awards under these plans consistent with the methodology
prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's net income and earnings per share would have been reduced in 1997 and
1996 as follows:
1997 1996 1995
(in thousands, except per share values) ------------ ------------ ------------
Income from continuing operations -- as reported .......................... $ 18,871 $ 17,110 $ 10,084
Income from continuing operations -- pro forma ............................ 16,803 16,132 9,760
Basic income per share from continuing operations -- as reported .......... $ 1.74 $ 1.59 $ .94
Basic income per share from continuing operations -- pro forma ............ $ 1.55 $ 1.50 $ .91
Diluted income per share from continuing operations -- as reported ........ $ 1.67 $ 1.55 $ .93
Diluted income per share from continuing operations -- pro forma .......... $ 1.49 $ 1.48 $ .90
--------
41
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
1997 1996 1995
----------- ----------- ----------
Expected dividend yield .................. 0% 0% 0%
Expected stock price volatility .......... 30% 22% 23%
Risk-free interest rate .................. 5.84% 5.50% 5.66%
Expected life of option .................. 4.8 years 4.5 years 4.5 years
Transactions from January 1, 1995 through December 31, 1997, under the
above plans were as follows:
Weighted Weighted
Number Option Price Average Average Life
of Shares per Share Price Remaining
------------- ---------------------- ---------- -------------
Options outstanding at January 1, 1995 ........... 822,500 $9.25 -- $20.00 $ 15.24 3.41 years
Granted ....................................... 255,000 15.38 -- 22.25 17.42
Exercised ..................................... (97,200) 9.25 9.25
Canceled ...................................... (75,300) 9.25 -- 16.25 15.48
------- -------------------- --------
Options outstanding at December 31, 1995 ......... 905,000 13.88 -- 22.25 16.47 3.18 years
Granted ....................................... 478,500 20.63 -- 25.63 21.04
Exercised ..................................... (99,242) 13.88 -- 16.00 14.84
Canceled ...................................... (60,000) 15.81 -- 20.63 17.70
------- -------------------- --------
Options outstanding at December 31, 1996 ......... 1,224,258 14.38 -- 25.63 18.26 2.95 years
Granted ....................................... 549,500 25.88 -- 33.13 26.49
Exercised ..................................... (216,403) 14.38 -- 25.63 16.31
Canceled ...................................... (121,257) 15.06 -- 31.75 24.15
--------- -------------------- --------
Options outstanding at December 31, 1997 ......... 1,436,098 $15.38 -- $33.13 $ 21.31 2.8 years
========= ==================== ======== =============
Options exercisable at December 31, 1997 ......... 453,222 $15.38 -- $24.13 $ 17.75
========= ==================== ========
In 1997 the Company redeemed outstanding stock options granted to the
former owner of a subsidiary. The amount paid of $1,000,000 was charged
directly to additional paid in capital.
(4) PROFIT SHARING PLANS:
The Company maintains profit sharing plans covering substantially all of
their employees as of December 31, 1997. Annual contributions under the plans
are determined by the Board of Directors of the Company or each subsidiary, as
appropriate. Consolidated profit sharing expense for the years ended December
31, 1997, 1996 and 1995 was $2,407,000, $2,164,000 and $1,327,000,
respectively.
