css industries overview 8 · css industries, inc. | all rights reserved 2017css industries, inc. |...

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CSS Industries Overview

(NYSE: CSS)

CSS Industries, Inc. | All Rights Reserved 2017 CSS Industries, Inc. | All Rights Reserved 2018

Forward Looking Statements

This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of

1995, including, among others, statements relating to the Company’s expected levels of net sales, net income (loss), and

adjusted EBITDA for fiscal 2018; the Company’s expected ability and capacity for value creation and to achieve long-term

strategic priorities and goals; and the Company’s expected capital allocation priorities. 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, inherent uncertainties associated with assumptions used to forecast fiscal 2018 net sales, net income and

adjusted EBITDA; execution risks that may impact the Company ability to achieve the levels of net sales, net income and

adjusted EBITDA forecasted for fiscal 2018; general market and economic conditions; increased competition (including

competition from foreign products which may be imported at less than fair value and from foreign products which may benefit

from foreign governmental subsidies); information technology risks, such as cyber attacks and data breaches; increased

operating 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

acquisitions, including acquisition integration costs and the risk that the Company may not be able to integrate and derive the

expected benefits from such acquisitions; the risk that customers may become insolvent, may delay payments or may

impose deductions or penalties on amounts owed to the Company; 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 more fully in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2017

and elsewhere in the Company’s filings with the Securities and Exchange Commission. 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.

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Our Mission and Vision

Mission Our creative craft, seasonal and gift products inspire our consumers and spark their participation. We deliver our high quality, on-trend and innovative products with a

focus on value through an Omni-Channel approach, designed to make life’s moments more memorable.

Vision To be the market leader in creative craft, seasonal and gift products by delivering an innovative and high valued experience to our customers. When we delight our

customers, we provide value to our stockholders. We strive to help make life’s everyday moments and special events more memorable.

We Make it Memorable for our customer, our consumers,

our employees and our shareholders Everyday!

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CSS Family of Brands

Long History of Industry Leadership

Dates back to 1863

#2 in home sewing

patterns

Dates back to 1870

Leader in gift and

stationery categories

Dates back to

1906

#1 in floral ribbon

Dates back to 2006

#1 in gift card

holders

Dates back to

1877

#1 in craft buttons

Dates back to 1945

#1 in packaging

ribbon Dates back to

1876

#1 in craft ribbon

Dates back to 1897

#1 in trims and

tapes

Dates back to

1906

#1 in knitting and

crocheting tools

Dates back to 1927

#1 in home sewing patterns

Dates back to

1976

#1 in needle arts Dates back to

1990

#1 in fusible

beads

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CSS Industries Strategy Map

KEYS TO SUCCESS

GOALS

STRATEGIC PRIORITIES

Grow Profitable Sales and Improve ROIC

Defend the base business

Identify adjacent product

categories with a focus on brands

Build an Omni- Channel business model

Improve ROIC by maximizing margins

while minimizing capital investment

Build a Collaborative,

Dynamic One CSS Culture

Keep our base business flat in a declining market

Design, Product Innovation,

Category Leadership

Complete at least

one material

acquisition per

year

Strategic Acquisitions

Achieve online sales of >$50

million annually

Dedicated Resources, Leverage

Technology

Improve ROIC >1% Every Year

Fix Underperforming

Product Lines, Focus on WC

Aligned & engaged workforce driving

for results

Communication, Accountability, Talent Infusion

Exceptional opportunities

for our employees

Premier partner for our customers

Superior returns

for our shareholders

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CSS Competitive Advantages

Managing product category complexity • Design and merchandising • Flexible distribution close to customers • Category/POS management

Strong direct retailer senior executive and buyer relationships • Tied to our relationship and service driven sales and marketing teams • Expanding due to expanding portfolio size • Category leadership across many product lines

Flexible supply chain with a mix of USA and imported key product categories • Narrow woven and extruded ribbon and sewing patterns made in the USA • High-end sewing and craft buttons sourced for variety from around the world • Gift and gift packaging products from value oriented Asian sources

On-trend custom product design • Customers look to us to communicate/validate trends • Becoming a go-to company for private label stationery production

Strong financial position • Strong historical free cash flow • Low/no leverage

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Multi-Channel Distribution

CSS is a trusted partner to its customer base of leading mass, craft, food & drug, discount, gift &

specialty retailers and warehouse clubs

• Exceptional reputation in the industry

• Breadth of product offerings (cross‐selling, production and sourcing capabilities)

