CSS » Topics » Results of Operations

These excerpts taken from the CSS 10-K filed Jun 2, 2009.
Results of Operations
 
Fiscal 2009 Compared to Fiscal 2008
 
Consolidated net sales for fiscal 2009 decreased 3% to $482,424,000 from $498,253,000 in fiscal 2008. Excluding net sales of businesses acquired over the last two fiscal years, sales declined 12%. Our fiscal 2009 Christmas business was negatively impacted by reduced sales of Christmas gift wrap, gift bags and decorative tissue paper and generally reduced purchases by many of our retailer customers in response to poor retail sales during the calendar 2007 Christmas (fiscal 2008) selling season. The weakening economy in the second half of fiscal 2009 further impacted our sales of all occasion and Christmas products, as some of our customers canceled or delayed purchases and, in certain cases, returned products in the face of the poor retail environment.


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Table of Contents

Cost of sales, as a percentage of net sales, increased to 74% in fiscal 2009 from 72% in fiscal 2008. The increase in the percentage of cost of goods sold to net sales is primarily due to increased material costs and increased fixed manufacturing overhead costs per unit due to reduced production volume.
 
Selling, general and administrative (“SG&A”) expenses of $96,723,000 in fiscal 2009 remained relatively unchanged from $96,703,000 in fiscal 2008. SG&A expenses, as a percentage of net sales, increased to 20% in fiscal 2009 from 19% in fiscal 2008. The increase, as a percentage of net sales, is primarily due to a full year of C.R. Gibson activity and the lower sales base in fiscal 2009. C.R. Gibson, acquired on December 3, 2007, maintains a higher level of SG&A expenses, relative to its sales, than our other businesses. Partially offsetting this increase was lower incentive compensation expense compared to the prior year.
 
Restructuring expenses were $1,138,000 in fiscal 2009 and $1,717,000 in fiscal 2008. The decline in restructuring expenses represents lower costs recorded in fiscal 2009 compared to fiscal 2008 related to the closure of two production facilities and a distribution center and a net gain of $761,000 recorded in fiscal 2009 related to the sale of two buildings that were previously classified as available for sale. Partially offsetting this decline were severance costs recorded in fiscal 2009 associated with permanent workforce reductions and the consolidation of certain back office operations.
 
Interest expense, net increased to $2,551,000 in fiscal 2009 from $974,000 in fiscal 2008. The increase in interest expense, net was primarily due to higher average borrowing levels primarily as a result of acquisitions and stock repurchases during fiscal 2009 compared to the prior year. The impact of higher average borrowings was partially offset by a lower average interest rate compared to the prior year.
 
Income before income taxes was $25,890,000, or 5% of sales, in fiscal 2009 and $38,833,000, or 8% of sales, in fiscal 2008.
 
Income taxes, as a percentage of income before taxes, were 34% in fiscal 2009 and 35% in fiscal 2008. The decrease in fiscal 2009 was primarily due to the reduction of tax reserves, partially offset by a reduction in tax exempt interest income and higher state taxes.
 
Net income for the year ended March 31, 2009 decreased 33% to $16,986,000 from $25,358,000 in fiscal 2008. The decrease in net income was primarily attributable to reduced sales volume, higher material costs, plant inefficiencies resulting from lower production volume and higher interest expense, partially offset by lower incentive compensation.
 
Fiscal 2008 Compared to Fiscal 2007
 
Consolidated net sales for fiscal 2008 decreased 6% to $498,253,000 from $530,686,000 in fiscal 2007. The decrease in net sales was primarily due to lower sales of products sold to warehouse clubs and lower sales of Christmas gift wrap, decorative tissue paper and gift bags and educational products. These sales reductions were partially offset by C.R. Gibson sales since its acquisition on December 3, 2007. Excluding sales from C.R. Gibson, net sales declined 9% from prior year.
 
Cost of sales, as a percentage of net sales, decreased to 72% in fiscal 2008 from 74% in fiscal 2007. The decrease in cost of sales was primarily due to improved efficiencies in the gift wrap, gift bag and tissue product lines resulting from the restructuring program announced in November 2006.
 
SG&A expenses, as a percentage of net sales, increased to 19% in fiscal 2008 from 18% in fiscal 2007. The increase in SG&A expenses, as a percentage of net sales, is primarily attributable to the mix of expenses compared to the prior year resulting from the acquisition of the C.R. Gibson business on December 3, 2007.
 
Restructuring expenses were $1,717,000 in fiscal 2008 and $2,327,000 in fiscal 2007. The decrease in restructuring expenses was due to the absence of costs related to a restructuring program in the prior year to combine the operations of the Cleo and Berwick Offray subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business which was partially offset by costs related to a restructuring program announced on January 4, 2008 to close the Company’s two production facilities in Elysburg, Pennsylvania and a distribution center in Troy, Pennsylvania. See Note 4 to the consolidated financial statements for further discussion.


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Table of Contents

Interest expense, net decreased to $974,000 in fiscal 2008 from $2,285,000 in fiscal 2007. The decrease in interest expense, net was primarily due to lower average borrowing levels during fiscal 2008 compared to the prior year as a result of cash generated from operations, offset by the impact of cash utilized to purchase the C.R. Gibson business and to repurchase the Company’s common stock and the impact of a lower rate of return on invested cash resulting from the Company’s investment in a tax exempt municipal fund in the current year.
 
Income before income taxes was $38,833,000, or 8% of net sales, in fiscal 2008 and $36,804,000, or 7% of net sales, in fiscal 2007.
 