- -------
42
(5) FEDERAL INCOME TAXES:
The following table summarizes the provision for U.S. federal, state and
foreign taxes on income:
1997 1996 1995
(in thousands) --------- ---------- -----------
Current:
Federal ............... $ 6,971 $ 10,297 $ 7,803
State . ............... 530 717 684
Foreign ............... 822 590 268
------- -------- --------
8,323 11,604 8,755
------- -------- --------
Deferred:
Federal ............... 3,042 (1,646) (2,419)
State ................. 206 431 313
Foreign ............... -- -- --
------- -------- --------
3,248 (1,215) (2,106)
------- -------- --------
$11,571 $ 10,389 $ 6,649
======= ======== ========
The differences between the statutory and effective federal income tax
rates on income from continuing operations before income taxes were as follows:
1997 1996 1995
---------- ---------- ----------
U.S. federal statutory rate ....................... 35.0% 35.0% 35.0%
State income taxes, less federal benefit .......... 1.6 2.7 3.9
Non-deductible goodwill ........................... 1.1 1.0 1.6
Other ............................................. .3 ( .9) ( .8)
---- ----- -----
38.0 % 37.8% 39.7%
==== ===== =====
Deferred taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities and available tax credit
carryforwards. The following temporary differences gave rise to net deferred
income tax assets as of December 31, 1997 and 1996:
1997 1996
(in thousands) --------- ---------
Deferred income tax assets:
Inventory ........................................... $ 2,326 $ 2,129
Property, plant and equipment ....................... 3,033 3,963
Accrued expenses .................................... 2,655 2,028
Other ............................................... 2,421 3,491
------- -------
10,435 11,611
------- -------
Deferred income tax liabilities:
Accounts receivable ................................. 3,253 3,387
Unremitted earnings of foreign subsidiaries ......... 1,253 627
Other ............................................... 4,873 4,994
------- -------
9,379 9,008
------- -------
Net deferred income tax asset ....................... $ 1,056 $ 2,603
======= =======
(6) LONG-TERM DEBT AND CREDIT ARRANGEMENTS:
Long-term debt consisted of the following:
December 31,
----------------------
1997 1996
(in thousands) ---------- ---------
Mortgages, payable monthly through 2001, interest at rates ranging from
prime plus 1% to 11.5% ................................................ $ 696 $ 941
Industrial Development Revenue Bonds, payable periodically through 2005,
interest at rates ranging from 3% to 9.25% ............................ 617 874
Berwick acquisition debt, payable in 2003, interest at 8% .............. 1,148 2,077
Other .................................................................. 1,073 522
------ ------
3,534 4,414
Less -- current portion ................................................ (954) (652)
------ ------
$2,580 $3,762
====== ======
--------
43
In conjunction with the acquisition of Cleo and the consolidation of other
credit facilities, the Company entered into a $195,000,000 unsecured revolving
credit facility with thirteen banks and financial institutions on November 15,
1995. This facility was amended on July 21, 1997 to provide CSS with an
unsecured revolving credit facility with fourteen banks and financial
institutions. The amended facility allows for borrowings up to $300,000,000,
expires on April 30, 2001 and provides that borrowings are limited during a
consecutive 30 day period during each year of the agreement. The loan agreement
contains provisions to increase or reduce the interest pricing spread over
LIBOR based upon the achievement of certain benchmarks related to the ratio of
earnings to interest expense. As of December 31, 1997, at the Company's option,
interest on the facility accrues at (1) the greater of the prime rate or 1/2%
in excess of the Federal Funds Rate, or (2) LIBOR plus 3/4%. The loan agreement
also contains covenants, the most restrictive of which pertain to net worth;
the ratio of operating cash flow to fixed charges; the ratio of earnings to
interest expense and the ratio of debt to capitalization. The weighted average
interest rate under these loan agreements for 1997 and 1996 was 6.71% and
6.65%, respectively.
On August 13, 1996, CSS entered into an interest rate swap agreement to
reduce the impact of changes in interest rates on its floating rate revolving
credit facility. At December 31, 1997, the Company had a swap agreement with a
total notional amount of $20,000,000. This agreement fixed the interest rate on
$20,000,000 of the borrowings under the revolving credit facility at 7.125%.
The interest rate swap agreement matured on February 13, 1998 and was not
replaced. This agreement involved the exchange of fixed-rate and floating-rate
interest payments periodically over the life of the agreement without the
exchange of the underlying principal amounts. The differential to be paid or
received was accrued as interest rates changed and recognized over the life of
the agreement as an adjustment to interest expense. The fair value of this swap
agreement was not material at December 31, 1997 and 1996, and was not
recognized in the financial statements.
On September 18, 1996, CSS entered into a $20,000,000 term loan with a
bank to provide additional capacity for seasonal requirements and general
corporate purposes. The term loan was repaid on December 23, 1996.
On August 1, 1996, CSS utilized proceeds from its $195,000,000 unsecured
revolving credit facility to redeem the outstanding principal balance of
$12,880,000 related to economic development revenue bonds assumed in connection
with the acquisition of Cleo. Cleo financed the construction of a distribution
facility with the proceeds from these economic development revenue bonds. Cleo
also maintained an Urban Development Action Grant ("UDAG") bearing interest at
8% and payable in quarterly installments. The UDAG was also repaid on October
2, 1996.
The Company and Berwick maintain various notes relating to the financing
of manufacturing facilities which are secured by mortgages on the facilities.
The Company and Berwick also maintain second mortgages on several facilities
financed with Industrial Development Revenue Bonds. The bonds mature between
1998 and 2001, accrue interest at rates ranging from 3% to 9.25% and are
secured by mortgages on the facilities.
In connection with the acquisition of Berwick in 1993, the Company entered
into a term loan with the primary selling shareholder. The original term loan
of $3,000,000 was reduced for indemnification claims and a payment of principal
to $1,148,000 and is payable on May 3, 2003 with interest payable quarterly at
a rate of 8% per year. The note is callable at the option of the noteholder,
subject to then unresolved claims.
