FOR IMMEDIATE RELEASE
May 22, 2007

CSS INDUSTRIES, INC. REPORTS SALES AND EARNINGS FOR THE YEAR AND QUARTER ENDED MARCH 31, 2007

    CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the year and quarter ended March 31, 2007. Sales for fiscal year 2007 increased 1% to $530,686,000 from $525,494,000 in fiscal 2006, while net income increased 9% to $23,889,000, or $2.19 per diluted share, from $21,841,000, or $2.00 per diluted share in 2006. Sales for the fourth quarter of fiscal 2007 decreased 13% to $45,258,000 from $52,161,000 in fiscal 2006. The net loss decreased 27% in the fourth quarter to $5,597,000, or $(.52) per diluted share, from $7,667,000, or $(.73) per diluted share, in fiscal 2006.

    As previously announced, the Company implemented a restructuring plan during the year to combine the operations of its Cleo Inc and Berwick Offray LLC subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business. In connection with this restructuring program, the Company incurred non-recurring costs of $2,523,000, net of tax, during the year ended March 31, 2007 (of which $860,000, net of tax, was recorded in the fourth quarter), a portion of which is classified as restructuring expenses on the Company’s Consolidated Statements of Operations. Excluding costs relating to the restructuring program in fiscal 2007 and normalizing stock option expense in the prior fiscal year for the Company’s adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R, (a) earnings per share on a fully diluted basis increased 33% to $2.42 compared to prior year earnings per diluted share of $1.82, and (b) the net loss per share for the quarter ended March 31, 2007 decreased to $(.44) per diluted share, from $(.78) per diluted share, in the prior fiscal year. The Company’s highly seasonal orientation results in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

    The sales increase of 1% in fiscal 2007 was primarily due to higher sales of Christmas gift wrap and boxed greeting cards, partially offset by lower sales of tissue, gift bags and ribbons and bows. The increase in net income for the year ended March 31, 2007 was primarily attributable to improved margins in the gift wrap, gift bag and tissue product lines, the impact of higher sales of gift wrap and boxed greeting cards and lower interest expense. These improvements were partially offset by the non-recurring costs related to the restructuring program, incremental costs related to the Company’s adoption of SFAS No. 123R, and increased selling, general and administrative expenses, primarily related to increased incentive compensation expense. The decrease in sales for the quarter ended March 31, 2007 was primarily the result of lower sales of boxed greeting cards and ribbons and bows. The decrease in the net loss for the quarter ended March 31, 2007 was primarily due to higher margins achieved on tissue, gift wrap and gift bag product lines, partially offset by the non-recurring costs related to the restructuring program, incremental costs related to the Company’s adoption of SFAS No. 123R, and increased incentive compensation expense.

    Net cash provided by operating activities increased to $55,347,000 in fiscal 2007 from $27,600,000 in fiscal 2006. This favorable performance was primarily driven by improved working capital management, particularly related to the management of inventory. Inventories were significantly reduced as a result of increased outsourcing of manufacturing activities and improved focus on production planning disciplines.

    “We are pleased with the 33% improvement in diluted earnings per share for the full year, after adjusting for the effects of the restructuring program in fiscal 2007 and adjusting for the proforma impact of stock option expense in fiscal 2006. Substantial improvement in the management and profitability of our gift wrap and tissue product lines drove these favorable results. In addition, early indications show that the restructuring plan announced last November is on track to provide the benefits expected,” said Christopher J. Munyan, President and CEO.

    “For fiscal 2008, we expect earnings to be in the range of $2.45-$2.60 per diluted share,” said Munyan. “Although our estimate for fiscal 2008 includes the expected benefits from our recent restructuring program, we also currently expect a decline in sales volume in fiscal 2008 primarily related to certain warehouse clubs. Although management is disappointed with the currently expected sales volume decline, we are focusing resources on developing and implementing organic sales growth initiatives and on expanding into new product categories.”

    This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements relating to expected future earnings and financial performance. Forward-looking statements are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management as to future events and financial performance with respect to the Company’s operations. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they were made. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, general market conditions, increased competition, increased operating and product costs, including labor-related and energy costs and costs related to the imposition or retrospective application of duties on imported products, currency risks and other risks associated with international markets, risks associated with the combination of the operations of the Company’s Cleo and Berwick Offray subsidiaries, including the risk that the restructuring related costs may exceed the expected amounts, the risk that customers may become insolvent, costs of compliance with governmental regulations and government investigations, liability associated with non-compliance with governmental regulations, including regulations pertaining to the environment, Federal and state employment laws, and import and export controls and customs laws, and other factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006 and elsewhere in the Company’s SEC filings. As a result of these factors, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