Income taxes, as a percentage of income before taxes, were 35% in fiscal 2008 and fiscal 2007. Reductions in the Company’s effective tax rate from the Company’s investment during fiscal 2008 in a federal tax exempt municipal fund and from a decrease in the Company’s state effective tax rate were substantially offset by the non-recurrence of tax benefits recorded in fiscal 2007 related to decreases in foreign and state valuation allowances and state tax reserves.
 
Net income for the year ended March 31, 2008 increased 6% to $25,358,000 from $23,889,000 in fiscal 2007. The increase in net income was primarily attributable to current fiscal year cost savings and lower implementation expense associated with restructuring plans implemented in November 2006 and January 2008, incremental earnings contributed by the recently acquired C.R. Gibson business and reduced interest expense, net of the impact of reduced sales volume.
 
Results of Operations
 
Fiscal 2009 Compared to Fiscal 2008
 
Consolidated net sales for fiscal 2009 decreased 3% to $482,424,000 from $498,253,000 in fiscal 2008. Excluding net sales of businesses acquired over the last two fiscal years, sales declined 12%. Our fiscal 2009 Christmas business was negatively impacted by reduced sales of Christmas gift wrap, gift bags and decorative tissue paper and generally reduced purchases by many of our retailer customers in response to poor retail sales during the calendar 2007 Christmas (fiscal 2008) selling season. The weakening economy in the second half of fiscal 2009 further impacted our sales of all occasion and Christmas products, as some of our customers canceled or delayed purchases and, in certain cases, returned products in the face of the poor retail environment.


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Table of Contents

Cost of sales, as a percentage of net sales, increased to 74% in fiscal 2009 from 72% in fiscal 2008. The increase in the percentage of cost of goods sold to net sales is primarily due to increased material costs and increased fixed manufacturing overhead costs per unit due to reduced production volume.
 
Selling, general and administrative (“SG&A”) expenses of $96,723,000 in fiscal 2009 remained relatively unchanged from $96,703,000 in fiscal 2008. SG&A expenses, as a percentage of net sales, increased to 20% in fiscal 2009 from 19% in fiscal 2008. The increase, as a percentage of net sales, is primarily due to a full year of C.R. Gibson activity and the lower sales base in fiscal 2009. C.R. Gibson, acquired on December 3, 2007, maintains a higher level of SG&A expenses, relative to its sales, than our other businesses. Partially offsetting this increase was lower incentive compensation expense compared to the prior year.
 
Restructuring expenses were $1,138,000 in fiscal 2009 and $1,717,000 in fiscal 2008. The decline in restructuring expenses represents lower costs recorded in fiscal 2009 compared to fiscal 2008 related to the closure of two production facilities and a distribution center and a net gain of $761,000 recorded in fiscal 2009 related to the sale of two buildings that were previously classified as available for sale. Partially offsetting this decline were severance costs recorded in fiscal 2009 associated with permanent workforce reductions and the consolidation of certain back office operations.
 
Interest expense, net increased to $2,551,000 in fiscal 2009 from $974,000 in fiscal 2008. The increase in interest expense, net was primarily due to higher average borrowing levels primarily as a result of acquisitions and stock repurchases during fiscal 2009 compared to the prior year. The impact of higher average borrowings was partially offset by a lower average interest rate compared to the prior year.
 
Income before income taxes was $25,890,000, or 5% of sales, in fiscal 2009 and $38,833,000, or 8% of sales, in fiscal 2008.
 
Income taxes, as a percentage of income before taxes, were 34% in fiscal 2009 and 35% in fiscal 2008. The decrease in fiscal 2009 was primarily due to the reduction of tax reserves, partially offset by a reduction in tax exempt interest income and higher state taxes.
 
Net income for the year ended March 31, 2009 decreased 33% to $16,986,000 from $25,358,000 in fiscal 2008. The decrease in net income was primarily attributable to reduced sales volume, higher material costs, plant inefficiencies resulting from lower production volume and higher interest expense, partially offset by lower incentive compensation.
 
Fiscal 2008 Compared to Fiscal 2007
 
Consolidated net sales for fiscal 2008 decreased 6% to $498,253,000 from $530,686,000 in fiscal 2007. The decrease in net sales was primarily due to lower sales of products sold to warehouse clubs and lower sales of Christmas gift wrap, decorative tissue paper and gift bags and educational products. These sales reductions were partially offset by C.R. Gibson sales since its acquisition on December 3, 2007. Excluding sales from C.R. Gibson, net sales declined 9% from prior year.
 
Cost of sales, as a percentage of net sales, decreased to 72% in fiscal 2008 from 74% in fiscal 2007. The decrease in cost of sales was primarily due to improved efficiencies in the gift wrap, gift bag and tissue product lines resulting from the restructuring program announced in November 2006.
 
SG&A expenses, as a percentage of net sales, increased to 19% in fiscal 2008 from 18% in fiscal 2007. The increase in SG&A expenses, as a percentage of net sales, is primarily attributable to the mix of expenses compared to the prior year resulting from the acquisition of the C.R. Gibson business on December 3, 2007.
 
Restructuring expenses were $1,717,000 in fiscal 2008 and $2,327,000 in fiscal 2007. The decrease in restructuring expenses was due to the absence of costs related to a restructuring program in the prior year to combine the operations of the Cleo and Berwick Offray subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business which was partially offset by costs related to a restructuring program announced on January 4, 2008 to close the Company’s two production facilities in Elysburg, Pennsylvania and a distribution center in Troy, Pennsylvania. See Note 4 to the consolidated financial statements for further discussion.


