( NYSE : CSS) N OVEMBER 2017
F O R W A R D L O O K I N G S T A T E M E N T S 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 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. 2
C S S M i s s i o n a n d V i s i o n S t a t e m e n t s Mission CSS craft and celebrations products inspire our consumers and spark their creativity. We deliver our high quality, on-trend and innovative products with a focus on value through an omnichannel approach. Vision To be the market leader in craft and celebrations products by delivering an innovative and high valued experience to our customers. When we delight our customers, we provide value to our shareholders. 3
C S S F A M I L Y O F B R A N D S Dates back to 1945 #1 in packaging ribbon Dates back to 1863 #2 in home sewing patterns Dates back to 1876 #1 in craft ribbon Dates back to 1877 #1 in craft buttons Dates back to 1927 #1 in home sewing patterns Dates back to 1870 Leader in gift and stationery categories Dates back to 1897 #1 in trims and tapes Dates back to 1906 #1 in knitting and crocheting tools Dates back to 2006 #1 in gift card holders Dates back to 1976 #1 in needle arts Dates back to 1990 #1 in fusible beads Dates back to 1906 #1 in floral ribbon L o n g h i s t o r y o f i n d u s t r y l e a d e r s h i p 4
M U L T I - C H A N N E L D I S T R I B U T I O N 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 Mass Discount Craft Warehouse Clubs Food & Drug The Container Store Safeway 5
Category Craft Celebrations & Gift Seasonal L A R G E S E R V E D M A R K E T S Subcategories Painting, kids crafts, edible art, home sewing, fabrics, paper crafts, wood crafts, home décor, knitting, crocheting, beads, jewelry making, floral crafts, needle arts Fashion accessories, parties & entertaining, bath & body, wedding gifts, home accents, candles, baby gifts, stationery, greeting cards, and gift wrap Greeting cards, gift wrap( bags, boxes, tags, ribbons, bows, gift card holders), novelty decor, novelty treats/gifts, novelty wearables, paper tableware, party supplies, holiday crafts/hobbies Est. Market Size* (at Retail) $40 billion $46 billion $30-40 billion CSS Participation Home sewing, kids crafts, knitting, crocheting, beads, needle arts, and paper crafts Parties & entertaining, wedding gifts, home accents, baby gifts, stationery, greeting cards and gift wrap Ribbon, bows, bags, wrap, gift card holders, boxed greeting cards, paper tableware, holiday crafts * Estimated market sizes from Mintel Group Ltd. category studies 6
L E A D E R S H I P T E A M W I T H D I V E R S E E X P E R I E N C E Title Age Year Joined CSS Previous Roles / Employers Chris Munyan President and Chief Executive Officer 52 1993 CEO since 2006; Chief Operating Officer, President Berwick Offray John Roselli Executive Vice President and Chief Financial Officer 45 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 2007 9 years in sales leadership roles at Calvin Klein and Elizabeth Arden Jack White Executive Vice President - Operations 53 2017 30+ years in senior operations and supply chain roles at DuPont Cara Farley Executive 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 Weiss Vice President - Logistics 47 2016 20+ years in senior supply chain management roles for Starbucks, Merrill Corporation and The Realizon Corporation 7
D R I V E N B Y D E S I G N 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 8
L I C E N S I N G E X P E R T I S E I S A C O M P E T I T I V E A D VA N T A G E Selected Properties a sample of o ur licens ing partn ers Vogue Patterns Carter s NFL Disney Badgley Mischka Spode MLB Mattel Tracey Reese Fitlosophy NBA Marvel CLC Nickelodeon CSS Industries is regularly named as one of the Top Global Licensees source: License! Global Magazine 9
B R O A D M A N U F A C T U R I N G A N D S O U R C I N G C A P A B I L I T I E S 200+ Asia partner factories with broad capability: paper, tin, polyester, fabrics, wood- MDF, textiles/apparel, ceramics, glass, acrylics/plastics Excellence in managing complexity Broad Market Coverage 13,000+ customers Retail, wholesale, on-line 8 CSS factories manufacturing plastic extruded and woven ribbon, bows, waxed tissue, sewing patterns, and trims Backward integrated for low cost Leading Performance Category leading domestic Distribution Capability 3,000+ Orders Imported Direct to Retailers, 99% on-time 50,000+ SKUs Numerous product categories MANUFACTURING 10
C O U P L E D W I T H D O M E S T I C D I S T R I B U T I O N I S H O W W E W I N Domestic Replenishment - 6,000 ship-to locations - 2+ million order lines/month - $500 average order size - Lead-time < 2 weeks DISTRIBUTION CENTERS - >$300+ million revenue/year R e t a i l e r s i n c r e a s i n g p r e s s u r e o n s u p p l i e r s t o m a n a g e i n v e n t o r y a n d w e a r e w e l l p o s i t i o n e d 11
Financial Overview
$ millions F I N A N C I A L O V E R V I E W Net Sales Net sales expected to grow 14% to 18% 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 Net Income (GAAP) Adjusted EBITDA growth primarily reflects cost reductions and contributions from acquisitions Adjusted EBITDA Fiscal year ending Mar 31 13
S A L E S H I S T O R Y $ millions G r o w t h d r i v e n b y a c q u i s i t i o n s i n C r a f t 14
S I G N I F I C A N T C A P A C I T Y F O R V A L U E C R E A T I O N $ millions Strong balance sheet with solid annual cash flow generation Cash balance fluctuates due to seasonal working capital requirements; September quarter is seasonal low point Credit facility with $150 million total capacity; borrowed $60 million in early November to fund Simplicity acquisition Available cash under credit facility Cash and cash equivalents and short-term investments as of 9/30/17 15
C A P I T A L A L L O C A T I O N P R I O R I T I E S 1. Distribute cash to shareholders via dividends $7.3 million paid in fiscal 2017 $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 16
I N V E S T M E N T H I G H L I G H T S Long history of category leadership #1 or #2 in most categories Decades-long relationships with customers Trusted design partner and category leader Defendable business model Trusted design partner and licensing portfolio U.S. manufacturing capabilities Ability to handle SKU complexity and replenishment business model New leadership brings new ideas 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 balance sheet and cash flow generation Strong cash flow generation historically Significant cash on hand and $90 million available under credit facility Low debt levels ($60 million as of early Nov.) Disciplined buyer in fragmented industry 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 17
Appendix
C S S I N D U S T R I E S, I N C. N O N - G A A P R E C O N C I L I A T I O N $ millions Year Ended March 31, 2018 2017 2016 Net (loss) income ($5.0) - ($2.0) $28.5 $17.2 Interest expense (income) 0.0 0.0 (0.1) Other income 0.0 (0.0) (0.3) Income tax (benefit) expense (1.9) - (0.9) 1.2 9.4 Depreciation and amortization 10.2 8.5 8.3 Gain on bargain purchases 0.0 (20.0) 0.0 Acquisition integration and other 6.6 2.5 1.0 McCall inventory step-up amortization 18.2 3.6 0.0 Severance 0.0 0.7 0.0 Legal settlements (0.1) 0.2 0.0 Adjusted EBITDA $28.0 - $32.0 $ 25.1 $ 35.6 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. 19
THANK YOU C S S I N D U S T R I E S, I N C. 4 5 0 P L Y M O U T H R O A D S U I T E 3 0 0 P L Y M O U T H M E E T I N G, P A 1 9 4 6 2