Long-term debt matures as follows:
(in thousands)
1998 ........................ $ 954
1999 ........................ 840
2000 ........................ 450
2001 ........................ 142
2002 ........................ 0
Thereafter .................. 1,148
------
Total ....................... $3,534
======
- -------
44
(7) OPERATING LEASES:
The future minimum rental payments associated with all noncancelable lease
obligations are as follows:
(in thousands)
1998 ........................ $ 4,163
1999 ........................ 3,835
2000 ........................ 3,357
2001 ........................ 2,724
2002 ........................ 1,169
Thereafter .................. 1,391
-------
Total ....................... $16,639
=======
Rent expense was $6,144,000, $4,710,000 and $2,376,000 in 1997, 1996 and
1995, respectively.
(8) CONCENTRATION RISKS:
One customer accounted for 21.2%, 17.9% and 13.3% of the Company's sales
in 1997, 1996 and 1995, respectively.
(9) COMMITMENTS AND CONTINGENCIES:
The Company is subject to various lawsuits and claims arising out of the
normal course of business. In the opinion of Company counsel and management the
ultimate liabilities resulting from such lawsuits and claims will not
materially affect the consolidated financial position of the Company.
(10) QUARTERLY FINANCIAL DATA (UNAUDITED):
Quarters
1997 -----------------------------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) ------------ ------------ ------------- -------------
Sales .............................................. $ 24,530 $ 37,742 $ 124,069 $ 171,379
-------- -------- --------- ---------
Gross profit ....................................... 7,764 13,258 38,874 45,137
-------- -------- --------- ---------
Income from continuing operations .................. (5,031) (2,641) 11,388 15,155
Income from discontinued operations, net of
income taxes ...................................... 1,533 1,407 619 2,789
Gain on sale of discontinued operations, net of
income taxes ...................................... 350 -- -- 17,521
-------- -------- --------- ---------
Net income ......................................... $ (3,148) $ (1,234) $ 12,007 $ 35,465
======== ======== ========= =========
Net income per common share:
Basic-
Continuing operations ........................... $ (.46) $ (.24) $ 1.05 $ 1.39
Discontinued operations ......................... .14 .13 .06 .25
Gain on sale of discontinued operations ......... .03 -- -- 1.61
-------- -------- --------- ---------
$ (.29) $ (.11) $ 1.11 $ 3.25
======== ======== ========= =========
Diluted- ..........................................
Continuing operations ........................... $ (.46) $ (.24) $ .99 $ 1.33
Discontinued operations ......................... .14 .13 .05 .24
Gain on sale of discontinued operations ......... .03 -- -- 1.53
-------- -------- --------- ---------
$ (.29) $ (.11) $ 1.04 $ 3.10
======== ======== ========= =========
--------
45
Quarters
1996 -----------------------------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) ------------ ------------ ------------- -------------
Sales .............................................. $ 25,690 $ 26,650 $ 126,723 $ 143,988
-------- -------- --------- ---------
Gross profit ....................................... 7,325 7,319 37,334 40,076
-------- -------- --------- ---------
Income from continuing operations .................. (3,168) (3,091) 10,579 12,790
Income from discontinued operations, net of
income taxes ...................................... 1,083 1,334 562 2,255
Gain on sale of discontinued operations, net of
income taxes ...................................... -- -- -- --
-------- -------- --------- ---------
Net income ......................................... $ (2,085) $ (1,757) $ 11,141 $ 15,045
======== ======== ========= =========
Net income per common share:
Basic-
Continuing operations ........................... $ (.29) $ (.29) $ .99 $ 1.19
Discontinued operations ......................... .10 .13 .05 .21
Gain on sale of discontinued operations ......... -- -- -- --
-------- -------- --------- ---------
$ (.19) $ (.16) $ 1.04 $ 1.40
======== ======== ========= =========
Diluted-
Continuing operations ........................... $ (.29) $ (.29) $ .96 $ 1.16
Discontinued operations ......................... .10 .13 .05 .20
Gain on sale of discontinued operations .........
-- -- -- --
-------- -------- --------- ---------
$ (.19) $ (.16) $ 1.01 $ 1.36
======== ======== ========= =========
The seasonal nature of CSS' business results in low sales and operating
losses for the first two quarters and high shipment levels and operating
profits for the second half of the year, thereby causing significant
fluctuations in the quarterly results of operations of the Company.
- -------
46
Part III
Item 10. Directors and Executive Officers of the Registrant
See "ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS OF CSS" in the Proxy
Statement for the 1998 Annual Meeting of Stockholders of the Company, which
will be incorporated herein by reference.