• Customized programs

• Deep, long‐term relationships with multiple buyers per retailer and continuity over many years

• Dedicated internal sales staff across all categories and national sales reps to extend reach in gift &

specialty

• We sell to many luxury retailers, such as Tiffany, Aveda, Nordstrom, Lush, Ghirardelli, Vera Bradley A S a m p l e o f O u r B l u e C h i p C u s t o m e r B a s e

Food & Drug Mass Discount Craft Warehouse Clubs

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Our Markets

Seasonal The seasonal product category is defined as products designed, produced and sold to mass market retailers for holidays and seasonal events, including Christmas, Valentine's Day, Easter and back-to-school. Products include Christmas packaging ribbons and bows, boxed greeting cards, gift tags, gift card holders, gift bags, gift wrap, tissue paper, classroom exchange Valentine’s Day classroom exchange cards, Easter egg dyes and novelties, and educational products. Production forecasts for these products are generally known well in advance of shipment. Gift The gift product category is defined as products primarily designed to enhance certain life events or special occasions such as weddings, birthdays, anniversaries, graduations, and the birth of a child. These products are primarily sold into mass and specialty retailers. Products include infant products, journals, gift card holders, all occasion boxed greeting cards, memory books, scrapbooks, stationery, stickers and other items that commemorate life's celebrations. Products in this category are generally ordered on a replenishment basis throughout the year. Craft The craft product category is defined as products used for craft activities, and includes ribbons, buttons, sewing patterns, knitting needles, needle arts and kids crafts. These products are sold to mass market and specialty retailers and are generally ordered on a replenishment basis throughout the year.

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Seasonal Gift Crafts

Total Market Size (at retail*): $212.6B $46.2B $43.9B

CSS Market Segments: $159.2B $36.2B $21.5B

Total Market Status: Growing Growing Stable

CSS Market Segment Status: Shrinking Shrinking Growing

Competitive Dynamic: Narrow market with leading brands by

season for key product segments

Highly fragmented with few category

specific brands and no leading national

brands

Highly fragmented with category

specific brands, but no leading

national brands

Key Market Dynamics: Mass drives the market and most purchases are still

brick & mortar focused

Purchases shifting from specialty stores

to mass accounts and on-line sales

Increasing DI focus to address retailer margin pressure

Our Markets

* Based on consumer reported spending

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Leadership Team with Diverse Experience Title Age

Year Joined

CSS Previous Roles / Employers

Chris MunyanPresident and Chief Executive

Officer52 1993

CEO since 2006; Chief Operating Officer,

President Berwick Offray

John RoselliExecutive Vice President and

Chief Financial Officer45 2017

13 years at TE Connectivity/Tyco in

divisional CFO roles / investor relations; 6

years as analyst at Citigroup

Carey Edwards Executive Vice President - Sales 46 20079 years in sales leadership roles at Calvin

Klein and Elizabeth Arden

Jack WhiteExecutive Vice President -

Operations53 2017

30+ years in senior operations and supply

chain roles at DuPont

Cara FarleyExecutive Vice President -

Marketing and Product

Development

49 2015

20+ years in senior marketing roles across

branded consumer goods including Kids,

Craft, Gift and Seasonal categories

Jeff DeSandre Vice President - CIO 47 2017

8 years at First Quality Enterprises (2 yrs as

CIO); 12 years in IT leadership roles at CSS,

Deloitte and News Corp

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Driven by Design

We are the category leaders

for many of our customers –

they come to us for input on

design trends in our

categories.

We subscribe to top trend

services, purchase reports

and shop internationally

throughout the year to identify

trends.

We attend a broad range of

trade shows and seminars.