    CSS’ consolidated results of operations for the three months and years ended March 31, 2007 and 2006 and condensed consolidated balance sheets and cash flows as of and for the years ended March 31, 2007 and 2006 follow:

CSS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) Mar 31, 2007 (Unaudited) Mar 31, 2006 ASSETS CURRENT ASSETS Cash and cash equivalents $ 100,091 $ 57,656 Accounts receivable, net 37,169 35,582 Inventories 82,138 103,770 Deferred income taxes 8,645 7,898 Assets held for sale 2,564 - Other current assets 13,665 18,906 Total current assets 244,272 223,812 PROPERTY, PLANT AND EQUIPMENT, NET 58,897 70,868 OTHER ASSETS Intangible assets, net 35,280 35,374 Other 4,621 4,095 Total other assets 39,901 39,469 Total assets $343,070 $334,149 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ — $ — Current portion of long-term debt 10,195 10,169 Other current liabilities 45,768 52,161 Total current liabilities 55,963 62,330 LONG-TERM DEBT 20,392 30,518 OTHER LONG-TERM OBLIGATIONS 3,221 3,533 DEFERRED INCOME TAXES 2,384 5,258 STOCKHOLDERS' EQUITY 261,110 232,510 Total liabilities and stockholders' equity $343,070 $334,149

 

CSS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)	For the Years Ended  March 31,
	2007	2006
	(Unaudited)
Cash flows from operating activities:
Net income	$23,889	$21,841
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization	14,335	14,499
Deferred tax benefit	(3,621)	(1,512)
Compensation expense related to stock options	2,825	172
Changes in assets and liabilities, net	17,889	(7,952)
Other	30	552
Net cash provided by operating activities	55,347	27,600
Cash flows from investing activities:
Purchase of property, plant and equipment	(5,289)	(9,515)
Proceeds from sale of assets	732	361
Net cash used for investing activities	(4,557)	(9,154)
Cash flows from financing activities:
Payments on long-term obligations	(10,241)	(10,484)
Borrowings on notes payable	172,360	243,845
Payments on notes payable	(172,360)	(243,845)
Dividends paid	(5,100)	(5,040)
Purchase of treasury stock	(323)	(7,167)
Proceeds from exercise of stock options	5,486	4,568
Tax benefit realized for stock options exercised	1,822	-
Net cash used for financing activities	(8,356)	(18,123)
Effect of exchange rate changes on cash and cash equivalents	1	-
Net increase in cash and cash equivalents	42,435	323
Cash and cash equivalents at beginning of period	57,656	57,333
Cash and cash equivalents at end of period	$100,091	$57,656

    CSS Industries, Inc. Reconciliation of Certain Non-GAAP Measures (Unaudited) (In thousands, except per share amounts)

    Management believes that presentation of results of operations adjusted for the affects of non-recurring costs related to a restructuring program in fiscal 2007 and the proforma impact of recognizing stock option expense as if the Company had adopted SFAS No. 123R in fiscal 2006, provides useful information to investors because it enhances comparability between the current year and prior year reporting periods.

	Year Ended March 31, 2007
	Income Before Income Taxes	Net Income	Diluted Earnings Per Share
As Reported	$36,804	$23,889	$2.19
- Restructuring expenses	2,327	1,489	.14
- Inventory write-down due to facility closure	660	423	.04
- Other incremental costs related to restructuring plan	954	611	.06
Non-GAAP Measurement	$40,745	$26,412	$2.42

	Year Ended March 31, 2006
	Income Before Income Taxes	Net Income	Diluted Earnings Per Share
As Reported	$32,716	$21,841	$2.00
- Restructuring expenses	37	25	-
- Expensing stock options – SFAS No. 123R adopted 4/1/06	(2,722)	(2,318)	(.18)
Non-GAAP Measurement	$30,031	$19,548	$1.82

	Three Months Ended March 31, 2007
	Income Before Income Taxes	Net Income	Diluted Earnings Per Share
As Reported	$(9,896)	$(5,597)	$(.52)
- Restructuring expenses	582	387	.04
- Inventory write-down due              to facility closure	90	63	.01
- Other incremental costs related to restructuring plan	635	410	.04
Non-GAAP Measurement	$(8,589)	$(4,737)	$(.44)

	Three Months Ended March 31, 2006
	Income Before Income Taxes	Net Income	Diluted Earnings Per Share
As Reported	$(13,104)	$(7,667)	$(.73)
- Expensing stock options – SFAS No. 123R adopted 4/1/06	(642)	(519)	(.05)
Non-GAAP Measurement	$(13,746)	$(8,186)	$(.78)

Diluted earnings per share for the year and three months ended March 31, 2007 does not add due to rounding.

FOR FURTHER INFORMATION CONTACT:
Vincent A. Paccapaniccia
Chief Financial Officer
tele: (215) 569-9900