Item 11. Executive Compensation
See "EXECUTIVE COMPENSATION" in the Proxy Statement for the 1998 Annual
Meeting of Stockholders of the Company, which will be incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See "CSS SECURITY OWNERSHIP" in the Proxy Statement for the 1998 Annual
Meeting of Stockholders of the Company, which will be incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
See "CERTAIN TRANSACTIONS AND SUBSIDIARY MATTERS" in the Proxy Statement
for the 1998 Annual Meeting of Stockholders of the Company, which will be
incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Attached hereto and filed as part of this report are the financial
statement schedules and the exhibits listed below.
1. Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets -- December 31, 1997 and 1996
Consolidated Statements of Operations -- for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows -- for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -- for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
(b) Reports on Form 8-K filed during the last quarter of 1997
None.
(c) Exhibits, Including Those Incorporated by Reference The following is a
list of exhibits filed as part of this annual report on Form 10-K. Where
so indicated by footnote, exhibits which were previously filed are
incorporated by reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in
parentheses.
Articles of Incorporation and By-laws
3.1 Restated Certificate of Incorporation filed December 5, 1990. (1)
(Exhibit 3.1)
3.2 Amendment to Restated Certificate of Incorporation filed May 8,
1992. (2) (Exhibit 3.2)
3.3 Certificate eliminating Class 2, Series A, $1.35 Preferred Stock
filed September 27, 1991. (3) (Exhibit 3.2)
3.4 Certificate eliminating Class 1, Series B, Convertible Preferred
Stock filed January 28, 1993. (2) (Exhibit 3.5)
--------
47
3.5 By-laws of the Company, as amended to date (as last amended November
18, 1996). (8) (Exhibit 3.5)
Material Contracts
10.1 CSS Industries, Inc. 1991 Stock Option Plan for Non-Employee
Directors. (2) (Exhibit 10.1)
10.2 CSS Industries, Inc. 1995 Stock Option Plan for Non-Employee
Directors. (8) (Exhibit 10.2)
10.3 Registration Rights Grant dated January 21, 1993, between the
Company and certain former holders of common stock in Philadelphia
Industries, Inc. (2) (Exhibit 10.2)
*10.4 Loan Agreement among CSS Industries, Inc., the Lending Institutions
listed therein, CoreStates Bank, N.A. as the Administrative Agent,
and Merrill Lynch & Co. as the Syndication Agent, dated as of July
21, 1997.
10.5 Stock Purchase Agreement dated as of October 3, 1995 between the
Company and Gibson Greetings, Inc. (6) (Exhibit 2.1)
10.6 Interest Rate Swap Master Agreement dated as of August 9, 1996
between CoreStates Bank, N.A. and CSS Industries, Inc. (8) (Exhibit
10.8)
Executive Compensation Plans and Arrangements
10.7 CSS Industries, Inc. 1985 Incentive Stock Option Plan, as last
amended in 1991. (3) (Exhibit 10.1)
10.8 CSS Industries, Inc. 1994 Equity Compensation Plan (as last amended
January 23, 1996). (8) (Exhibit 10.10)
10.9 CSS Industries, Inc. Non-Qualified Supplemental Executive Retirement
Agreements, dated March 3, 1993, with certain executive officers of
the Company. (2) (Exhibit 10.15)
10.10 CSS Industries, Inc. Non-Qualified Supplemental Executive Retirement
Plan Guidelines, dated January 25, 1994. (4) (Exhibit 10.14)
10.11 Deferred Compensation Agreement between Jack Farber and CSS
Industries, Inc., restated as of December 8, 1994. (5) (Exhibit
10.8)
10.12 CSS Industries, Inc. Annual Incentive Compensation Arrangement,
Administrative Guidelines, dated March 15, 1993. (2) (Exhibit 10.17)
10.13 The Paper Magic Group, Inc. Management Incentive Bonus Program,
Administrative Guidelines, dated March 15, 1993. (2) (Exhibit 10.28)
10.14 1994 Amendment to The Paper Magic Group, Inc. Management Incentive
Bonus Program, Administrative Guidelines, dated March 2, 1994. (4)
(Exhibit 10.26)
10.15 The Paper Magic Group, Inc. 1994 Incentive Stock Option Plan. (5)
(Exhibit 10.16)
10.16 Berwick Industries, Inc. Incentive Bonus Plan, dated January 1,
1994. (4) (Exhibit 10.27)
10.17 Cleo Inc. Management Incentive Plan, dated March 7, 1996. (7)
(Exhibit 10.23)
10.18 Berwick Industries, Inc. Non-Qualified Supplemental Executive
Retirement Plan, dated November 18, 1996. (8) (Exhibit 10.26)
10.19 The Paper Magic Group, Inc. Non-Qualified Supplemental Executive
Retirement Plan, dated December 5, 1996. (8) (Exhibit 10.27)
10.20 Stock Purchase Agreement between New England Business Service, Inc.
and CSS Industries, Inc. dated December 5, 1997. (9) (Exhibit 2.1)
Subsidiaries
*21. List of Significant Subsidiaries of the Registrant
Footnotes to List of Exhibits
- -----------
* Filed with this Annual Report on Form 10-K.