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Table of Contents

Interest expense, net decreased to $974,000 in fiscal 2008 from $2,285,000 in fiscal 2007. The decrease in interest expense, net was primarily due to lower average borrowing levels during fiscal 2008 compared to the prior year as a result of cash generated from operations, offset by the impact of cash utilized to purchase the C.R. Gibson business and to repurchase the Company’s common stock and the impact of a lower rate of return on invested cash resulting from the Company’s investment in a tax exempt municipal fund in the current year.
 
Income before income taxes was $38,833,000, or 8% of net sales, in fiscal 2008 and $36,804,000, or 7% of net sales, in fiscal 2007.
 
Income taxes, as a percentage of income before taxes, were 35% in fiscal 2008 and fiscal 2007. Reductions in the Company’s effective tax rate from the Company’s investment during fiscal 2008 in a federal tax exempt municipal fund and from a decrease in the Company’s state effective tax rate were substantially offset by the non-recurrence of tax benefits recorded in fiscal 2007 related to decreases in foreign and state valuation allowances and state tax reserves.
 
Net income for the year ended March 31, 2008 increased 6% to $25,358,000 from $23,889,000 in fiscal 2007. The increase in net income was primarily attributable to current fiscal year cost savings and lower implementation expense associated with restructuring plans implemented in November 2006 and January 2008, incremental earnings contributed by the recently acquired C.R. Gibson business and reduced interest expense, net of the impact of reduced sales volume.
 
Results
of Operations



 




Fiscal
2009 Compared to Fiscal 2008



 



Consolidated net sales for fiscal 2009 decreased 3% to
$482,424,000 from $498,253,000 in fiscal 2008. Excluding net
sales of businesses acquired over the last two fiscal years,
sales declined 12%. Our fiscal 2009 Christmas business was
negatively impacted by reduced sales of Christmas gift wrap,
gift bags and decorative tissue paper and generally reduced
purchases by many of our retailer customers in response to poor
retail sales during the calendar 2007 Christmas (fiscal
2008) selling season. The weakening economy in the second
half of fiscal 2009 further impacted our sales of all occasion
and Christmas products, as some of our customers canceled or
delayed purchases and, in certain cases, returned products in
the face of the poor retail environment.





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Table of Contents






Cost of sales, as a percentage of net sales, increased to 74% in
fiscal 2009 from 72% in fiscal 2008. The increase in the
percentage of cost of goods sold to net sales is primarily due
to increased material costs and increased fixed manufacturing
overhead costs per unit due to reduced production volume.


 



Selling, general and administrative (“SG&A”)
expenses of $96,723,000 in fiscal 2009 remained relatively
unchanged from $96,703,000 in fiscal 2008. SG&A expenses,
as a percentage of net sales, increased to 20% in fiscal 2009
from 19% in fiscal 2008. The increase, as a percentage of net
sales, is primarily due to a full year of C.R. Gibson activity
and the lower sales base in fiscal 2009. C.R. Gibson, acquired
on December 3, 2007, maintains a higher level of SG&A
expenses, relative to its sales, than our other businesses.
Partially offsetting this increase was lower incentive
compensation expense compared to the prior year.


 



Restructuring expenses were $1,138,000 in fiscal 2009 and
$1,717,000 in fiscal 2008. The decline in restructuring expenses
represents lower costs recorded in fiscal 2009 compared to
fiscal 2008 related to the closure of two production facilities
and a distribution center and a net gain of $761,000 recorded in
fiscal 2009 related to the sale of two buildings that were
previously classified as available for sale. Partially
offsetting this decline were severance costs recorded in fiscal
2009 associated with permanent workforce reductions and the
consolidation of certain back office operations.


 



Interest expense, net increased to $2,551,000 in fiscal 2009
from $974,000 in fiscal 2008. The increase in interest expense,
net was primarily due to higher average borrowing levels
primarily as a result of acquisitions and stock repurchases
during fiscal 2009 compared to the prior year. The impact of
higher average borrowings was partially offset by a lower
average interest rate compared to the prior year.


 



Income before income taxes was $25,890,000, or 5% of sales, in
fiscal 2009 and $38,833,000, or 8% of sales, in fiscal 2008.


 



Income taxes, as a percentage of income before taxes, were 34%
in fiscal 2009 and 35% in fiscal 2008. The decrease in fiscal
2009 was primarily due to the reduction of tax reserves,
partially offset by a reduction in tax exempt interest income
and higher state taxes.


 



Net income for the year ended March 31, 2009 decreased 33%
to $16,986,000 from $25,358,000 in fiscal 2008. The decrease in
net income was primarily attributable to reduced sales volume,
higher material costs, plant inefficiencies resulting from lower
production volume and higher interest expense, partially offset
by lower incentive compensation.


 




Fiscal
2008 Compared to Fiscal 2007



 



Consolidated net sales for fiscal 2008 decreased 6% to
$498,253,000 from $530,686,000 in fiscal 2007. The decrease in
net sales was primarily due to lower sales of products sold to
warehouse clubs and lower sales of Christmas gift wrap,
decorative tissue paper and gift bags and educational products.
These sales reductions were partially offset by C.R. Gibson
sales since its acquisition on December 3, 2007. Excluding
sales from C.R. Gibson, net sales declined 9% from prior year.


