CSS Industries, Inc. Reports Sales and Earnings for the Nine Months and Quarter Ended December 31, 2006

Business Wire, Jan 25, 2007

PHILADELPHIA -- CSS Industries, Inc. (NYSE:CSS) announced today the results of operations for the nine months and third quarter ended December 31, 2006. For the nine months ended December 31, 2006, sales increased by 3% to $485,428,000 from $473,333,000 in 2005. Net income of $29,486,000, or $2.71 per diluted share, was relatively flat compared to prior year net income of $29,508,000, or $2.69 per diluted share. For the quarter ended December 31, 2006, sales increased by 5% to $264,065,000 from $251,796,000 in the prior year, while net income decreased 3% to $23,290,000, or $2.13 per diluted share, compared to prior year net income of $23,924,000, or $2.18 per diluted share. As previously announced, the Company implemented a restructuring plan during the quarter 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 plan, the Company incurred incremental, non-recurring costs of $1,663,000, net of tax, during the third quarter and nine months ended December 31, 2006, a portion of which is classified as restructuring expenses on the Company's Consolidated Statement of Operations. Excluding costs relating to the restructuring plan and incremental stock option expense related to the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 123R, net income increased 11% to $32,780,000, or $3.02 per diluted share, and 7% to $25,503,000, or $2.33 per diluted share, for the nine months and quarter ended December 31, 2006, respectively. 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 increase in sales for the nine months ended December 31, 2006 was primarily due to higher sales of Christmas gift wrap and boxed greeting cards, partially offset by lower sales of all-occasion cards, tissue, gift bags and ribbons and bows. The increase in net income for the nine months ended December 31, 2006, excluding the incremental, non-recurring costs related to the restructuring plan and the incremental costs related to the Company's adoption of SFAS No. 123R, was primarily attributable to improved margins on gift wrap, gift bag and tissue product lines and the impact of higher sales of Christmas boxed greeting cards, partially offset by increased selling, general and administrative expenses, primarily related to increased incentive compensation expense. The increase in sales for the quarter ended December 31, 2006 was primarily the result of increased sales of gift wrap, Christmas boxed greeting cards and ribbons and bows, partially offset by lower sales of all-occasion cards, tissue, gift tags and gift bags. The increase in net income for the quarter ended December 31, 2006, excluding the incremental, non-recurring costs related to the restructuring plan and the incremental costs related to the Company's adoption of SFAS No. 123R, was primarily due to higher margins achieved on tissue, gift wrap and gift bag product lines, partially offset by increased incentive compensation expense.

"We are pleased with the continued improvement in earnings during the quarter and nine months ended December 31, 2006 which improved 7% and 11%, respectively, over the prior year, absent the charges related to the restructuring plan and the new rules regarding the expensing of stock options. This improvement is largely a result of our continued focus on our gift wrap and tissue product lines," said Christopher J. Munyan, President and CEO. "As previously announced, we anticipate that the restructuring plan will reduce earnings per diluted share by approximately $.28 for the full fiscal year. Exclusive of these restructuring costs, we continue to expect earnings to be in line with our previous guidance of $2.40 - $2.55 per diluted share this fiscal year, although probably towards the lower end of such range."

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, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties, educational products and Easter egg dyes and novelties.

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 relating 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.