- -------
48
(1) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1990 and incorporated herein by reference.
(2) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1992 and incorporated herein by reference.
(3) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1991 and incorporated herein by reference.
(4) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1993 and incorporated herein by reference.
(5) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1994.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q (No. 1-2661) for
the fiscal quarter ended September 30, 1995.
(7) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1995 and incorporated herein by reference.
(8) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1996 and incorporated herein by reference.
(9) Filed as an exhibit to the current Report on Form 8-K (No. 1-2661) dated
December 23, 1997.
The Company agrees to provide the SEC upon request with copies of certain
long-term debt obligations of CSS Industries, Inc., Cleo Inc., Berwick
Industries, Inc.
The Company agrees to furnish supplementally a copy of omitted Schedules
and Exhibits, if any, with respect to Exhibits listed above upon request.
Stockholders who have been furnished a copy of this Report may obtain
copies of any Exhibit listed above on payment of $.50 per page for reproduction
and mailing charges by writing to the Secretary, CSS Industries, Inc., 1845
Walnut Street, Philadelphia, Pennsylvania 19103.
--------
49
CSS Industries, Inc. and Subsidiaries
Schedule II
Valuation and Qualifying Accounts
(In thousands)
Column A Column B Column C Column D Column E
- ------------------------------------------------- ----------- ---------- --------------- ------------
Additions
----------------------------
Balance Charged
at to costs Charged Balance
Beginning and to Other at End of
of Period Expenses Accounts Deductions Period
----------- ---------- --------------- ------------ ----------
Year ended December 31, 1997
Doubtful accounts receivable-customers ......... $2,941 $ 903 $ 280(a) $1,832 $2,292
Year ended December 31, 1996
Doubtful accounts receivable-customers ......... $3,864 $1,821 $ -- $2,744 $2,941
Year ended December 31, 1995
Doubtful accounts receivable-customers ......... $1,045 $1,346 $ 2,036(b) $ 563 $3,864
Notes: (a) Balance at acquisition of Color-Clings
(b) Balance at acquisition of Cleo, Topstone and Illusive Concepts.
- -------
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on behalf of the undersigned hereunto duly authorized.
CSS INDUSTRIES, INC.
---------------------------------------------------------
Registrant
By /s/ Jack Farber
------------------------------------------------------
Jack Farber, Chairman of the Board, President and Chief
Executive Officer (principal executive officer)
Dated: March 5, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities on the date indicated.
Dated: March 5, 1998 /s/ Jack Farber
-------------------------------------------------------
Jack Farber, Chairman of the Board, President and Chief
Executive Officer (principal executive officer and a
director)
Dated: March 5, 1998 /s/ James G. Baxter
-------------------------------------------------------
James G. Baxter, Executive Vice President and Chief
Financial Officer (principal financial and accounting
officer and a director)
Dated: March 5, 1998 /s/ Willard M. Bright
-------------------------------------------------------
Willard M. Bright, Director
Dated: March 5, 1998 /s/ James H. Bromley
-------------------------------------------------------
James H. Bromley, Director
Dated: March 5, 1998 /s/ John R. Bunting, Jr.
-------------------------------------------------------
John R. Bunting, Jr., Director
Dated: March 5, 1998 /s/ Stephen V. Dubin
-------------------------------------------------------
Stephen V. Dubin, Director
Dated: March 5, 1998 /s/ Richard G. Gilmore
-------------------------------------------------------
Richard G. Gilmore, Director
Dated: March 5, 1998 /s/ Leonard E. Grossman
-------------------------------------------------------
Leonard E. Grossman, Director
Dated: March 5, 1998 /s/ James E. Ksansnak
-------------------------------------------------------
James E. Ksansnak, Director
Dated: March 5, 1998 /s/ Michael L. Sanyour
-------------------------------------------------------
Michael L. Sanyour, Director
Dated: March 5, 1998 /s/ William C. Warren
-------------------------------------------------------
William C. Warren, Director
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51
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52