 



Cost of sales, as a percentage of net sales, decreased to 72% in
fiscal 2008 from 74% in fiscal 2007. The decrease in cost of
sales was primarily due to improved efficiencies in the gift
wrap, gift bag and tissue product lines resulting from the
restructuring program announced in November 2006.


 



SG&A expenses, as a percentage of net sales, increased to
19% in fiscal 2008 from 18% in fiscal 2007. The increase in
SG&A expenses, as a percentage of net sales, is primarily
attributable to the mix of expenses compared to the prior year
resulting from the acquisition of the C.R. Gibson business on
December 3, 2007.


 



Restructuring expenses were $1,717,000 in fiscal 2008 and
$2,327,000 in fiscal 2007. The decrease in restructuring
expenses was due to the absence of costs related to a
restructuring program in the prior year to combine the
operations of the Cleo and Berwick Offray subsidiaries, to close
Cleo’s Maysville, Kentucky production facility and to exit
a non-material, non-core business which was partially offset by
costs related to a restructuring program announced on
January 4, 2008 to close the Company’s two production
facilities in Elysburg, Pennsylvania and a distribution center
in Troy, Pennsylvania. See Note 4 to the consolidated
financial statements for further discussion.





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Table of Contents






Interest expense, net decreased to $974,000 in fiscal 2008 from
$2,285,000 in fiscal 2007. The decrease in interest expense, net
was primarily due to lower average borrowing levels during
fiscal 2008 compared to the prior year as a result of cash
generated from operations, offset by the impact of cash utilized
to purchase the C.R. Gibson business and to repurchase the
Company’s common stock and the impact of a lower rate of
return on invested cash resulting from the Company’s
investment in a tax exempt municipal fund in the current year.


 



Income before income taxes was $38,833,000, or 8% of net sales,
in fiscal 2008 and $36,804,000, or 7% of net sales, in fiscal
2007.


 



Income taxes, as a percentage of income before taxes, were 35%
in fiscal 2008 and fiscal 2007. Reductions in the Company’s
effective tax rate from the Company’s investment during
fiscal 2008 in a federal tax exempt municipal fund and from a
decrease in the Company’s state effective tax rate were
substantially offset by the non-recurrence of tax benefits
recorded in fiscal 2007 related to decreases in foreign and
state valuation allowances and state tax reserves.


 



Net income for the year ended March 31, 2008 increased 6%
to $25,358,000 from $23,889,000 in fiscal 2007. The increase in
net income was primarily attributable to current fiscal year
cost savings and lower implementation expense associated with
restructuring plans implemented in November 2006 and January
2008, incremental earnings contributed by the recently acquired
C.R. Gibson business and reduced interest expense, net of the
impact of reduced sales volume.


 




Results
of Operations



 




Fiscal
2009 Compared to Fiscal 2008



 



Consolidated net sales for fiscal 2009 decreased 3% to
$482,424,000 from $498,253,000 in fiscal 2008. Excluding net
sales of businesses acquired over the last two fiscal years,
sales declined 12%. Our fiscal 2009 Christmas business was
negatively impacted by reduced sales of Christmas gift wrap,
gift bags and decorative tissue paper and generally reduced
purchases by many of our retailer customers in response to poor
retail sales during the calendar 2007 Christmas (fiscal
2008) selling season. The weakening economy in the second
half of fiscal 2009 further impacted our sales of all occasion
and Christmas products, as some of our customers canceled or
delayed purchases and, in certain cases, returned products in
the face of the poor retail environment.





14





Table of Contents






Cost of sales, as a percentage of net sales, increased to 74% in
fiscal 2009 from 72% in fiscal 2008. The increase in the
percentage of cost of goods sold to net sales is primarily due
to increased material costs and increased fixed manufacturing
overhead costs per unit due to reduced production volume.


 



Selling, general and administrative (“SG&A”)
expenses of $96,723,000 in fiscal 2009 remained relatively
unchanged from $96,703,000 in fiscal 2008. SG&A expenses,
as a percentage of net sales, increased to 20% in fiscal 2009
from 19% in fiscal 2008. The increase, as a percentage of net
sales, is primarily due to a full year of C.R. Gibson activity
and the lower sales base in fiscal 2009. C.R. Gibson, acquired
on December 3, 2007, maintains a higher level of SG&A
expenses, relative to its sales, than our other businesses.
Partially offsetting this increase was lower incentive
compensation expense compared to the prior year.


 



Restructuring expenses were $1,138,000 in fiscal 2009 and
$1,717,000 in fiscal 2008. The decline in restructuring expenses
represents lower costs recorded in fiscal 2009 compared to
fiscal 2008 related to the closure of two production facilities
and a distribution center and a net gain of $761,000 recorded in
fiscal 2009 related to the sale of two buildings that were
previously classified as available for sale. Partially
offsetting this decline were severance costs recorded in fiscal
2009 associated with permanent workforce reductions and the
consolidation of certain back office operations.


 



Interest expense, net increased to $2,551,000 in fiscal 2009
from $974,000 in fiscal 2008. The increase in interest expense,
net was primarily due to higher average borrowing levels
primarily as a result of acquisitions and stock repurchases
during fiscal 2009 compared to the prior year. The impact of
higher average borrowings was partially offset by a lower
average interest rate compared to the prior year.


 



Income before income taxes was $25,890,000, or 5% of sales, in
fiscal 2009 and $38,833,000, or 8% of sales, in fiscal 2008.


 



Income taxes, as a percentage of income before taxes, were 34%
in fiscal 2009 and 35% in fiscal 2008. The decrease in fiscal
2009 was primarily due to the reduction of tax reserves,
partially offset by a reduction in tax exempt interest income
and higher state taxes.