We partner with top licensors

and designers to compliment 11


Licensing Expertise is a Competitive Advantage

Vogue Patterns Carter’s

Spode

NFL

MLB

Disney

Mattel

Marvel

Nickelodeon

NBA

CLC

Badgley Mischka

Tracey Reese Fitlosophy

Selected Properties

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3,000+ Orders Imported

Direct to Retailers, 99% on-

time

Leading

Performance

Excellence in

managing

complexity

Category leading domestic

Distribution Capability

Broad Market

Coverage

50,000+ SKUs Numerous product

categories

13,000+ customers

Retail, wholesale, on-line 8 CSS factories

manufacturing plastic

extruded and woven ribbon,

bows, waxed tissue, sewing

patterns, and trims

MANUFACTURING

Broad Manufacturing and Sourcing Capabilities…

200+ Asia partner factories

with broad capabilities

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…Coupled with Domestic Distribution is How We Win

DISTRIBUTION

CENTERS

Domestic Replenishment

- 6,000 ship-to locations

- 2+ million order

lines/month

- $500 average order size

- Lead-time < 2 weeks

- >$300+ million

revenue/year

Retailers increasing pressure on suppliers to manage inventory and we are well positioned

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Financial Overview

CSS Industries, Inc. | All Rights Reserved 2018

Financial Overview

• Net sales expected to grow 10% to

12% primarily due to Simplicity and

McCall

• Projected net loss in FY2018 largely

driven by acquisition-related costs as

well as the accounting treatment of

acquired inventory

• Adjusted EBITDA growth primarily

reflects contributions from acquisitions

Net Income (GAAP) Adjusted EBITDA

Net Sales $ millions

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Sales History

$ millions

Growth driven by acquisitions in Craft

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Significant Capacity for Value Creation

• Strong balance sheet

with solid annual cash

flow generation

• Cash balance fluctuates

due to seasonal working

capital requirements;

September quarter is

typically the seasonal

low point

• $150 million credit facility

with $48 million drawn as

of 12/31

$ millions

Available cash under credit facility

Cash and cash equivalents and short-

term investments as of 12/31/17

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Capital Allocation Priorities

1. Distribute cash to shareholders via dividends

$5.5 million paid through 9 months of

FY18

$0.80 per share

2. Strategic Acquisitions in Craft / Celebrations

Product tuck-ins

Adjacent product categories

3. Share repurchase

303K shares authorized as of 9/30/17

To be utilized if cash cannot be deployed

for value creating M&A

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Investment Highlights

Long history of category

leadership

Defendable business

model

New leadership brings

new ideas

Strong balance sheet

and cash flow

generation

Disciplined buyer in

fragmented industry

• #1 or #2 in most categories

• Decades-long relationships with customers

• Trusted design partner and category leader

• Trusted design partner and licensing portfolio

• U.S. manufacturing capabilities

• Ability to handle SKU complexity and replenishment business model

• 4 of 6 senior leaders are new within the past two years

• Diversity of experience from large companies in the retail, chemicals and

electronics industries

• Strong cash flow generation historically

• Significant cash on hand and $102 million available under credit

facility

• Low debt levels ($48 million as of 12/31)

• Long list of private equity or family-owned businesses that are expected to sell

• Challenging retail environment expected to reduce competition among buyers

• Significant value can be created from acquisitions…at the right price

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Appendix


Non-GAAP Reconciliation

Use of Non-GAAP Measures and the Reconciliation of GAAP to Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) in this presentation,

the Company has provided certain non-GAAP financial information, specifically adjusted diluted EPS and adjusted EBITDA. These measures are

non-GAAP metrics that exclude various items that are detailed in the accompanying financial tables reconciling U.S. GAAP results to non-GAAP

results that are included in this presentation. Management believes that the presentation of these non-GAAP financial measures provides useful

information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the

Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period

to period comparisons of the Company’s operating results. The presentation of our non-GAAP measures is not intended to be considered in isolation

or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company has reconciled

the non-GAAP information included in this presentation to the nearest U.S. GAAP measures, as required under the rules of the Securities and

Exchange Commission regarding the use of non-GAAP financial measures.

Year Ended March 31,

2018 2017 2016

Net (loss) income ($11.3) - ($9.1) $28.5 $17.2

Income tax (benefit) expense (3.9) - (3.1) 1.2 9.4

Interest expense (income) 0.0 0.0 (0.1)

Other income (0.1) (0.0) (0.3)

Depreciation and amortization 10.5 8.5 8.3

Gain on bargain purchases 0.0 (20.0) 0.0

Acquisition integration and other 9.9 3.4 1.0

Inventory step-up amortization 17.9 3.6 0.0

Adjusted EBITDA $23.0 - $26.0 $ 25.1 $ 35.6

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css industries overview 8 · css industries, inc. | all rights reserved 2017css industries, inc. |...

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