 



Net income for the year ended March 31, 2009 decreased 33%
to $16,986,000 from $25,358,000 in fiscal 2008. The decrease in
net income was primarily attributable to reduced sales volume,
higher material costs, plant inefficiencies resulting from lower
production volume and higher interest expense, partially offset
by lower incentive compensation.


 




Fiscal
2008 Compared to Fiscal 2007



 



Consolidated net sales for fiscal 2008 decreased 6% to
$498,253,000 from $530,686,000 in fiscal 2007. The decrease in
net sales was primarily due to lower sales of products sold to
warehouse clubs and lower sales of Christmas gift wrap,
decorative tissue paper and gift bags and educational products.
These sales reductions were partially offset by C.R. Gibson
sales since its acquisition on December 3, 2007. Excluding
sales from C.R. Gibson, net sales declined 9% from prior year.


 



Cost of sales, as a percentage of net sales, decreased to 72% in
fiscal 2008 from 74% in fiscal 2007. The decrease in cost of
sales was primarily due to improved efficiencies in the gift
wrap, gift bag and tissue product lines resulting from the
restructuring program announced in November 2006.


 



SG&A expenses, as a percentage of net sales, increased to
19% in fiscal 2008 from 18% in fiscal 2007. The increase in
SG&A expenses, as a percentage of net sales, is primarily
attributable to the mix of expenses compared to the prior year
resulting from the acquisition of the C.R. Gibson business on
December 3, 2007.


 



Restructuring expenses were $1,717,000 in fiscal 2008 and
$2,327,000 in fiscal 2007. The decrease in restructuring
expenses was due to the absence of costs related to a
restructuring program in the prior year to combine the
operations of the Cleo and Berwick Offray subsidiaries, to close
Cleo’s Maysville, Kentucky production facility and to exit
a non-material, non-core business which was partially offset by
costs related to a restructuring program announced on
January 4, 2008 to close the Company’s two production
facilities in Elysburg, Pennsylvania and a distribution center
in Troy, Pennsylvania. See Note 4 to the consolidated
financial statements for further discussion.





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Table of Contents






Interest expense, net decreased to $974,000 in fiscal 2008 from
$2,285,000 in fiscal 2007. The decrease in interest expense, net
was primarily due to lower average borrowing levels during
fiscal 2008 compared to the prior year as a result of cash
generated from operations, offset by the impact of cash utilized
to purchase the C.R. Gibson business and to repurchase the
Company’s common stock and the impact of a lower rate of
return on invested cash resulting from the Company’s
investment in a tax exempt municipal fund in the current year.


 



Income before income taxes was $38,833,000, or 8% of net sales,
in fiscal 2008 and $36,804,000, or 7% of net sales, in fiscal
2007.


 



Income taxes, as a percentage of income before taxes, were 35%
in fiscal 2008 and fiscal 2007. Reductions in the Company’s
effective tax rate from the Company’s investment during
fiscal 2008 in a federal tax exempt municipal fund and from a
decrease in the Company’s state effective tax rate were
substantially offset by the non-recurrence of tax benefits
recorded in fiscal 2007 related to decreases in foreign and
state valuation allowances and state tax reserves.


 



Net income for the year ended March 31, 2008 increased 6%
to $25,358,000 from $23,889,000 in fiscal 2007. The increase in
net income was primarily attributable to current fiscal year
cost savings and lower implementation expense associated with
restructuring plans implemented in November 2006 and January
2008, incremental earnings contributed by the recently acquired
C.R. Gibson business and reduced interest expense, net of the
impact of reduced sales volume.


 




These excerpts taken from the CSS 10-K filed Jun 2, 2008.
Results of Operations
 
Fiscal 2008 Compared to Fiscal 2007
 
Consolidated sales for fiscal 2008 decreased 6% to $498,253,000 from $530,686,000 in fiscal 2007. The decrease in sales was primarily due to lower sales of products sold to warehouse clubs and lower sales of Christmas gift wrap, decorative tissue paper and gift bags and educational products. These sales reductions were partially offset by C.R. Gibson sales since its acquisition on December 3, 2007. Excluding sales from C.R. Gibson, sales declined 9% from prior year.
 
Cost of sales, as a percentage of sales, decreased to 72% in fiscal 2008 from 74% in fiscal 2007. The decrease in cost of sales was primarily due to improved efficiencies in the gift wrap, gift bag and tissue product lines resulting from the restructuring program announced in November 2006.
 
Selling, general and administrative (“SG&A”) expenses, as a percentage of sales, increased to 19% in fiscal 2008 from 18% in fiscal 2007. The increase in SG&A expenses, as a percentage of sales, is primarily attributable to the mix of expenses compared to the prior year resulting from the acquisition of the C.R. Gibson business on December 3, 2007.
 
Restructuring expenses were $1,717,000 in fiscal 2008 and $2,327,000 in fiscal 2007. The decrease in restructuring expenses was due to the absence of costs related to a restructuring program in the prior year to combine the operations of the Cleo and Berwick Offray subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business which was partially offset by costs related to a restructuring program announced on January 4, 2008 to close the Company’s two production facilities in Elysburg, Pennsylvania and a distribution center in Troy, Pennsylvania. See Note 4 to the consolidated financial statements for further discussion.
 
Interest expense, net decreased to $974,000 in fiscal 2008 from $2,285,000 in fiscal 2007. The decrease in interest expense, net was primarily due to lower average borrowing levels during fiscal 2008 compared to the prior year as a result of cash generated from operations, offset by the impact of cash utilized to purchase the C.R. Gibson business and to repurchase the Company’s common stock and the impact of a lower rate of return on invested cash resulting from the Company’s investment in a tax exempt municipal fund in the current year.
 
Income before income taxes was $38,833,000, or 8% of sales, in fiscal 2008 and $36,804,000, or 7% of sales, in fiscal 2007.
 
Income taxes, as a percentage of income before taxes, were 35% in fiscal 2008 and fiscal 2007. Reductions in the Company’s effective tax rate from the Company’s investment during fiscal 2008 in a federal tax exempt municipal fund and from a decrease in the Company’s state effective tax rate were substantially offset by the non-recurrence of tax benefits recorded in fiscal 2007 related to decreases in foreign and state valuation allowances and state tax reserves.
 
Net income for the year ended March 31, 2008 increased 6% to $25,358,000 from $23,889,000 in fiscal 2007. The increase in net income was primarily attributable to current fiscal year cost savings and lower implementation expense associated with restructuring plans implemented in November 2006 and January 2008, incremental earnings contributed by the recently acquired C.R. Gibson business and reduced interest expense, net of the impact of reduced sales volume.


12


 

Fiscal 2007 Compared to Fiscal 2006
 
Consolidated sales for fiscal 2007 increased 1% to $530,686,000 from $525,494,000 in fiscal 2006. The increase in sales 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.
 
Cost of sales, as a percentage of sales, decreased to 74% in fiscal 2007 from 76% in fiscal 2006. The improvement in cost of sales was primarily due to improved manufacturing and distribution efficiencies achieved in the gift wrap, gift bag and tissue product lines and the impact of higher sales of gift wrap and boxed greeting cards, partially offset by incremental costs of $706,000 associated with the restructuring program, which includes $660,000 related to the write-down of inventory.
 
Selling, general and administrative (“SG&A”) expenses, as a percentage of sales, increased to 18% in fiscal 2007 from 17% in fiscal 2006. The increase in SG&A expenses, as a percentage of sales, was primarily due to incremental share-based compensation expense related to the adoption of SFAS No. 123R, “Share-Based Payment,” increased incentive compensation expense and incremental costs of $909,000 associated with the restructuring program established in the current year.
 
Restructuring expenses were $2,327,000 in fiscal 2007 and $37,000 in fiscal 2006. The increase in restructuring expenses was due to the establishment of a restructuring program in fiscal 2007 to combine the operations of the Cleo and Berwick Offray subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business. See Note 4 to the consolidated financial statements for further discussion.
 
Interest expense, net decreased to $2,285,000 in fiscal 2007 from $3,279,000 in fiscal 2006. The decrease in interest expense, net was primarily due to lower average borrowing levels during fiscal 2007 compared to the prior year and increased cash balances.
 
Income before income taxes was $36,804,000, or 7% of sales, in fiscal 2007 and $32,716,000, or 6% of sales, in fiscal 2006. Excluding costs relating to the restructuring program in fiscal 2007 and including the pro forma effect of stock option expense in the prior fiscal year for the Company’s adoption of SFAS No. 123R, income before income taxes increased 36% to $40,745,000 in fiscal 2007 from $30,031,000 in fiscal 2006.
 
Income taxes, as a percentage of income before taxes, were 35% in fiscal 2007 and 33% in fiscal 2006. The increase in the effective tax rate was primarily due to a non-recurring, one-time favorable impact of the American Jobs Creation Act of 2004 of approximately $430,000 relating to the repatriation of earnings from the Company’s foreign affiliates that was recorded in the prior year. Also contributing to the increase was the non-deductibility for tax purposes of a portion of the share-based compensation expense recorded in fiscal 2007 as a result of the adoption of SFAS No. 123R.
 
Net income for the year ended March 31, 2007 increased 9% to $23,889,000 from $21,841,000 in fiscal 2006. Excluding costs relating to the restructuring program in fiscal 2007 and including the pro forma effect of stock option expense in the prior fiscal year for the Company’s adoption of SFAS No. 123R, net income increased 35% to $26,412,000 in fiscal 2007 from $19,548,000 in fiscal 2006 and diluted earnings per share increased 33% to $2.42 in fiscal 2007 compared to prior year diluted earnings per share of $1.82.
 
Results
of Operations



 




Fiscal
2008 Compared to Fiscal 2007



 



Consolidated sales for fiscal 2008 decreased 6% to $498,253,000
from $530,686,000 in fiscal 2007. The decrease in sales was
primarily due to lower sales of products sold to warehouse clubs
and lower sales of Christmas gift wrap, decorative tissue paper
and gift bags and educational products. These sales reductions
were partially offset by C.R. Gibson sales since its acquisition
on December 3, 2007. Excluding sales from C.R. Gibson,
sales declined 9% from prior year.


 



Cost of sales, as a percentage of sales, decreased to 72% in
fiscal 2008 from 74% in fiscal 2007. The decrease in cost of
sales was primarily due to improved efficiencies in the gift
wrap, gift bag and tissue product lines resulting from the
restructuring program announced in November 2006.


 



Selling, general and administrative (“SG&A”)
expenses, as a percentage of sales, increased to 19% in fiscal
2008 from 18% in fiscal 2007. The increase in SG&A
expenses, as a percentage of sales, is primarily attributable to
the mix of expenses compared to the prior year resulting from
the acquisition of the C.R. Gibson business on December 3,
2007.


 



Restructuring expenses were $1,717,000 in fiscal 2008 and
$2,327,000 in fiscal 2007. The decrease in restructuring
expenses was due to the absence of costs related to a
restructuring program in the prior year to combine the
operations of the Cleo and Berwick Offray subsidiaries, to close
Cleo’s Maysville, Kentucky production facility and to exit
a non-material, non-core business which was partially offset by
costs related to a restructuring program announced on
January 4, 2008 to close the Company’s two production
facilities in Elysburg, Pennsylvania and a distribution center
in Troy, Pennsylvania. See Note 4 to the consolidated
financial statements for further discussion.


 



Interest expense, net decreased to $974,000 in fiscal 2008 from
$2,285,000 in fiscal 2007. The decrease in interest expense, net
was primarily due to lower average borrowing levels during
fiscal 2008 compared to the prior year as a result of cash
generated from operations, offset by the impact of cash utilized
to purchase the C.R. Gibson business and to repurchase the
Company’s common stock and the impact of a lower rate of
return on invested cash resulting from the Company’s
investment in a tax exempt municipal fund in the current year.


 



Income before income taxes was $38,833,000, or 8% of sales, in
fiscal 2008 and $36,804,000, or 7% of sales, in fiscal 2007.


 



Income taxes, as a percentage of income before taxes, were 35%
in fiscal 2008 and fiscal 2007. Reductions in the Company’s
effective tax rate from the Company’s investment during
fiscal 2008 in a federal tax exempt municipal fund and from a
decrease in the Company’s state effective tax rate were
substantially offset by the non-recurrence of tax benefits
recorded in fiscal 2007 related to decreases in foreign and
state valuation allowances and state tax reserves.


 



Net income for the year ended March 31, 2008 increased 6%
to $25,358,000 from $23,889,000 in fiscal 2007. The increase in
net income was primarily attributable to current fiscal year
cost savings and lower implementation expense associated with
restructuring plans implemented in November 2006 and January
2008, incremental earnings contributed by the recently acquired
C.R. Gibson business and reduced interest expense, net of the
impact of reduced sales volume.





12





 







Fiscal
2007 Compared to Fiscal 2006



 



Consolidated sales for fiscal 2007 increased 1% to $530,686,000
from $525,494,000 in fiscal 2006. The increase in sales 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.


 



Cost of sales, as a percentage of sales, decreased to 74% in
fiscal 2007 from 76% in fiscal 2006. The improvement in cost of
sales was primarily due to improved manufacturing and
distribution efficiencies achieved in the gift wrap, gift bag
and tissue product lines and the impact of higher sales of gift
wrap and boxed greeting cards, partially offset by incremental
costs of $706,000 associated with the restructuring program,
which includes $660,000 related to the write-down of inventory.


 



Selling, general and administrative (“SG&A”)
expenses, as a percentage of sales, increased to 18% in fiscal
2007 from 17% in fiscal 2006. The increase in SG&A
expenses, as a percentage of sales, was primarily due to
incremental share-based compensation expense related to the
adoption of SFAS No. 123R, “Share-Based
Payment,” increased incentive compensation expense and
incremental costs of $909,000 associated with the restructuring
program established in the current year.


 



Restructuring expenses were $2,327,000 in fiscal 2007 and
$37,000 in fiscal 2006. The increase in restructuring expenses
was due to the establishment of a restructuring program in
fiscal 2007 to combine the operations of the Cleo and Berwick
Offray subsidiaries, to close Cleo’s Maysville, Kentucky
production facility and to exit a
non-material,
non-core business. See Note 4 to the consolidated financial
statements for further discussion.


 



Interest expense, net decreased to $2,285,000 in fiscal 2007
from $3,279,000 in fiscal 2006. The decrease in interest
expense, net was primarily due to lower average borrowing levels
during fiscal 2007 compared to the prior year and increased cash
balances.


 



Income before income taxes was $36,804,000, or 7% of sales, in
fiscal 2007 and $32,716,000, or 6% of sales, in fiscal 2006.
Excluding costs relating to the restructuring program in fiscal
2007 and including the pro forma effect of stock option expense
in the prior fiscal year for the Company’s adoption of
SFAS No. 123R, income before income taxes increased
36% to $40,745,000 in fiscal 2007 from $30,031,000 in fiscal
2006.


 



Income taxes, as a percentage of income before taxes, were 35%
in fiscal 2007 and 33% in fiscal 2006. The increase in the
effective tax rate was primarily due to a non-recurring,
one-time favorable impact of the American Jobs Creation Act of
2004 of approximately $430,000 relating to the repatriation of
earnings from the Company’s foreign affiliates that was
recorded in the prior year. Also contributing to the increase
was the non-deductibility for tax purposes of a portion of the
share-based compensation expense recorded in fiscal 2007 as a
result of the adoption of SFAS No. 123R.


 



Net income for the year ended March 31, 2007 increased 9%
to $23,889,000 from $21,841,000 in fiscal 2006. Excluding costs
relating to the restructuring program in fiscal 2007 and
including the pro forma effect of stock option expense in the
prior fiscal year for the Company’s adoption of
SFAS No. 123R, net income increased 35% to $26,412,000
in fiscal 2007 from $19,548,000 in fiscal 2006 and diluted
earnings per share increased 33% to $2.42 in fiscal 2007
compared to prior year diluted earnings per share of $1.82.


 




This excerpt taken from the CSS 10-K filed Jun 5, 2007.
Results of Operations
 
Fiscal 2007 Compared to Fiscal 2006
 
Consolidated sales for fiscal 2007 increased 1% to $530,686,000 from $525,494,000 in fiscal 2006. The increase in sales 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.
 
Cost of sales, as a percentage of sales, decreased to 74% in 2007 from 76% in 2006. The improvement in cost of sales is primarily due to improved manufacturing and distribution efficiencies achieved in the gift wrap, gift bag and tissue product lines and the impact of higher sales of gift wrap and boxed greeting cards, partially offset by incremental costs of $706,000 associated with the restructuring program, which includes $660,000 related to the write-down of inventory.
 
Selling, general and administrative (“SG&A”) expenses, as a percentage of sales, increased to 18% in 2007 from 17% in 2006. The increase in SG&A expenses, as a percentage of sales, is primarily due to incremental share-


12


Table of Contents

based compensation expense related to the adoption of SFAS No. 123R, “Share-Based Payment,” increased incentive compensation expense and incremental costs of $909,000 associated with the restructuring program established in the current year.
 
Restructuring expenses were $2,327,000 in fiscal 2007 and $37,000 in fiscal 2006. The increase in restructuring expenses was due to the establishment of a restructuring program in the current year to combine the operations of the Cleo and Berwick Offray subsidiaries, to close Cleo’s Maysville, Kentucky production facility and to exit a non-material, non-core business. See Note 3 to the consolidated financial statements for further discussion.
 
Interest expense, net decreased to $2,285,000 in 2007 from $3,279,000 in 2006. The decrease in interest expense, net was primarily due to lower borrowing levels during fiscal 2007 compared to the prior year and increased cash balances.
 
Income before income taxes was $36,804,000, or 7% of sales, in fiscal 2007 and $32,716,000, or 6% of sales, in fiscal 2006. Excluding costs relating to the restructuring program in fiscal 2007 and including the pro forma effect of stock option expense in the prior fiscal year for the Company’s adoption of SFAS No. 123R, income before income taxes increased 36% to $40,745,000 in fiscal 2007 from $30,031,000 in fiscal 2006.
 
Income taxes, as a percentage of income before taxes, were 35% in 2007 and 33% in 2006. The increase in the effective tax rate is primarily due to a non-recurring, one-time favorable impact of the American Jobs Creation Act of 2004 of approximately $430,000 relating to the repatriation of earnings from the Company’s foreign affiliates that was recorded in the prior year. Also contributing to the increase is a portion of the share-based compensation expense recorded in the current year as a result of the adoption of SFAS No. 123R not being deductible for tax purposes.
 
Net income for the year ended March 31, 2007 increased 9% to $23,889,000 from $21,841,000 in 2006. Excluding costs relating to the restructuring program in fiscal 2007 and including the pro forma effect of stock option expense in the prior fiscal year for the Company’s adoption of SFAS No. 123R, net income increased 35% to $26,412,000 in fiscal 2007 from $19,548,000 in fiscal 2006 and diluted earnings per share increased 33% to $2.42 in fiscal 2007 compared to prior year diluted earnings per share of $1.82.
 
Fiscal 2006 Compared to Fiscal 2005
 
Consolidated sales for fiscal 2006 decreased 2% to $525,494,000 from $536,362,000 in fiscal 2005. The decline in sales was due primarily to lower sales of Christmas gift wrap, everyday ribbons and bows and boxed greeting cards. This sales decline was partially offset by increased sales of seasonal tissue and gift bags and reduced customer program expenses.
 
Cost of sales, as a percentage of sales, increased to 76% in 2006 from 74% in 2005. The increase in cost of sales, as a percentage of sales, was due to a decline in the operating performance of our gift wrap and tissue product lines. This decline was primarily due to increased product and energy costs, including increased fuel costs during our peak seasonal shipping season.
 
SG&A expenses, as a percentage of sales, increased to 17% in 2006 from 16% in 2005. The increase in SG&A expenses, as a percentage of sales, was primarily due to incremental costs related to severance associated with a workforce reduction and recruiting and relocation costs resulting from the hiring of key managers, partially offset by decreased incentive compensation expense.
 
Restructuring expenses were $37,000 in fiscal 2006 and $2,537,000 in fiscal 2005. The decrease in restructuring expenses was due to limited restructuring activities occurring in fiscal 2006 compared to fiscal 2005. During fiscal 2005, the Company recorded restructuring expenses related to its administrative office located in Minneapolis, Minnesota in the amount of $1,207,000 and recorded restructuring expenses related to the closure of its plant located in Anniston, Alabama in the amount of $1,330,000.
 
Interest expense, net increased to $3,279,000 in 2006 from $2,374,000 in 2005 primarily due to higher average borrowing levels during the year as a result of cash expended with the March 2005 repurchase of 1,739,760 shares of common stock as a result of the Company’s tender offer which expired on March 4, 2005, as well as the impact of higher interest rates.


13


Table of Contents

 
Income before income taxes was $32,716,000, or 6% of sales, in fiscal 2006 and $47,118,000, or 9% of sales, in fiscal 2005.
 
Income taxes, as a percentage of income before taxes, were 33% in 2006 and 35% in 2005. The decrease in the effective tax rate was primarily due to a one-time favorable impact of the American Jobs Creation Act of 2004 of approximately $430,000 relating to the repatriation of earnings from the Company’s foreign affiliates.
 
Net income for the year ended March 31, 2006 decreased 29% to $21,841,000 from $30,692,000 in 2005.
 
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